In One Of America’s Darkest Hours, Industry Shines Its Brightest Light

Jeff has been reporting, analyzing and opining about the retail grocery business since 1973. He has served as publisher of Food Trade News and Food World since 1978 and as president since 2007. He can be reached at [email protected].

Who could have imagined the last 30 days? I’m not quite old enough to remember “the greatest generation” – those who survived World War II – but I can’t think of anything that’s imperiled so many people and businesses as the COVID-19 pandemic has for the past month. And clearly the worst is yet to come.

Since 1973, first at The Griffin Report and then in 1978 when Dick Bestany and I purchased Food World and Food Trade News, I’ve written more than 1,100 “Taking Stock” columns. My editorials have almost exclusively focused on news and opinion about the grocery business. For some of those opinions I’ve received harsh criticism, for others praise.

This piece will be different. The pandemic has brought out a range of emotions that seem to fluctuate constantly – fear, sadness, compassion, anger, frustration and sympathy. Each day’s headlines seem more tragic than the day before as what’s happened to this great country and its people seems unfathomable and surreal.

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Yet despite the depression, I, like many others, believe in the deep resolve of our people and culture and believe that these dark days will ultimately end. And while it’s likely that a “new normal” will evolve from the pain we’ve experienced, the work being done by the millions of people in the grocery industry is one of the reasons that I believe there is already some light at the end of the tunnel.

I don’t have the space to mention every retailer, wholesaler or vendor in this column, but collectively the industry has done an unbelievable job of providing food and service to America’s consumers despite facing huge handicaps of its own.

From farmer to retailer, it’s been a challenge to keep the pipeline open – harvesting or processing food, shipping it to warehouses and delivering it to stores. Employees have worked overtime to keep their retail outlets as well stocked as possible while also attempting to keep their stores clean. Shorter operating hours really mean longer days for everyone because much of that “down time” is spent sanitizing and restocking.

Resourcefulness also needs to be praised. With the foodservice industry severely impacted by the realties of the coronavirus, retailers and wholesalers have forged partnerships with local restaurant associations and large institutional distributors to hire store associates as well as warehouse employees and truck drivers. Many manufacturers have reconfigured their production lines to produce more product focusing on their most popular brands while also adding an extra work shift when possible.

When I woke up on April 2 to learn that more than six million Americans had filed for unemployment, my heart sank. That number will almost certainly increase over the next six weeks, but it would be even worse if not for the role that retailers have undertaken to hire more workers. Every retailer of the 25 that I polled has added – and are still adding – new employees to meet the increased demand (and in some cases to replace associates who are sick or in quarantine). Instacart – 300,000; Amazon -100,000; CVS – 50,000; Albertsons – 30,000; and Kroger – 20,000 – those aren’t small numbers of new people to add to the employment rolls.

The industry’s generosity has been impressive, too. I was touched to see that Ahold Delhaize USA is donating $10 million to charities for community relief during the pandemic. Albertsons, Walmart, Kroger and Amazon have also provided philanthropic donations to those in need as have many other companies in all facets of the grocery business.

It’s the smaller things that matter, too. Safeway has run several full-page newspaper ads thanking its employees for their hard work and tireless efforts during this period of crisis. Parent company Albertsons is one of many retailers that have given their associates a wage increase during the COVID-19 crisis. Merchants have provided emergency paid sick leave to their employees.

The old adage, “tough times don’t last, tough people do” certainly applies to the fabric of many who have chosen the grocery industry as their life’s work. But it’s deeper than that. The resolve, dedication and selflessness demonstrated by so many in the past month defies any praise I can offer.

It’s why this is a great business.

‘Round The Trade

It appears that Save A Lot, the beleaguered St. Louis area discount grocer, has completed phase one of its transformation plan. And part of that plan does not include Onex Corporation, the Canadian hedge fund which acquired the discounter from Supervalu in 2016.  Now that Save A Lot has recapitalized and pared about $500 in debt, we believe the plan might include a Chapter 11 filing. That might be an important lever for Save A Lot to use to attempt to gain lease relief at its approximately 350 corporately-owned stores, most of which sources have told us the company would like to sell to its licensees. Independently owned Save A Lot stores generally perform at a higher level than the retailer’s company-owned units. Real estate firm Hilco and financial advisers the Cypress Group and PJ Solomon have been retained to deal with landlords, franchisees and directly with Save A Lot. With the recapitalization announcement and the departure of primary owner Onex completed, the next six weeks will be interesting to watch to see how many corporately-owned stores the “new” Save A Lot can actually sell. If it can successfully maneuver its plan, Save A Lot could transform its self into primarily becoming a wholesaling and marketing organization with perhaps a handful of corporately-owned stores.

Village Super Markets, with a successful bid for five stores and the perishables distribution center (PDC), has emerged as the big winner in the auction to acquire stores from Fairway Market, which declared bankruptcy on January 23. The results of the auction were posted in a U.S. Bankruptcy Court document after 5:00 p.m. on March 25. All told, there were three successful bidders for Fairway’s 14 stores including Seven Seas Georgetowne LLC, a Key Food member owned by brothers Paul and Pat Conte, who acquired the Ralph Avenue store in Brooklyn which Fairway opened in October 2019. The Conte brothers operate about a dozen stores in Manhattan, Brooklyn and Queens including three Food Emporiums (former A&P-owned stores) in Manhattan. The Ralph Avenue location was another A&P property (Waldbaum’s) that Fairway acquired at auction. The Bankruptcy Court considers the Village and Seven Seas acquisitions to be “going concern” deals. Additionally, Amazon Retail LLC has purchased the real estate leases for the stores in Woodland Park, NJ and Paramus, NJ.

Village’s winning bid includes four of Fairway’s Manhattan stores (Upper West Side, Upper East Side, Chelsea and Kips Bay) as well as Fairway’s production and distribution center (PDC) in the Bronx for a purchase price of $76.2 million. That differs slightly from its original “stalking horse” bid which included all five of Fairway’s Manhattan units (its Harlem store is not part of this deal, although the parking lot adjacent to that store was agreed to be purchased by Village). It does, however, also include Fairway’s Pelham Manor, NY unit (Westchester County) that both Bogopa and, reportedly, Amazon bid on. Seven Seas’ winning bid for the Georgetowne store in Brooklyn was approximately $5 million. Amazon’s successful bid for the leases in Paramus, NJ and Woodland Park, NJ was $1.5 million. Bogopa, which sought to acquire six stores from Fairway as well as its PDC in the Bronx by making a late “overqualified” bid for $75 million, was shut out in the bidding process, although it was listed as back-up bidder for the stores and the PDC that Village is set to acquire. And Amazon, which reportedly was interested in four stores – Pelham Manor, Brooklyn (Ralph Avenue) and the two New Jersey stores – was only successful in gaining control of the latter two units, although it was listed as a back-up bidder for the Ralph Avenue unit ($4.6 million for the lease only).

The financial breakout of Village’s purchase is: $27 million for the Upper West Side/Broadway location, plus an additional $1.89 million in inventory; $27 million for the Upper East Side/86th Street Store, plus an addition $1.4 million in inventory; $2.6 million for the Kips Bay/2nd Avenue store, plus $1.42 million in inventory; $4.1 million for the Pelham Manor store, plus $1.84 for the inventory; $100,000 for the parking lot at the Harlem store; $0 for the Chelsea/West 25th Street store, but $920,000 to acquire the supermarket’s inventory. Village, controlled by the Sumas family, currently operates 30 ShopRite supermarkets (two in Maryland) and three Gourmet Garage units in Manhattan. It is Wakefern’s second largest member and its only publicly-traded operator.

Fairway Market said it will continue to serve its communities by operating all of its stores, including stores not sold during the court-supervised auction, and intends to do so for the foreseeable future to accommodate the current public need for groceries. “We are pleased with the outcome of the auction and are grateful for our dedicated and hard-working employees, suppliers and distributors during this process which has taken place in these unprecedented times,” said Abel Porter, CEO at Fairway Market. “Serving our community has always been our top priority and we remain committed to providing quality items and a safe shopping environment for our customers and our employees during this global health crisis.”

According to court documents, 38 parties offered bids for the high-volume units. According to the March 25th filing, a hearing to approve the sale will be held on April 14. The deadline to object to the proposed sales transactions was April 1. With the auction results made public that leaves six stores that did not receive offers (or successful bids) including units in Westbury, NY; Plainview, NY; Douglaston, NY; Brooklyn, NY (Red Hook); Manhattan, NY (Harlem) and Stamford, CT. Additionally, concerning any unsold stores, the Bankruptcy Court document noted that if Fairway (and its debtors) determines to open up a new bidding process for parties which have not been the subject of an offer to purchase accepted by the sellers and the affiliates owning the assets of such supermarket as of the conclusion of the auction, “sellers shall provide buyer with prior written notice of such determination.”

In other Village news, the company also posted its Q4 sales earnings and the results were less than stellar. Earnings for the 13-week period ended January 25 plummeted 53 percent. The Springfield, NJ based retailer attributed much of the decline to increased price investments – ShopRite’s chainwide commitment to everyday low prices on items customers purchase most frequently – ShopRite’s Right Price Promise – which was introduced in October 2019. Net income for the 13-week period was $2.01 million compared to $7.57 million in the 13 weeks ended January 26, 2019. Sales for the period were $437.4 million, an increase of 2.2 percent compared to the 13 weeks ended January 26, 2019. Overall sales increased due to the opening of the Stroudsburg, PA replacement store on November 1, 2019, the acquisition of Gourmet Garage on June 24, 2019 and a same store sales increase of 0.1 percent. Same store sales increased due to continued sales growth of the Bronx, New York City store (which opened on June 28, 2018), recently remodeled or replaced stores and continued growth of ShopRite from Home including expansion to five additional stores.

In addition to the Fairway store sell-offs, two other bankrupt firms – Lucky’s and Earth Fare – have officially sold some of their stores to new buyers. At Lucky’s, 23 of its original 39 stores were sold at auction on March 27 with Aldi gaining six Florida locations for $7.8 million and Publix buying five units for $11.5 million, all in the Sunshine State too. Southeastern Grocers (SEG) also grabbed four Florida units for $2.4 million and original owners Bo and Trish Sharon came away with two Colorado units. Total proceeds from the auction was $29 million. Six current Lucky’ stores in Colorado, Ohio, Michigan and Missouri will remain open. At Earth Fare, most of its 50 stores have gone unsold. However, a group that included original owner Roger Derrough acquired five stores in North Carolina, Virginia, Georgia and South Carolina as well as the company brand and intellectual rights. It also named Bethany Turon, former senior VP-human resources for the Asheville, NC-based retailer, its new chief executive while former Earth Fare executive Mike Cianciarulo joins as chairman. Other winners in the derby included SEG with four Florida stores,  Whole Foods (Chattanooga, TN and South Asheville, NC, near Earth Fare’s headquarters) and Aldi (one store in Tallahassee, FL).

Costco Wholesale has made a move that it hopes will help expedite delivery of certain items it sells at its 547 club stores in the U.S. and Puerto Rico. The Issaquah, WA-based club store merchant has acquired Innovel Solutions, provider of third-party end-to-end logistics solutions with nationwide capabilities. Innovel was a subsidiary of Transform Holdco, LLC, parent firm of Sears and Kmart stores. The purchase price of $1 billion was funded from the Costco’s existing cash balances. Innovel has for decades provided Sears and, more recently third parties, with “final mile” delivery (ah, the puzzle of “the last mile solution”), complete installation and white glove capabilities for big and bulky products. Products served through Innovel include major appliances, furniture, mattresses, televisions, grills, patio products, fitness equipment and wine cellars. Costco noted that Innovel consistently ranks in the top quartile of customer satisfaction scores. Innovel currently employs more 1,500 people and operates 11 distribution/fulfillment centers and more than 100 final-mile cross-dock centers, with over 15 million square feet of warehouse space. The company also operates dedicated call centers. Costco has been a customer of Innovel since 2015. According to Craig Jelinek, Costco’s chief executive: “We have had a great relationship with Innovel and share a philosophy of taking care of our members. We believe the acquisition will allow us to grow our e-commerce sales of big and bulky items at a faster rate.” Under Costco’s ownership, Innovel will continue to serve Sears and other existing third-party customers. Costco currently operates a total of 786 warehouses including 100 in Canada, 39 in Mexico, 29 in the United Kingdom, 26 in Japan, 16 in Korea, 13 in Taiwan, 11 in Australia, two in Spain and one each in Iceland, France, and China. Costco also operates e-commerce sites in the U.S., Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia.

An interesting story from the non-profit news organization ProPublica, which reports that thanks to a concerted lobbying effort, Walmart narrowly avoided being indicted by U.S. Department of Justice for indiscriminately dispensing opioid pills/prescription by its in-store pharmacists.

It might not be opening a second headquarters in New York City, but Amazon hasn’t lost interest in the nation’s largest market. “Godzilla” is reportedly purchasing the former Lord & Taylor flagship store on 5th Avenue in Manhattan for a whopping $1.5 billion. The iconic structure (which my late mother used to pray, er, shop at about once a month) encompasses 660,000 square feet and is 11 stories. It will serve as the company’s Big Apple headquarters. According to Bloomberg, Amazon has secured another California location to open its second grocery store (which still has no name). The site is in Irvine, CA (Orange County), about 65 miles form the originally planned site in Woodland Hills. And regarding the two New Jersey Fairway market leases that Amazon acquired at auction in late March, one of my sources told me that they will also operate under the new retail supermarket concept but may not open this year because of major remodeling plans (and now COVID-19). Not that it needed much help anyway, but Amazon (as well as other e-commerce/delivery firms) has certainly benefited from the amount of groceries that are now being delivered during this health crisis. Will any of that momentum carry over once the pandemic has passed, and “Godzilla” actually opens a few new supermarket-type outlets?

Local Notes

Giant Food has launched a new “rewards” program giving customers more opportunities to save and earn rewards through in-store or online purchases. Renamed “Giant Flexible Rewards,” the Landover, MD-based chain’s program offers customers three categories to earn and redeem points: gas savings, grocery savings and special rewards (free grocery items). “We are delighted to expand our popular Giant Gas Rewards program, which allows shoppers to earn savings against the purchase of fuel at Giant or participating Shell stations,” said Ryan Draude, director of loyalty at Giant. “By giving customers the power to customize their rewards, shoppers can choose rewards that fit their lifestyle every time they redeem. This launch is the first step toward more rewards for every Giant customer where they feel appreciated for each interaction with us – in store or shopping online. Soon, there will be more ways to earn and redeem points, and exciting partnerships that will include supporting local charities in our communities.”

Weis Markets recently reported sales and earnings increases for both its recently completed fourth quarter and 2020 fiscal year. During the 13-week period ended December 28, 2019, the Weis’ overall sales increased 1.1 percent to $902.4 million compared to the same period in 2018, while Q4 comparable store sales increased 1.4 percent. Income from operations in the fourth quarter totaled $23.0 million compared to $15.5 million in the same period in 2018. The Sunbury-PA-based regional chain also saw fourth quarter net income increase of 42.6 percent to $18.9 million compared to $13.2 million in 2018, while earnings per share totaled $0.70 compared to $0.49 per share for the same period in 2018. Weis attributed its increases in fourth quarter 2019 sales and comparable store sales to targeted holiday promotions through its loyalty marketing program and continuing improvements in store level efficiencies and price optimization. For the full 52-week fiscal year, Weis’ overall sales rose 1 percent while comp revenue grew by 1.5 percent. Income from operations increased $2.0 million, or 2.4 percent to $84.6 million over the same period in 2018. The publicly-traded but closely-held retailer posted a net income increase of 8.4 percent to $68 million compared to $62.7 million in 2018 while earnings per share for the same period increased $0.20 to $2.53 per share. Weis said that sales over the past 12 months continued to benefit from investments in its “Low, Low Price (LLP)” program which offers price reductions on 7,000 private-brand items. Weis also said that volume also benefited from targeted loyalty marketing programs, varied promotions and advertising in key markets. “We made significant forward progress in 2019 by driving sales with targeted merchandising and marketing programs, significant price investments and improved in-store execution, which sustains our growth program,” said Weis Markets chairman and CEO Jonathan Weis. “The result was a 1.5 percent increase in annual comparable store sales in 2019. During the year, we also expanded online ordering with in-store pickup and home delivery to 184 stores which resulted in more than 250,000 orders and a 115.4 percent increase in online sales.”

More Weis news: Donna Banks-Ficcio has left the regional merchant to join UNFI in its Central Region. Banks-Ficcio, a veteran of the retail grocery wars, joined Weis in 2017 and most recently served as VP-center store sales and merchandising. She’s familiar with the Minneapolis area from her days at Supervalu from 2015-2017. UNFI has also added Jack Clare to its team as chief information officer (CIO). Clare joins the Providence-based wholesaler/retailer from Dunkin’ Brands where he served in a similar capacity.

Ahold Delhaize USA’s Carlisle, PA-based “brand” will now be called The Giant Company, and its new logo features oversized red letters, including a highlighting of the “a.” “For nearly a century, we’ve been a trusted part of the communities we serve, helping families come together to share a meal and create special memories,” said president Nick Bertram. The new look will be utilized for all the company’s banners – Martin’s, Giant Heirloom Market, Giant Direct and Martin’s Direct have been refreshed. The new logo will become fully integrated in all Giant branding over the next 12 months.

The Coastal Companies, Savage, MD, one of the largest produce distributors in the Mid-Atlantic region recently announced that it acquired another large produce wholesaler – Lancaster Foods from Guest Services, Inc., a hospitality management company based in Fairfax, VA. Lancaster Foods joins Coastal Sunbelt Produce, East Coast Fresh and Hearn Kirkwood as subsidiaries of The Coastal Companies. The acquisition will enhance The Coastal Companies’ retail presence in the region and expands Lancaster’s product offering to include grab-and-go, ready-to-eat and prepared foods. “We are delighted to welcome Lancaster Foods to our family of companies,” said John Corso, CEO of The Coastal Companies. “Lancaster Foods shares our values of quality and service. This transaction pairs Lancaster’s leading position in retail with our leading position in foodservice to significantly expand The Coastal Companies’ market reach, sourcing and value-added capabilities.” The Coastal Companies will continue to operate Lancaster Foods under its current brand name and from its existing facility in Jessup, MD. John Gates, president of Lancaster Foods, and his team will remain with the company and continue to lead the organization. In conjunction with this transaction, Gates joins The Coastal Companies board of directors and becomes a member of The Coastal Companies Executive Leadership Team. “Lancaster and Coastal have emerged as leaders in their markets. We have shared values around people and relationships. We are excited to be joining The Coastal Companies.” said Gates. “Together, our network of vendors and our portfolio of products and services will enable us to provide even greater value to our customers.” With the addition of Lancaster, The Coastal Companies expands to four facilities, more than 650,000-square feet of cold storage and processing, with a market reach that stretches from Maine to Florida. Over the coming year, overlapping retail and wholesale customer relationships will be harmonized while foodservice relationships will remain unchanged. “The company has grown because we take care of our customers, we take care of our people, and we invest in our business,” said Corso. “Lancaster Foods is a great strategic and cultural fit with The Coastal Companies. We look forward to partnering with John Gates and his team.”

Awful citizens of the month? It’s a tie between George Falcone and Margaret Cirko. Both have been charged with coughing on shoppers and/or food during the past month as coronavirus fears were elevating significantly. Falcone alleged coughed near an employee at Wegmans’ Manalapan, NJ store, telling her he was infected and Cirko coughed on about $35,000 worth of food (which had to be thrown out) at a Gerrity’s store in Hanover Township, PA (Luzerne County). Both idiots were arrested and charged with several offenses, including making terroristic threats, a felony. Perhaps permanent gaggings would solve their problems.

From our obit desk, we have several deaths to report. Dr. Tom Haggai, who began his adult life as a Baptist pastor in High Point, NC and gained industry fame and respect as CEO of IGA, passed away last month at age 89. Dr. Tom was truly an amazing person, not only reshaping the global retail marketing organization for more than 40 years but helping so many others in the industry with his wisdom and intellect. So, here’s “my” Dr. Tom story. About five years ago, after attending a Bozzuto’s trade show at Foxwoods in Connecticut, Tom and I shared a hired car back to the airport in Providence. We both had flights to catch within two hours of leaving the casino. As we’re driving on Interstate-95, the car hits something in the road causing a flat tire. Knowing we were pressed for time, Tom looked at me and said, “Jeff, let’s go fix it ourselves.” I said to Tom, “Great idea, but there’s no way I’m going to let you replace the tire when cars are whizzing by at 70 miles an hour.” He said that if we didn’t do it, we’d both miss our flights. Fortunately, the driver had called his company, which dispatched another vehicle fairly quickly. But even in his 80s, I’m pretty sure he would have tried to fix the flat if he’d had to.

Also leaving us was Bob Aders, former CEO of FMI. I knew Bob pretty well in the early years of Food World. He was the man most instrumental in bringing together the Super Market Institute (SMI) and the National Association of Food Chains (NAFC) in the late 1970s. His leadership as FMI’s first chief executive helped shape the foundations which today is the grocery industry’s largest retail trade association. Before his FMI career, Aders served as chairman of Kroger and as undersecretary of labor during Gerald Ford’s regime. And I can attest he could bend his elbow pretty well and tell some very funny jokes.

“The Gambler,” “Lucille,” “Islands in the Stream,” and “Lady” (to name a few of his 21 number one country songs). Those hits only make up part of the legacy of Kenny Rogers, who passed away last month at the age of 81. Growing up dirt-poor in Houston, Rogers persevered for 10 years before finding his first taste of musical success in the late 60s with the group The First Edition, which had hits with “Ruby Don’t Take your Love To Town” and my all-time Rogers favorite “Just Dropped In (To See What Condition My Condition Was In)” – which was given new life in the “The Big Lebowski” (1998). In 1974, he began a solo career that would see him win five Country Music Association (CMA) awards as well as the CMA’s Lifetime Achievement honors in 2013. Before retiring in 2017, he sold an incredible 47 million records. He was also a popular actor, appearing primarily in a series of TV movies as Brady Hawkes, “The Gambler,” which was based on his best-selling song.

And finally, here’s a somewhat heartwarming story to share during these difficult times. Consumers who enjoy Tito’s Handmade Vodka (my personal favorite) have found another way to utilize the benefits of this quality American-made product. With hand sanitizer almost impossible to find, fans of the brand began substituting (or sharing) their need for personal hygiene (and pleasure) by applying the clear liquid to their hands and scrubbing vigorously. Great idea but at 80-proof, Tito’s alcohol content was only 40 percent, less than the 60 percent needed to be an effective sanitizer. But leave it to those ingenious minds who work at company headquarters in Auston, TX – they are now using their distillery to also produce “Tito’s Hand Cleaner.” And the best part of the story: they plan to give it all away. Stay safe!