In 2020 Ahold Delhaize had its most active acquisition year since the merger of the two Dutch chains in 2016. It purchased 62 Bi-Lo units and a distribution center from Southeastern Grocers and folded those units in to its Food Lion brand.
Later in the year, Ahold Delhaize acquired New York based e-grocer Fresh Direct to supplement its growing omnichannel initiatives (for $327 million for its 80 percent stake) and you can expect more acquisition opportunities in the near future. That’s according to Frans Muller who recently told the Financial Times that he expects more opportunities to acquire U.S. retailers.
“We expect more consolidation. Smaller businesses can struggle to find the capital to invest in e-commerce. There are still a lot of family-owned companies, or firms where there is no succession in place,” he told the London-based business journal, adding that the American market remains very fragmented, especially on the East Coast.
In addressing future e-commerce opportunities, particularly grocery delivery, Muller said the economics of online food retailing were significantly different in the U.S. “Home delivery is very costly in a low-density market. But a lot of U.S. consumers are passing a store on their way to or from work and it only takes about three minutes to collect groceries,” the 58-year-old chief executive told the Financial Times.
At Ahold Delhaize USA (ADUSA), the retailer has reached the first significant milestone in its effort to become a fully self-supplied company by Q4 2022. The big retailer announced that it has transitioned procurement at its Freetown Grocery DC in Assonet, MA from a third-party vendor (C&S) to a self-managed network, providing direct control of inventory and replenishment at this facility.
“Our work to transform the supply chain to an integrated self-distribution model of the future is not only on-time, but ahead of schedule,” said Chris Lewis, executive VP-supply chain for Retail Business Services (RBS), ADUSA’s services company. “Today marks an important milestone in our journey with the transition of procurement at this facility, and we’re looking forward to other facility transitions this year. On top of that, we’ve launched new programs to begin to help us as we optimize the network at scale.”
Freetown Grocery was built in 2004 and is a 1.1 million square foot facility fulfilling grocery demand for the Stop & Shop brand. Stop & Shop continues to own the facility and fulfill orders, while ADUSA Procurement manages replenishment and inventory.
“This transition is an important one for the Stop & Shop brand because it gives us more control and ultimately enables us to better serve our stores and our customers at more than 200 Stop & Shop locations across Massachusetts, Connecticut and Rhode Island,” said Jim Labrecque, VP- distribution operations at Stop & Shop.
The Freetown unit is the first of six distribution centers to transition services into the self-managed network in 2021. In addition to Freetown’s grocery operations, a fresh facility in the same complex, a distribution center in Jessup, MD (for Giant Food) and a distribution center in Carlisle, PA (for The Giant Company), will also transition procurement services into the self-managed network in 2021.
Moreover, ADUSA Distribution will open new facilities in Mauldin, SC (formerly a Bi-Lo warehouse) and Manchester, CT. Construction is also well under way for two new fully automated frozen depots in Plainville, CT (which will supply Stop & Shop stores) and Mountville, PA (which will supply The Giant Company and Giant Food stores).
The shift to a fully self-supplied distribution network was originally announced in December 2019 and is estimated to cost approximately $480 million. The move primarily involves Giant Food, The Giant Company and Stop & Shop, all of which relied on C&S to provide many third-party services. The original Delhaize America brands – Food Lion and Hannaford – have long been directly supplying their stores from warehouses in North Carolina (and other states) and Maine respectively. Lewis noted that the massive project is ahead of schedule.
‘Round The Trade
We have a few sales and earnings to report on, including Costco’s second quarter financials which featured a 13 percent comp store revenue increase (10.3 percent in the U.S.) and an e-commerce sales gain of 91.1 percent. Additionally membership fee income jumped by 8 percent to $881 million from 59.7 million households. On the profit front in Q2, which ended on February 14, earnings were $951 million compared to $931 million in the corresponding period last year. A few weeks after the quarter ended on March 1, Costco raised the minimum wage for its U.S. associates. Depending on location, starting pay now begins at between $15.50 and $16.50 per hour.
Sprouts also enjoyed an excellent fourth quarter in fiscal 2020, but unlike many retailers, the perishables-driven merchant fared better in the profit column than the sales one. Not that revenue was bad (up 8 percent with an adjustment for an extra calendar week) but earnings zoomed 25 percent to $588 million. Those profit numbers follow a similar trend in other recent quarters since former Walmart executive Jack Sinclair took the helm in September 2020 and reformulated Sprouts’ mission to achieve higher margins by reducing promotional pricing, simplifying its offerings and focusing on core issues such as decreasing shrink and focusing its efforts to improve supply chain efficiency (Sprouts will open a new distribution center this month in Aurora, CO and another in Orlando, FL late in 2021). Also helping Sprouts’ recent numbers was e-commerce growth – a 290 percent increase for the year. The Phoenix, AZ-based grocer said that its digital platform now contributes about 11 percent of total sales. Sprouts is also slated to open 20 new stores this year, 10 in the Sunshine State alone, but none in the Mid-Atlantic or Northeast.
UNFI and its largest customer, Whole Foods/Amazon, have extended their current supply agreement by two years. The current 10-year contract was originally signed in 2017 and will expire at approximately the same time as another supply agreement that Amazon signed last year with wholesaler SpartanNash to presumably supply “Godzilla’s” expanding Amazon Fresh conventional store model. The Providence, RI-based distributor also posted some strong numbers in its recently completed second quarter. Net sales jumped 7.1 percent to $6.9 billion and net income was $57.9 million, compared to a loss of $414.6 million a year ago. Debt was also reduced by $250 million, leaving UNFI with remaining debt of about $2.5 billion, the lowest since the company purchased Supervalu in 2018. CEO Steve “Spinmeister” Spinner said that he has agreed to stay on as chief executive until a successor is named, noting, “COVID has made the process a bit more complicated and the board has asked me to extend my timeline in order to be sure that we continue to have a comprehensive process. I’m committed to staying until I can turn the reins over to our new CEO. I’m confident that UNFI will have a new and exciting leader later this year.”
Local Notes
Wegmans is very close to gaining approval for its proposed new store in Lower Makefield Twp., PA (Bucks County). The township’s planning commission recently voted unanimously to recommend final land approval for the project which includes Wegmans and other stores at the entire 37-acre mixed use site. Next and final step is approval from Lower Makefield’s board of supervisors which could happen in the next 30 days. If the store does get built, expect a battle royale among the uber-retailer and competitors McCaffrey’s and The Giant Company, which both operate high volume supermarkets about 1.5 miles away in Yardley. And while Wegmans usually is successful in completing new store projects it has planned (one notable exception is the proposed store in Marple, PA that was pulled from consideration in 2018 due to developer issues), it did recently choose to not go forward with three stores it had planned to build. In Middletown, NJ the merchant withdrew from a proposed 130,000 square foot unit citing COVID-related considerations; in Arcola, VA it also terminated a deal (after reconsideration, Wegmans felt a third store in Loudoun County would cannibalize existing sales); and a Cary, NC unit on Cary Towne Boulevard will also not be built (COVID-related considerations). One proposed new store that is moving forward, according to delawareonline.com, is the first Wegmans store in the First State. Construction is expected to begin later this year for a planned 2022 opening at Route 141 and Lancaster Pike in tony Greenville, DE. And for some real brick and mortar news, last month Wegmans opened its third store in the Research Triangle area of North Carolina. The 100,000 square foot unit in Chapel Hill will soon be followed by another new Wegmans in Wake Forest (slated to open in May). The Rochester, NY-based uber-retailer also has plans to open another new Raleigh-Durham-Chapel Hill area store in Holly Springs.
Lidl has raised the starting wage for all employees at its seven Philadelphia-area stores to $15 hour, which will impact about 150 associates. Elevating starting pay for its associates is a policy that the German discounter has pursued over the past year. Earlier this month at its 15 Long Island stores (formerly Best Markets), employees received a bump in starting wage from $15 to $16.50 an hour, and at its 13 Atlanta area units, associates’ starting pay was raised from $12.50 to $15 an hour. The Philadelphia area stores affected are in Exton, Folsom, Lansdale, Royersford, Trooper and two in Philadelphia (Roosevelt Boulevard and Butler Street). Since the beginning of March Lidl has also opened two new units, a net new store in Woodbridge, NJ and the reopening of the former Best Market store in Franklin Square, NY.
Affinity Group, the sales and marketing agency where our buddy Bill Chiodo (ex-Acosta) is president of its new and growing retail division, has acquired Triangle Sales & Marketing and Burns & Associates, two well-established sales agencies serving the Pittsburgh and Cleveland markets. With these two transactions, Affinity Group has acquired five retail sales organizations in the last 24 months. As the businesses are quickly integrated, Jim Tepe, former owner of Triangle Sales & Marketing and Burns & Associates, will be appointed executive VP of the new Affinity Group Retail – Pittsburgh/Cleveland team, and will report to Chiodo. Jack Burns, former owner of Burns & Associates, will become VP of the Pittsburgh/ Cleveland team. In announcing the acquisitions, Enzo Dentico, chairman of Affinity Group, who cut his teeth in the foodservice channel before expanding into retail, said, “Both of the agencies we are acquiring have been doing business in the Pittsburgh and Cleveland markets for over 30 years, selling all categories and retail classes of trade, with a focus on perishables. The new team will be working from their offices in Warrendale, PA. The team, customers and clients will also have access to the brand new, state-of-the-art Affinity Group Culinary Center that is currently under construction in Pittsburgh.” Chiodo added: “Strategically, these acquisitions represent another important step in Affinity Group’s efforts to become the premier retail sales agency in the eastern half of the United States. And we want our clients and customers to know that this new team will be fully integrated into Affinity Group Retail and will be utilizing our trimester planning process, our retail reporting system, and our syndicated data-based category selling approach.”
Sadly, we have some obits to report this month, including David Mintz, the man who invented Tofutti. You can still find Tofutti (non-dairy ice cream) on retailers’ shelves, but when the New York-born Mintz unveiled his soy-based concoction in the early 80s, it took the market by storm. Mintz, who had previously owned several kosher delis in New York and also operated a successful catering business, sought to create an offering that would allow him to serve meat alongside dairy-like dishes to maintain observance of Jewish dietary laws. In 1972, a friend told him about the versatility of tofu and he trekked to Chinatown to purchase a gallon. After his restaurant closed at 9:00 p.m., he began experimenting with a formula that would ultimately lead to a blend of ingredients that he believed had a similar taste and texture to ice cream. Shortly thereafter, he said the name “Tofutti” came to him at 4:00 a.m. In 1982, total annual sales were less than $24,000. Within three years, with the help of distribution at traditional grocery stores as well as at Zabar’s and Bloomingdales, revenue skyrocketed to more than $17 million. Mintz, 89, remained chief executive of Tofutti Brands, now based in Cranford, NJ, until his death.
One of the pioneers of reggae, Bunny Wailer, has passed away at the age of 73. In his native Kingston, Jamaica, along with original members Bob Marley and Peter Tosh, Bunny helped found The Wailers in 1963. Born Neville Livingston, he changed his name to Bunny Wailer when the group was formed. By the early 70s, Bob Marley had taken control of the group and Bunny, who disliked touring, left the band shortly thereafter. During the past 40 years, Wailer developed a successful career as a solo act with a reggae style that reflected a more religious bent that aligned with his Rastafarian beliefs. He was a three-time Grammy winner for best reggae album.
And finally, Henry Goldrich is dead. Despite having never played an instrument, Goldrich’s influence on the music industry puts him among the unknown heavyweights in the biz. In fact, when asked what musical instrument he played, he’d say, “I play cash register.” Henry Goldrich, 88, was the owner of Manny’s Music in Manhattan, one of the greatest music stores and coolest places to hang. Back in the day (perhaps the heyday), Manny’s was a staple of Music Row, located on W. 48th Street (between 6th and 7th Avenues), a block that was heavily populated by music shops. It was opened by his father, Manny, in 1935, who had already built up a clientele that included many great jazz musicians of the 40s and 50s. After Manny died in 1968, Henry took over and shifted the store to include more instruments that focused on rock music. Such was Goldrich’s aura that the greatest musicians in the industry – Hendrix, Clapton, The Rolling Stones, Pink Floyd, The Who and Bob Dylan – all bought instruments at Manny’s and often hung around to engage in some banter with Henry. I can even offer you a personal link to the store. I bought my first real guitar there, a 1968 Guild D-40 (I couldn’t come close to affording the Martin D-28 that I really wanted.). Manny’s closed in 2009 and Music Row is now virtually a blip in the history of Manhattan, but in the day, Manny’s represented a slice of history that I will never forget.
