As notable as Ahold Delhaize USA (ADUSA) has been during the past six weeks with its response of the coronavirus pandemic, vendors aren’t too thrilled with East Coast’s largest merchant. That’s because of a letter/memo sent by the company on April 7 which seemingly seeks to gain additional vendor funds for promotional deals and pandemic-related costs.
Here’s the missive:
“The leadership teams from our great local brands across Ahold Delhaize USA would like to thank you for your continued support throughout the COVID-19 pandemic. Your partnership during this unprecedented time is both appreciated and valued. There is of course extraordinary retail demand, and we recognize it is very difficult times for all of us as we navigate COVID-19. To help meet increased demand in stores, we are creating more than 20,000 employment opportunities in total across our local brands. We have the opportunity to make a difference for our associates, customers and communities in the future, and we are counting on you as part of this journey. As we continue to meet the increased demand, we need your help in making sure we deliver on our commitments. These include: Securing necessary product levels. Your dedicated efforts to increase supply to our local brands is paramount as we work together in partnership. Increasing allocations, finetuning assortments in conjunction with our category teams, and being both creative and flexible in how we think about rapidly bolstering our supply chain networks will be foundational to our collective response. Trade rates need to remain whole for the year. We understand promotional activity will see some potential adjustments in the coming weeks, while supply replenishment remains the priority. We do expect that when the situation stabilizes, commercial elements will be made whole for each Ahold Delhaize USA brand. We will partner to make adjustments to the detailed plans to reflect the demands, but it is imperative total trade rates are delivered. Pandemic-related costs will be evaluated. As we continue to evaluate the impacts of this pandemic on our business, we will review ancillary costs we are incurring and revisit with each supplier as needed at a later date. We could not serve our communities without your partnership, especially during times of crisis when we all are needed most. We know that your teams across the supply chain are wholly dedicated and working tirelessly. Thank you for your continued collaboration. We will provide additional communication as we navigate these unprecedented times, and please reach out with any questions.”
Where should I begin? Bad timing, mixed messaging and seemingly little concern or empathy for what costs the vendors have had to bear to keep their plants open and their supply chains as efficient as possible during this crisis. “It’s nice of them to say we’re ‘appreciated and valued,’” said a senior VP at one of the country’s largest CPG firms. “Then in the same letter, they expect us to make whole on our trade rates when just getting product to our customers has been a Herculean effort. And on top of that, we might be liable for their increased pandemic-related costs, too? Did I just read their comps were up substantially in March and I’m sure their earnings will be healthy, too? If this is such a rational approach, find me other customers who have asked to be compensated in a similar manner.”Another local brokerage executive noted; “I really thought the company had moved on from the greedy trade rationalization days, but this memo indicates they’re still operating with the same DNA. As big as Ahold Delhaize may be, our clients have said they might not get first bite of the apple once things begin to normalize again.”
A spokeswoman for ADUSA said the intent of the letter was to be transparent and let the suppliers know that “we have some expenses to deal with. Certainly we are very appreciative of the work that our vendors have done during these incredibly challenging times.” For the record, we reached out to other major retailers both regionally and nationally, and only one – SpartanNash – admitted they had sent a similar letter. However, the Michigan-based wholesaler/retailer sent a letter of apology to its suppliers (signed by two EVPs including former ADUSA senior VP Walt Lentz, acknowledging the first letter was not sent with proper approval – it was sent by the two SpartanNash transportation executives; ADUSA’s letter was sent and signed by the company five division presidents and its CEO Kevin Holt). I think Holt and company owe the vendors a big apology, too.
At corporate Ahold Delhaize’s annual meeting held in Amsterdam earlier this month, CEO Frans Muller announced that its outlook for the remainder of the year was “uncertain.” What is certain is that the big retailer’s U.S. stores produced a 34 percent comp store sales increase in March and it expects its underlying operating margin for Q1 to “be above the prior year.” Ahold Delhaize will release its full financial report including earnings on May 7. What made the meeting notable was that other than a few company executives, the meeting room was empty as shareholders were urged to listen, vote and ask questions online. The fact that Ahold Delhaize was even able to hold a meeting was impressive, but you won’t be seeing many more industry gatherings of any type anytime soon.
Save A Lot Seeks To ‘Transform’ With Recapitalization, New Investors
Save A Lot, the beleaguered St. Louis area discount grocer, has completed phase one of its transformation plan. And part of that plan apparently does not include Onex Corporation, the Canadian hedge fund which acquired the discounter from Supervalu in 2016. According to my sources, the new investment group includes Bain Capital, Incapital, J.P. Morgan, CDPQ and Arborlane who helped Save A Lot recapitalize about $500 million in debt and add a capital infusion of $350 million. We believe another other future component of its transformation plan may 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 few months 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 itself into primarily becoming a wholesaling and marketing organization with perhaps a handful of corporately-owned stores. Then again, we’re talking about a company currently led by two of the most inept leaders (CEO Ken McGrath and COO Kevin Procter) currently employed in the retail food business. Unless they can make peace with many of their licensees, it’s hard to envision how this new plan will lead to success…Albertsons and Kroger, the two largest unionized grocery chains in the country, have joined the UFCW International in urging federal and state officials to designate their store level associates as “extended first responders” which would allow them to gain faster access to coronavirus testing and accelerate the process to get protective gear. In a related matter, the UFCW has launched a national campaign that emphasizes the need for consumers to wear protection and practice social distancing to reduce the potential spread of the disease. Called #ShopSmart, the campaign will utilize all forms of media to spread the word. “This is not union versus non-union, nor is it about politics or party. This is about life or death. Workers are being exposed and they are dying. We’ve seen the deaths of grocery workers from Walmart, Trader Joe’s and in food plants,” said UFCW International president Marc Perrone in a virtual press conference held on April 13. “As of today, based on our most recent estimates, at least 30 of our members have died across all industries, and nearly 3,000 are no longer at work because they’ve been exposed to somebody who’s sick or they’re sick themselves.” The UFCW currently represents about 900,000 members, most of them employed at grocery stores…and in direct reference to Perrone’s comments about “food plants”: no company has been more impacted than Smithfield Foods, whose Sioux Falls, SD pork processing plant is now closed after 518 employees and 126 non-employees connected to Smithfield tested positive, making that facility the largest cluster zone in the country, according to the New York Times, surpassing the number of cases (585) diagnosed on USS Theodore Roosevelt in Guam. On April 17, there were about 1,000 COVID-19 cases in the entire state. The Sioux Falls plant employs 3,700 associates. Subsequently, Smithfield facilities in Missouri and Wisconsin have also closed. Other meat processors JBS, Cargill and Tyson have also been forced to close facilities (some temporarily) leading to a major supply chain issue in beef, pork and chicken…an interesting story from the non-profit news organization ProPublica, which reports that because of 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…my buddy Jim Donald recently joined the board of Nordstrom’s. Jim is currently co-chairman of Albertsons and has toiled for many other food related firms – Publix, Walmart, Safeway, Pathmark and Haggen. It’s like he just can’t let himself really retire.
‘Round The Trade
During the past month, two of the largest industry events – the IDDBA show in Indianapolis and the Summer Fancy Food Show at the Javits Center in Manhattan – pulled the plug and it’s entirely possible that all industry meeting and conferences (as well as sporting events and concerts) will be postponed until next year.
Trader Joe’s will open its second Delaware store (probably in 2021) in Christiana. The site will be the former Saks Off 5th Avenue site in the Christiana Fashion Center. TJ’s only other “First State” store opened in 2003 on Concord Pike in Wilmington, not far from the Pennsylvania state line. Trader Joe’s also announced that it will open its second unit in Richmond, VA at the site of the old Martin’s/Ukrop’s site at the junction of Stony Point Road and W. Huguenot Road. That unit should open in 2021 as well…speaking of store openings, Sprouts opened its fourth Maryland unit on April 15 (one of the handful of new stores to open nationally during the pandemic) in Pasadena. It was nice to see senior VP Dan Croce and his team practicing proper social distancing and utilizing personal protective gear as they cut the ribbon on the former Shoppers Food unit (see photo here). In other Sprouts news, Gillian Phipps, former VP-branding, marketing for Kroger’s own brands, has joined the Phoenix, AZ-based retailer as its new senior VP and chief marketing officer.
From our obit desk, we have several deaths to report, two that are COVID-19 related. I was deeply saddened by the death of Steve Ravitz, 73, the patriarch of the Ravitz family, which owns five ShopRites and a Price Rite in southern New Jersey. He succumbed to the virus earlier this month after a nearly two-week hospital stay. Steve was truly a larger than life person who helped build one of New Jersey’s finest supermarket companies and was also one of the most philanthropic people you’ll ever meet. And he was so proud of his children, three of whom – Brett, Jayson and Shawn – followed Steve (and their grandfather Stanley) into the business and have built wonderful reputations of their own. So, of all the Steve Ravitz stories (and there are many), here’s my favorite. About 15 years ago, I was at now-defunct Calder Race Track in Miami Gardens, FL with a friend who owned a few thoroughbreds and wanted to attend an upcoming horse sale at the track. As we’re walking around the grounds at Calder inspecting the horses who would be put up for sale, somebody tapped me on the shoulder. “I don’t think you can do any meaningful reporting at a place like this,” a voice said. Sure enough, it was Steve, who was known to have been around a racetrack once or twice. I recall ending up at the bar, enjoying a good laugh and of course, talking about the business
Just before presstime we learned of the death of Harold “Hank” Greenberg, who for nearly 40 years was a fixture in the Delaware Valley food business from his days at Penn Fruit and Food Fair. The Philadelphia native moved to Chicago in 1982 to accept a senior position at Certified Grocers Midwest (now defunct) before being named president of the wholesale co-op in 1988. In the early days of my career shortly after we acquired Food Trade News in 1978, Hank served as a mentor, helping me understand the nuances of the Philly market with his kindness and 30-pound brain. Hank, who was living in Jupiter, FL, was 93 when he left us.
During the past month we lost a couple of notable musicians. The great singer-songwriter John Prine, 73, has left us after contracting COVID-19. Simply stated, Prine was one of my all-time favorite musical artists. With his nasally, scratchy voice, the former Chicago area mailman created some of America’s finest country and folk songs during a nearly 50-year career. As entertaining as he was live, Prine’s biggest mark was as a songwriter and he penned powerful, and often witty, lyrics that were beautifully interpreted by such artists as Bonnie Raitt (“Angel From Montgomery”), Joan Baez (“Sam Stone”) and 10,000 Maniacs (“Hello In There”). Prine, who beat cancer twice, hadn’t recorded an album of new material in 15 years before he released “The Tree of Forgiveness” in 2018, which helped earn him a lifetime achievement Grammy Award earlier this year. One of my favorite Prine songs – “When I Get To Heaven” – from that album included these “Prine-ian” lyrics: “When I get to heaven, I’m gonna shake God’s hand; Thank him for more blessings than one man can stand; Then I’m gonna get a guitar and start a rock & roll band; Check into a swell hotel – ain’t the afterlife grand?”
A contemporary of Prine’s who was also admired for his great songwriting skills, Bill Withers, has died, too. After serving in the Army for nine years, Withers learned to play the guitar, which ultimately led to a meeting with music producer Clarence Avant. Avant liked his original songs and introduced him to legendary keyboard player Booker T. Jones (Booker T. & the MGs). They recorded his first album “Just As I Am” in 1971, which included arguably Withers’ biggest hit – “Ain’t No Sunshine.” Other hits included “Lean On Me” (1972), “Use Me” (1972), “Lovely Day” (1977) and “Just The Two Of Us” (1981). After clashing with music executives over studio control, Withers quietly retired from the business in 1985, although he did continue to perform sporadically over the years. Bill Withers was one of the most unsung talents of the past half century. He was 81 when he died…and just before presstime, we learned that the long-delayed Stop & Shop acquisition of King Kullen could be completed by April 30. The deal, which was first announced in early January 2019, has been delayed because of FTC concerns regarding store overlaps. Stay tuned, more to come.
Food Industry Displays Its Brightest Colors During The Most Difficult Time Of Our Lives
Who could have imagined the last 45 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 six weeks. And clearly there are more challenges and heartbreaks 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.
Yet despite the depression I, like many others, believe in the deep resolve of our people and culture 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 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 continues to do an unbelievable job of providing food and service to America’s consumers despite facing huge and increasing 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 realities 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 line to produce more product focusing on their most popular brands while also adding an extra work shift when possible.
As I write this piece on April 16, more than 22 million Americans have filed for unemployment benefits during the past three weeks alone. That number will certainly increase over the next month, 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 new employees to meet the increased demand (and in some cases to replace associates who are sick or in quarantine). Instacart – 300,000; Amazon – 175,000; Walmart – 150,000; CVS – 50,000; Albertson – 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 and many merchants have provided emergency paid sick leave to their employees.
The old adage, “tough times don’t last, tough people do” certainly applies to 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 six weeks defies any praise I can offer.
It’s why this is a great business.