Earlier this month, Walmart announced it is going full-throttle with its plan to shift most of its regional distribution centers to a new automated system that relies heavily on robotics. According to a blog post from Joe Metzger (no relation), executive VP-supply chain for the world’s largest retailer, 25 of its 42 regional depots will deploy Symbotic robotics technology which utilizes proprietary software with a fleet of autonomous robots that is designed to increase warehouse capacity and unloading and sorting efficiency.
“This move will fundamentally alter how products get to stores. But to understand exactly how that’ll work, and why it’s such a big deal, it’s helpful to understand a bit about how it works now,” Metzger explained. “Right now, product arrives at one of our regional distribution centers and is either cross-docked or warehoused until we need it. The products are moved or stored manually. When it’s time for the product to go to a store, someone is tasked with packing a 53-foot trailer in a human game of Tetris for transit. When the truck arrives at a store, our associates unload it manually and get the items where they need to be. The technology from Symbotic does things differently. This system uses a complex algorithm to store cases like puzzle pieces using high-speed mobile bots – operating with a precision that speeds the intake process and increases the accuracy of freight being stored for future orders. By using dense modular storage, it also expands building capacity. And by using high-speed palletizing robotics to organize and optimize freight, it creates custom store- and aisle-ready pallets, which take the guesswork out of unloading trucks. In short, this is a game changer.”
Symbotic has been working with Walmart since 2017 when the Behemoth tested the company’s system at its Brooksville, FL DC.
And late last month Ahold Delhaize USA (ADUSA) announced that it would reach its goal of having more than 85 percent of its distribution network self-managed completed by the end of 2022. ADUSA originally announced its shift to a self-managed distribution and logistics network in late 2019 at a projected cost of $480 million. At that time, Food Lion and Hannaford (formerly Delhaize America) had already been self-distributing groceries while Stop & Shop, The Giant Company (then Giant/Martin’s) and Giant Food (from the old Ahold USA configuration) only self-supplied their stores with perishables; C&S distributed most of the chain’s dry groceries and some perishables goods from a multitude of depots in the Mid-Atlantic and Northeast. ADUSA plans to fully control its supply chain by the end of 2023, which was the company’s original goal.
At the Zaandam, Netherlands-based merchant’s Q1 earnings call in May, Natalie Knight, Ahold Delhaize’s chief financial officer, said that the shift towards more self-controlled distribution also helps the retailer manage online demand and inflation. “At a time where inflation is an issue, it means we have more in our own control,” she noted.
Rick Cohen, who helped build C&S Wholesale Grocers into the largest grocery wholesaler in the U.S., will unfortunately be losing a substantial amount of business from its largest account when the ADUSA distribution shift is completed. However, the CEO of Symbotic, a company founded in 2005, is the very same Rick Cohen. And to illustrate how big a deal this is you should consider that the average size of a Walmart DC is approximately 1.5 million square feet and handles about 300,000 individual SKUs. Multiply that by 25.
I’ve said this several times over the years and it remains true today: when it comes to members of the “30-pound brain” club, Senor Cohen is at the top of the list.
‘Round The Trade
We reported earlier in this column about the good news involving C&S chairman Rick Cohen’s robotics firm Symbotic. There are also two positive developments affecting Cohen’s core wholesaling enterprise. The Keene, NH based firm announced just before presstime that it plans to acquire Piggly Wiggly Midwest, based in Sheboygan, WI. The deal involves C&S purchasing 11 Piggly Wiggly corporately-owned stores, 14 Butera Market supermarkets based in the Chicago market, plus 84 Piggly Wiggly franchise locations in Wisconsin. “The purchase of Piggly Wiggly Midwest is a natural expansion of our already successful Piggly Wiggly Carolina business and reinforces our strong commitment to this beloved brand. It is a well-established legend in grocery retail that is valued by cusomers for its competitive pricing and focus on service,” said Bob Palmer, CEO of C&S. And in another announcement that will certainly have an impact on the Piggly Wiggly deal, former Stop & Shop president Mark McGowan, who left the big Quincy, MA chain in 2019 after more than 30 years with the company, has joined C&S as its SVP-retail. That’s a great move by C&S, which is getting one of the hardest working and most instinctive minds in the biz….interesting story earlier this month in The Wall Street Journal about Amazon’s attempt to leverage its clout with some clients by attaching equity deals with the promise of new business. The story notes that “Godzilla” has made at least a dozen deals with public-traded companies (and about 75 other deal with privately-held firms) in which it acquires future stock rights (warrants) at what could be below-market prices. Obviously, this is a tempting situation for any company who wants the added business and prestige of partnering with Amazon and it’s technically within the rules. Such was the case with the agreement the Seattle-based juggernaut made with wholesale grocer SpartanNash last year. Amazon has been working with the Grand Rapids, MI-based distributor (with multiple warehouses scattered across the country) since 2016. However, late last year Amazon sought to amend its deal with the stipulation that if it purchased $8 billion of groceries over the next seven years from SpartanNash, it would be eligible to purchase up to 15 percent of the wholesaler’s stock at a price that potentially would be less than that of the current market. Another provision of the deal was that if someone made a takeover bid for the company, Amazon would have 10 days to counteroffer. Since that deal was first made public, SpartanNash has leased a former US Foodservice depot in Severn, MD and remodeled it to serve as the dry grocery warehouse to serve Amazon Fresh’s Mid-Atlantic stores, which could easily number 60 units in the next two years.
Instacart, the 2011 start-up that instills both confidence and fear in many retailers’ minds, has named a new chief executive. The San Francisco-based company has named former Facebook exec Fidji Simo to run the day-to-day show at the grocery delivery firm. Founder and former CEO Apoorva Mehta now becomes executive chairman. Simo, who joined Instacart’s board seven months ago, said, “I fell in love with Instacart first as a customer, then as a board member, and now I’m honored to join the company as CEO and lead its next growth chapter.” There will be a lot on her plate as the company, with an other-worldly market valuation of $39 billion, is set to go public in a few months. And then the fun for traditional retailers should begin as Instacart seems poised to develop its own grocery trade channel which would likely compete with the retailers it currently serves today as a last-mile delivery company. I’m predicting that this could get ugly.
Lidl, which recently appointed Michal Lagunionek as its fourth U.S. CEO in six years, now has to deal with another departure, that of Klaus Gehrig, who had been the longtime chief executive of parent company Schwarz Group and had served as head man of the German discounter since 2004 (he joined the company from rival Aldi in 1976). Current Lidl CEO Gerd Chrzanowski, is expected to be named CEO of Schwarz when he completes his duties at Lidl. In the meantime, 81-year-old chairman Dieter Schwarz will serve as interim chief executive.
Walmart has named Chris Cracchiolo as the new top dog at Walmart+, the Behemoth’s membership subscription delivery service that was started last September. Cracchiolo comes to Walmart from American Express where he spent 19 years, most recently as senior VP-global brands and lifestyle benefits and also oversaw the big credit card company’s membership rewards program. He replaces David Echegoyen, who recently left to join private equity firm Cove Hill Partners. Cracchiolo will report to Walmart chief customer officer Janey Whiteside.
And the Bureau of Labor Statistics has released its June Consumer Price Index numbers and as we’ve all witnessed, the inflation monster is clearly upon us. The federal agency’s “all items” index increased 5.4 percent, making it the largest price jump since August 2008. As suppliers and retailers know, that number is only going to get higher over the next few months. And as stated before, with increasing supply chain restrictions and a severely diminished labor pool, this could be a very challenging holiday season for retailers of any kind.
Local Notes
A few thoughts on some news items covered elsewhere in this issue. The formation of Albertsons’ new national category management team for center store that will launch on July 25 has a real opportunity to be successful and ultimately save the retailer hundreds of millions of dollars a year. But its level of effectiveness will really depend on how well Albertsons can thread the needle in keeping the local divisions involved with its core group of products (and vendors) with those making trade deals located hundreds or thousands of miles away from the operating divisions (except the Boise division). Even though it might be more costly to operate in terms of dollars expended, the decentralized model has provided Albertsons with many benefits, some of which are difficult to measure in dollars alone. Will the number of local items that the individual divisions can procure be restricted? Can the local divisions expect the same level of ISE (in-store execution) support from the vendors that they had when a large percentage of a division’s procurement was handled locally? Will brokers be impacted if one of their clients changes their “point of sale” from Malvern, PA or W. Bridgewater, MA to Boise? If Albertsons’ new center store national category plan can avoid (even inadvertently) penalizing the current decentralized division structure, then I believe the goal of this initiative can succeed. We’ll give you a report card in a few months…
And the appointment of Tony Hoggett, the 31-year Tesco vet who will be running Amazon’s physical stores beginning in January, has a good chance to be a success with “Godzilla.” I say that not to sound xenophobic, but rather on reviewing the track records of more than a dozen European supermarket executives who I’ve met in the last 25 years who have tried to ply their “magic” in the U.S. Sure there are exceptions like Anthony Hucker, CEO of SEG and the great Gordon Reid president of Stop & Shop, but most European-born executives that I’ve encountered in the U.S. tend to be more than a little haughty, arrogant and entitled. However, Hoggett has impeccable credentials with a great retailer and will be working in an environment that calls for discipline and structure, something Europeans are very good at. We wish him much success in his new role.
After a landlord dispute, Walmart has closed its Owings Mills, MD store. That unit was more than 25 years old and was one of the few Walmart conventional discount (Division 1) units operating in the Baltimore market.
Discounter Save A Lot has sold five corporate stores located in Prince George’s County, MD to a new licensee. Qasim Warraich, president of AQS Foods LLC, has purchased Save A Lot units in Bladensburg, Forestville, Oxon Hill, Seat Pleasant and Temple Hills. Prior to this move, Warraich owned and operated gas stations and c-stores in both Maryland and Oklahoma. And our buddies, David Green and Melvin Shapiro have acquired their 11th Save A Lot from an existing licensee. This store, in Bedford, PA, will be totally remodeled and is expected to reopen in early October.
I know I’m getting old when five of my industry friends I’ve seemingly known forever are retiring. Shout outs to Wayne Bailey (47 years with Weis Markets in many diverse leadership roles); Bob Bennett Jr. (47 years with Giant Food; his father Bob Bennett Sr. also had an illustrious 42-year career with the chain); Ed Burda (37 years in the food industry with Pepsi and Utz); Bill deBrauwere (49 years in the biz, the last eight years with Crossmark, following long executive tenures on the retail side with Ahold USA and Grand Union); and Jim Kidwell (28 years in the biz, the last 18 as director of marketing and procurement for independent retail group Family Owned Markets, who will be retiring in January). While each of these five gentleman has his own unique set of skills, they all share something in common: great professionalism and tremendous passion for the business, plus they’re really good guys.
From the death desk we have a couple of obits, both from the world of cinema. Richard Donner, the eclectic director of films such as “Superman” (1978), “The Toy” (1982), “Lethal Weapon” (1987 – followed by “Lethal Weapon 2” in 1989, “Lethal Weapon 3” in 1992 “Lethal Weapon 4” in 1998) and “Scrooged” (1988), has died. He began his directing career in 1960 and over the next 15 years directed hundreds of TV shows, including multiple episodes of “Have Gun – Will Travel,” “The Twilight Zone,” “The Man From U.N.C.L.E.,” “Gillian’s Island,” “Perry Mason,” “The Fugitive,” “Cannon” and “Kojak.” In 1976, Donner received attention for his unique style in directing “The Omen” (an awful movie, but one that raised eyebrows) and scored big at the box office. One of his most interesting projects was as director of “The Goonies” (1985), a film about misfit children on a treasure hunt that starred then-fledgling actors Sean Astin, who was 14, and Josh Brolin, who was 17. Steven Spielberg produced “The Goonies” and hired Donner because, he said, “You’re a bigger kid than I am.” Donner was 91 when he passed.
Also fading into the sunset was one of my favorite character actors of the last 50 years. William Smith, who usually played strongmen and bad guys, had a career that ran from 1954 to 2020 and included more than 300 acting credits. Among his most notable roles were as the snarky Anthony Falconetti in the popular 18-part miniseries “Rich Man, Poor Man” (1976) and as bare-knuckle fighter Jack Wilson in “Any Which Way You Can” (1980) where he was both rival and ultimately friend to the film’s star Clint Eastwood (Philo Beddoe). A most interesting man who was an Air force pilot, professional bodybuilder, champion discus thrower and a published poet, Smith was 88.
