I’ll bet if I’d polled 50 retailers a year ago when the huge sales spikes created by pandemic-related fears had already abated a bit, almost all would have said that comp store revenue would decline to significant negative levels when looking 12 months forward.
However, that clearly hasn’t been the case with almost all merchants. Certainly, comp store sales have continued to decrease each month since the panic-buying/hoarding peak of March and April 2020, but retailers in the supermarket, mass and club channels have all continued to post same store sales gains for the first five months of this year that were better than 2019 levels (the last year of normalcy).
A clearer view will become more visible over the next six months when children return to actual classrooms and restaurants continue to build on recent sales and traffic momentum. Those two factors will surely create a dip in retail food revenue both with in-store visits and online ordering from the levels we’ve seen over the past year.
What’s becoming more ambiguous, however, is how much the labor shortage will continue to impact the grocery business as well as the restaurant business. Simply stated, the labor pool is the worst it’s been in three decades and even if retailers can find available people to hire, many of them aren’t particularly good or loyal, which could lead to significant turnover. Several merchants told me they hope that once the federal unemployment insurance subsidy (American Rescue Plan) expires on September 30, more potential job seekers will re-enter the labor pool. However, what that percentage may be is anybody’s guess at this point. Another factor, and one that is more predictable, is the number of people who have permanently left jobs such as store clerk or waitress during the pandemic in order to seek careers that are more stable and lucrative.
And then there’s inflation, which is rising monthly to near record levels. One retailer told me that he considered putting no meat items (except hot dogs) in his company’s July 4 ad, due to skyrocketing wholesale costs. “Should I feature sirloin steaks at $8.99 a pound just to lose a little money or will that ‘feature’ price alone insult our customers?” He ultimately decided to include the steaks in his company’s ad.
It’s not just meat that’s seen soaring prices over the past two months. Commodity costs for corn, wheat and soybeans are also escalating. And its even worse with packaging – corrugated and plastics in particular – and suppliers tell us that by early Q4 consumers will see prices that they haven’t experienced before.
One senior VP-sales for a large CPG supplier said, “When all these price increases are woven into the system and ultimately passed along, it’s going to have a profound effect on a lot of Americans. You can start at the farm, move to the manufacturing plants and ultimately to the stores’ shelves – everything is going to cost more. A lot more. Even basic supply chain issues from finding enough labor to work in plants and warehouses to the shrinking number of truck drivers will play a role in driving up prices.”
It’s going to be a lot more difficult for companies not to swallow some these stiff increases than in the past – which means there will be a lot of direct “pass alongs” to the consumer. And coupled with price hikes come product shortages with manufacturers struggling to find raw materials and some items already being placed on allocation.
Still, retailers will adjust as they have in the past. And while there are a lot of unknowns that lie ahead, retailers feel pretty good about their current situation. Business is still good to very good and many have benefited from the lessons of the pandemic and learned to improve their e-commerce games over the past 15 months, making their long-term omnichannel outlook positive.
And while most merchants don’t want to dwell in the past, retailers (supplier and wholesalers, too) deserve a huge shout-out for their courageous and selfless efforts during the worst health crisis in a century.
As I’ve done for the previous 43 years, here’s my take on the market leaders in the core Baltimore-Washington market:
Giant Food – A very strong year could have been even stronger if the perennial market leader would have had better in-stock conditions during the early part of the pandemic. Still, Giant has regained its mojo which it lost for 15 years while parent company Ahold (now Ahold Delhaize) ran the regional chain as if it was a subsidiary of Stop & Shop. That changed when Gordon Reid took the helm at Giant. Gordon’s now president of Stop & Shop (Giant Food North?) and the big merchant hasn’t lost a beat under current leader and veteran Giant executive Ira Kress. Almost every aspect of the Landover, MD-based company has improved, from store operations to merchandising and especially morale. With so much store penetration in the Baltimore and Washington markets, Giant has also done an effective job of acquiring closed chain stores and adding them to their portfolio as net new or replacement units.
Safeway – Not much movement in terms of new store openings (it opened an onsite replacement unit at its Capitol Hill unit), but Safeway remodeled nearly a dozen stores. On a broader scale, the former Eastern division was rolled into the company’s Acme unit to become part of the Albertsons Mid-Atlantic division with headquarters shifting from Lanham. MD to Malvern, PA. Also shifting was Safeway’s distribution to a more efficient warehouse in Denver, PA. Safeway also performed well during the early stages of the pandemic with much better in-stock conditions than most of its peers. Now that the Eastern division is operating in a unit with great scale, parent firm Albertsons needs to invest some money in the Baltimore-Washington market to more aggressively modernize its stores. The leadership skills are certainly there with president Jim Perkins and SVP Tom Lofland, but Safeway needs to keep pace with its traditional competitors – Giant, Wegmans and Harris Teeter – as well as the growing presence of alternative channel merchants – Walmart, Costco and Target.
Walmart – You’d think a company with the scale and clout of Walmart would have done a better job of avoiding the deep “shelf holes” we witnessed during the first two months of the pandemic, but whether it was a supply chain issue or a labor problem, Walmart clearly missed some opportunities. Overall, it was still a very good year for the Behemoth, especially aided by a ramped-up presence and execution of its digital-driven platform which included curbside pickup and “ship to store.” Last September, the world’s biggest retailer added its own order and delivery portal – Walmart+. All told, these huge investments, many made before the pandemic began, have and will continue to pay huge dividends for the company. Once again, for the third consecutive year, the Arkansas merchant did not open a single brick & mortar store, as it continues to spend heavily on e-commerce. Those investments were a game changer over the past 12 months and are designed to put even more distance between Walmart and the remaining retailers in all food channels.
Harris Teeter – A very solid year for the upscale division of Kroger which, like a lot of retailers, saw sales balloon during the first few months of the pandemic. Harris Teeter is steadily increasing its penetration in the market with new stores slated to open in Washington, DC (Howard University); Alexandria, VA; Falls Church, VA; Kent Island, MD; and a replacement unit in Arlington, VA. Harris Teeter’s strengths are not only its differentiated offerings but also its excellent locations, its store operations consistency and its strong management team led by president Rod Antolock.
Wegmans – The Rochester, NY-based uber retailer had a productive last 12 months, but it could have been a lot better if it weren’t forced to close or impose restrictions on several of its service departments including its soup, specialty and salad bars because of COVID-19. This necessity clearly impacted sales and some of those features won’t be returning, at least in their former incarnations. Wegmans’ signature play was always its stores – large food palaces that drew more customers (and higher sales) than any other food merchant in the market. While the family-owned retailer has offered a decent e-commerce platform for the past several years, its focus had been on attracting customers to its physical stores to take part in the experience. Nobody foresaw a pandemic.
Shoppers – RIP (almost). So, the sales tailwinds of COVID-19 created an opportunity for Shoppers to temporarily take down its “for sale” sign. That boom period is already waning, and it won’t be too long before the once dynamic merchant seeks to sell its remaining 23 stores. By that time, Steve “Senor Spinmeister” Spinner, CEO of parent firm UNFI, will likely have retired and the company’s other retail division, Cub Foods, will likely be up for sale, too. It’s a sad legacy for many of the company’s past and present associates who have been led on a slow and twisting journey down the rathole.
Amazon Fresh Opens First E. Coast Store; New Locations Revealed
To put it bluntly, the debut of the Amazon Fresh (AF) store in Franconia (Alexandria), VA late last month was a bit underwhelming. Of course, my view comes as somebody who’s written about the industry for almost 50 years and is more analytical than most of the 35 year olds who visited the store on opening day.
And to be fair, the new “scan & go” Dash Cart technology that AF is utilizing is impressive, if somewhat limiting – the “smart” shopping carts are designed to hold only two paper shopping bags.
The store itself reminded me of a “poor man’s” Whole Foods but with a more differentiated product mix than its big sister – conventional items like Coke, Frito-Lay, Chips Ahoy are carried that can’t be found at a WFM. At 30,000 square feet with limited fresh departments (excluding produce, which was first rate), you would be hard-pressed to do all of your weekly shopping at the former Shoppers unit. The service meat, seafood and deli departments did not offer much variety and center store varied little from a typical supermarket. Prices at the store were good, certainly not deep discount but clearly following a modified EDLP format. There was little promotional signage in the store.
Amazon Fresh utilizes the Whole Foods “365” private label as well as its own “Aplenty” brand (an awful name) for snack foods. The store is being supplied from WFM’s perishable facility in Landover, MD and the new SpartanNash distribution center in Severn, MD.
Several sources told me that the store is averaging slightly more than $300,000 a week for its first three weeks, not bad but certainly not eye-opening. Of course, there are many in the trade who believe that the goal of Amazon Fresh is to serve as another fulfillment hub for big daddy amazon.com, and even on opening day we saw several team members assembling orders that were digitally sourced.
The next AF store that will open in the DC area will be at the former Giant Food unit in Chevy Chase on Wisconsin Avenue, which should debut next month.
And just before presstime, we learned of nearly 30 new AF locations that will reportedly open in the Mid-Atlantic. In addition to the previously reported new sites in the market – Gaithersburg, MD, Fairfax, VA and two locations in Washington, DC – we have discovered that new Amazon Fresh stores will likely open in Chevy Chase, MD (Connecticut Avenue); Alexandria, VA; Arlington, VA; Bailey’s Crossroads, VA; Falls Church, VA; Lorton, VA; Manassas, VA; Springfield, VA; and a third DC location near Dupont Circle (all DC stores will be considerably smaller than AF’s 30,000 square foot prototype).
Moreover, the company reportedly plans to add stores in the Philadelphia and Metro New York markets. In addition to previously reported AF sites Bensalem, PA; Havertown, PA; Philadelphia, PA (5th & Spring Garden Streets); Warrington PA; Paramus, NJ; and Woodland Park, NJ, new stores are likely to open in Ardmore, PA; Broomall, PA; Doylestown, PA; Exton, PA; Lansdale, PA; Philadelphia (Market Street); Willow Grove, PA; Brookfield, CT; Bridgewater, NJ; East Brunswick, NJ; Eatontown, NJ; Hamilton Twp., NJ; Holmdel, NJ; Iselin, NJ; Lodi, NJ; Moorestown, NJ; Nutley, NJ; Old Bridge, NJ; Long Beach, NY; Oceanside, NY; and Plainview, NY.
And you can bet there’s an even longer list than that.
Will one Amazon Fresh store be a serious threat to other retailers in that market? Doubtful. But stringing together 100 AF stores in the DC-NY corridor would indeed have an impact. And when you add the firepower of other Amazon assets (Whole Foods and amazon.com) with the possibility of “Godzilla” acquiring several regional grocery chains in the next five years, Amazon becomes the number one issue that keeps other food retailers up at night.
‘Round The Trade
And there’s even more Amazon stuff to note: JP Morgan is reporting that “Godzilla” will surpass Walmart next year as the largest U.S. retailer. The “Behemoth’s” 2020 revenue was $559 billion last year; Amazon’s 2020 sales were $386 billion. JP Morgan’s prediction itself isn’t startling, but the projected rapidity of Amazon’s growth caught me off guard. Previous reports by other analysts and research firms predicted that Amazon would become numero uno by 2024 or 2025. Now that Washington, DC attorney general Karl Racine has filed suit against the Seattle-based juggernaut for antitrust behavior claiming that Amazon imposes onerous terms with its third-party sellers that ultimately drive up prices for online shoppers everywhere, expect other states to follow. Multiple published reports indicate that Pennsylvania, Massachusetts and Connecticut are considering similar action. Sales from Amazon approved third party sellers were $80.5 billion last year (about 21 percent of total revenue). While Amazon’s sales and earnings continue to skyrocket, there’s clearly a darkening cloud that hovers above the company. Those dark clouds include intense scrutiny from Congress, the Federal Trade Commission and labor unions. Not surprisingly, Amazon disputes the relevancy and accuracy of Racine’s suit, stating that, “The DC Attorney General has it exactly backwards – sellers set their own prices for the products they offer in our store. Amazon takes pride in the fact that we offer low prices across the broadest selection, and like any store we reserve the right not to highlight offers to our customers that are not priced competitively. The relief that the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of the antitrust law.” These will be difficult and protracted battles facing Amazon.
FMI – the Food Industry Association – has released its annual “U.S. Grocery Shopper Trends” and one of the most interesting (but not surprising) trends is that the number of online shoppers has increased to 64 percent of all adults in the U.S. The report added that 29 percent of e-commerce consumers placing an order every week, or even more frequently. And the annual research paper indicates that more shoppers are utilizing mass merchants (Walmart and Target) as their primary online choice. Another emerging trend was that 58 percent of shoppers are now eating at home, certainly a byproduct of the pandemic. “Throughout the past year, American grocery consumers have developed a deeper relationship with their kitchens, increased their healthy eating consciousness, and have learned new ways to shop. We see shoppers engaging in more stock-up trips to support their at-home cooking, exercising new online shopping skills, and letting their personal concept of being well impact their food and shopping behaviors. Looking ahead, we expect many of these trends to continue,” said Leslie Sarasin, FMI’s CEO. I generally agree but look for the “eating at home” number to drop closer to the 50 percent mark.
From Ahold Delhaize USA we learned that late last month its distribution center complex in Mauldin, SC (which it acquired from Southeastern Grocers last year) began receiving product at its dairy, meat, and produce and its frozen facilities. Shipping will begin on July 15. ADUSA is hoping to integrate 23 warehouses into a fully functioning self-supply distribution and logistics network by 2023.
And embarrassing leak of the month: according to The Financial Times, which got hold of an internal Nestle report/presentation, the world’s largest food manufacturer admitted that more than 60 percent of its food and drink offerings do not meet the recognized definition of health and that some of its items will never be healthy no matter how much re-engineering is performed. Personally, that means an abrupt end to my Nerds addiction; I’m switching to Fruity Water.
Local Notes
A tip of the hat to our friends at Eddie’s of Roland Park. The two-store Baltimore-based retailer recently announced that it will undergo a multi-million renovation at its original store on Roland Avenue in the city. The renovation of Eddie’s other store on North Charles Street, a former Acme Market, was completed in 2016 and the upgrade has proven remarkably successful.
This time, the remodel will take place in a smaller footprint – 8,500 square feet – and the store will remain open during the remodeling process. “This is incredibly exciting for us,” said Eddie’s VP Michael Schaffer, the third-generation co-owner who is helping steer the project. “It has literally been years in the planning, and my family is grateful to the longtime shoppers and devoted fans who have been cheering on this process with great anticipation.” Construction is set to begin as early as this month and is expected to last up to 15 months – including a pause during the busy holiday shopping season. Initial phase work will include the store’s basement and façade—including an expansive, steel cantilevered canopy erected front and center above the main entrance, which will provide protection from the weather, a shaded place for seating, and a location for outdoor events. “This store was destined to be a place for gathering,” stated Nancy Cohen, Eddie’s president/co-owner and daughter of the late Victor Cohen, who founded the store. “My father always felt that the key to a successful business was treating your customers like family, making them feel at home. This store is rich with history, and we hope to share some of that story through the interiors, while introducing many new elements to heighten the Eddie’s shopping experience.”
The new design will include more windows, inviting natural light into the retail space, as well as LED illumination, improved circulation, and new, energy-efficient refrigeration and freezer cases throughout the store. The shopping experience will also feel more open, thanks to an exposed wood ceiling, wider aisles, improved flow and wayfinding—along with nearly 1,000 additional square feet of retail space including all-new shelving, fixtures and categorization. Full-service departments such as deli, bakery, cheese, coffee and gourmet-to-go will receive a complete upgrade and outfitted with new equipment and modernized signage. In produce, shoppers will enjoy a significantly expanded salad bar, a centralized wine and spirits department, and—similar to its North Charles Street location—Eddie’s signature catering service will move to near the checkout, making it more convenient for customers to order. Cohen, one of the best independent retailers in the country, also summarized some of the challenges of operating during the pandemic. “The year was not without its difficulties,” admitted Cohen. “But we have a wonderful staff that really pulled together. Between our employees’ dedication, the loyalty of our community and vendors, and now this amazing project finally getting underway—there is a lot to be optimistic about and thankful for.”
Sheetz, a stellar performer in the c-store arena, later this summer will become the first convenience store retailer to accept bitcoins at all locations. The Altoona, PA based family-owned chain, with 622 c-stores in PA, MD, VA, WV, OH and NC, will work with digital payment network Flexa and its point-of-sale tech partner NCR. “Above all else, our mission at Sheetz is to continue providing our customers with the ultimate one-stop-shop where they can refuel their car and refresh their body. As a result, we are constantly innovating and exploring new offerings to truly give our customers what they want, when they want it, 24/7/365 — that includes accepting many forms of payment. We’re very excited to be working with Flexa to roll out support for cryptocurrencies and other types of digital assets at our stores,” said Linda Smith, payments manager for Sheetz.
I attended the opening of the newest Mid-Atlantic Lidl unit in Columbia, MD earlier this month and was particularly impressed with the staff who were well-trained and extraordinarily courteous. I still don’t like the idea of grocery stores inhabiting space in malls (the new store encompasses part of the closed Sears store in the Columbia Mall) and Lidl still has to prove it can maintain its sales momentum beyond the opening few weeks…two former Price Rite stores will soon have new ethnic/specialty operators. Fresh World, which operates four other stores in Northern Virginia, will take over the 52,000 square foot space in Woodbridge, VA that was once occupied by the discount division of Wakefern. That store closed in 2019.
And just before presstime we learned that Global Food, which currently operates six other stores in our region – two in Maryland and four in Northern VA – will fill the 36,000 square foot space that once housed a Price Rite in the Woodlawn section of Baltimore County (Security Boulevard). Price Rite closed that location last September. We earlier reported that Price Rite is exploring sales options for its four remaining stores in Maryland – Rosedale, Baltimore City (W. Pratt Street), District Heights and Hyattsville.
Unfortunately, we have a fresh crop of deaths to report. On a personal note, I was deeply saddened by the passing of Ben Sigman, co-owner of B. Green & Co., who left us too soon at the age of 76. I first met Ben more than 40 years ago and you couldn’t help but be immediately impressed by his intellect and his genuine kindness. Ben treated everyone with respect and was especially proud to be a member of the B. Green family which has been involved in the grocery industry since 1915. I know the pandemic has created kind of a time warp, but it seems like it was only a few months ago that I ran into Ben and he greeted me as he always had – “How’s your family? How’s your business?” These weren’t throwaway lines for him – Ben really was interested and concerned. He will be missed.
From the world of entertainment we lost a great actor, Ned Beatty, who passed away earlier this month at the age of 83. Rarely gaining the spotlight, Beatty’s film career did begin with a bang, with his role as insurance salesman Bobby Trippe in the great film “Deliverance” (1972). In the most memorable scene of the movie, Beatty is ordered to strip down to his undershorts and then is forced to squeal like a pig by his attacker. While “Deliverance” helped make Beatty a sought-after actor, other future roles, including “All The President’s Men” (1976) and the stellar film “Network” (1976), cemented his reputation as a first-call performer. His other notable film credits included roles in “Superman” (1978) and “Rudy” (1993). All told, Beatty appeared in more than 160 film and TV shows. He also performed in many plays.
Gavin MacLeod is also dead. MacLeod began his career in the late 1950s and most often appeared in small character roles on TV. His first big break came in 1962 when he was cast as Seaman Joseph Haines, one of Quinton McHale’s (Ernest Borgnine) itinerant group of misfits on a World War II PT boat in the sitcom “McHale’s Navy.” From there, he became a regular as head writer Murray Slaughter on the iconic “The Mary Tyler Moore Show” (1970-1976). MacLeod mainly played it straight, offsetting other more animated characters such as anchorman Ted Baxter (Ted Knight) and news director Lou Grant (Ed Asner). He finally received the full spotlight treatment in his next role as Captain Stubing on awful sitcom “The Love Boat” (1977-1986). MacLeod, 90, appeared in 108 roles in a career that spanned nearly 60 years.
“Linc” has also left us. Clarence Williams III died earlier this month at the age of 81. Williams, a fine actor whose career began in 1959, appeared in 99 film and TV roles (and several Broadway plays). However, he will always be best-known by Baby Boomers as Linc Hayes, the young, cool undercover police officer in the TV series “The Mod Squad” (1968-1973). The show was the first if its genre to focus on the hippie generation and also featured newcomers Michael Cole and Peggy Lipton. However, it was Williams who really stood out. His well-groomed Afro and imposing deep voice made you pay immediate attention to his character. When “The Mod Squad” ended after a five-year run, Williams found it difficult to find meaningful roles, having been typecast. However, by the early 1980s, his career was resurrected as a character actor in such films as “Purple Rain” (1984); “52 Pick-Up” (1986); and “Tough Guys Don’t Dance” (1987). He returned to TV in the 90s and stood out in such shows as “Against The Wall” (1994), and as Muhammad Ali’s father in “Ali: An American Hero” (2000).
Finally, I want to say thanks to our great team from Best-Met Publishing as well as our many readers and loyal advertisers. It’s been a helluva a year, but most of us can now look ahead. However, it’s important to also look back and remember those we have lost or who have endured extreme hardship during the pandemic. While we are all blessed to be part of a great industry that prospered during the difficulties of dealing with COVID-19, let’s not forget those who were not as fortunate.