It might be the toughest job in the food industry – one that not only involves understanding the nuance that’s part of leading an organization with 50 owners who all possess distinctly different personalities. There’s also the New York-Philly factor which is a powerful intangible especially if you’ve never worked in those densely populated regions where competition is ultra-fierce and the pace of play is frenetic. Welcome to Wakefern, Mike Stigers.
As the incoming new president of the country’s largest wholesale food co-op, Stigers will face additional challenges that are unique from other grocery jobs. He’ll be replacing Joe Sheridan, a true legend in the business who has guided the company to unprecedented heights in his 47-year career, the last 12 as president. With his intellectual acuity, uncanny street smarts and impressive people skills, Sheridan has smoothly guided the co-op through the challenges of having to manage 50 successful entrepreneurs who are passionate about their business and tenacious about protecting their share of market. Sheridan has also provided great leadership as a mentor to so many Wakefern associates and as an important national figure within the entire industry. Since he took the helm as president in 2011, Wakefern’s annual retail volume has grown from $12.8 to nearly $19 billion in 2022.
Stigers will have another important issue to deal with immediately – the rapidly evolving culture at Wakefern, not only with its associates but also with its member-owners.
When Chris Lane was named executive VP of the co-op in 2016 it marked a critical moment in Wakefern history. Many trade observers believe that Lane’s promotion put him first in line to someday succeed Sheridan. Indeed, Lane was given the nod over several other Wakefern senior leaders as well as the latitude to bring his new talent on board and promote other Wakefern associates as the company planned for upcoming retirements and many of the technological changes that were being implemented industrywide. Lane and Sheridan also dealt with family leadership changes at several of its member-owners’ supermarket firms.
It’s not that succession hadn’t occurred many times previously at a company that was founded in 1946 by eight families in Newark, NJ. As in any family business, future leadership and control is always a vital concern, and with Wakefern’s member-owners, some who have fourth generation family members leading their organizations, that’s always been a baked-in reality. However, the most recent group of newer executives leading their respective organizations seems more openly vocal about how they’d like to see Wakefern evolve. Internal conflicts have always been present with an owner-membership base where passion, egos and the strive for perfection have always been present. However, most of those battles had previously been kept inside the “clubhouse.” That’s not always the case today as younger leaders often have different ideas than their predecessors and aren’t afraid of vocalizing their concerns.
There’s no doubt that the newest generation of member-owners are inheriting a different grocery business than their fathers and grandfathers. It’s been a generation since ShopRite battled Pathmark or Grand Union (both now defunct). And while Wegmans, Costco, Walmart, Target and dollar stores are not new competitors, they continue to nibble away at share from traditional supermarkets. When you add in the importance of online-driven sales, the overall game becomes much more complex and difficult.
After six years as EVP, Lane and Wakefern parted ways nine months ago, marking his tenure as a well-intentioned move that failed. At about that same time, Sheridan told the board that he was ready to retire (the two events were not related) and seemingly suddenly Wakefern had to prepare to be without its top two day-to-day leaders.
After a nationwide search that lasted longer than six months, Stigers was hired. The industry veteran who began his career with Safeway in California in 1974 certainly knows both the retail and wholesale business. Mike’s got strong people skills and did a very good job at UNFI/Supervalu over the past 12 years despite some internal challenges partially created by the ineptitude of several previous leaders.
When he arrives at Wakefern on Thursday June 1, he’ll be aided by a talented internal management team and one of the best chairmen in any business – Joe Colalillo. And it will be totally different than leading Cub Foods or Shoppers Food banners which sometimes were treated like second-rate citizens by UNFI and Supervalu. With market dominance in two of the country’s largest markets – New York and Philadelphia – the co-op’s ShopRite banner remains one of the most powerful and durable in the entire industry.
Still, leading the unique model that Wakefern is will be the most daunting challenge of Stiger’s 49-year career. We wish him luck.
‘Round The Trade
Wegmans is asking the Virginia Supreme Court to review its recent decision which has put its planned Hanover County distribution center on hold. The court case between the chain and some local residents has been mired in legal bureaucracy almost since the uber-merchant announced its plan to construct a 1.4 million square foot, $175 million DC in late 2019. Wegmans was hoping to begin construction this summer. More Wegmans news: Buffalo-based Niagara University’s Holzschuh College of Business Administration will be the beneficiary of a $1.5 million gift from the Wegmans Family Foundation to establish the Robert B. Wegman Endowed Director of Food Industry Innovation and Supply Chain Excellence position. The director will lead the growth and development of its centers of Food Industry Leadership and Supply Chain Excellence and will guide the efforts in creating a leading-edge facility on campus to house the centers. The director will also collaborate with food industry leaders in Western New York to create, build, and inspire transformative programs and partnerships that reach the pinnacle of global excellence and enrich the educational and career opportunities for students. “At Wegmans, we believe education creates opportunity,” said Colleen Wegman, president and CEO. “We’re proud to partner with Niagara University to help prepare the next generation of food industry professionals for their future in this essential business.” Robert Wegman, who was known as one of the most respected and influential leaders in the supermarket industry, graduated with a bachelor’s degree in accounting from Niagara University in 1941. In 2007, he was recognized in the university’s inaugural class of the Niagara Legacy – Alumni of Distinction. This is great news for NU, which is rapidly developing into one of the nation’s most innovative food marketing academic institutions and training grounds for future industry leaders.
Despite all the uphill battles Amazon has faced recently, the company remains a monolith and its current CEO Andy Jassy, who inherited a lot of unclaimed baggage from his iconic processor Jeff Bezos, remains unabashedly optimistic. In a recent letter to investors, Jassy acknowledged the challenges his company is currently facing, comparing it to the recession of 2008. Calling the country’s current financial state, a “macroeconomic time,” the 55-year-old chief executive pointed to the strength of the AWS unit which generates $85 billion of revenue annually as a key component to improving “Godzilla’s” long-term growth. Jassy also mentioned Amazon’s advertising business as another operating division with “high potential” for future growth. And here’s what the 26-year company veteran who became CEO in January 2021 said about Amazon’s grocery business: “Grocery is an $800B market segment in the U.S. alone, with the average household shopping three to four times per week. Amazon has built a somewhat unusual, but significant grocery business over nearly 20 years. Similar to how other mass merchants entered the grocery space in the 1980s, we began by adding products typically found in supermarket aisles that don’t require temperature control such as paper products, canned and boxed food, candy and snacks, pet care, health and personal care, and beauty. However, we offer more than three million items compared to a typical supermarket’s 30K for the same categories. To date, we’ve also focused on larger pack sizes, given the current cost to serve online delivery. While we’re pleased with the size and growth of our grocery business, we aspire to serve more of our customers’ grocery needs than we do today. To do so, we need a broader physical store footprint given that most of the grocery shopping still happens in physical venues. Whole Foods Market pioneered the natural and organic specialty grocery store concept 40 years ago. Today, it’s a large and growing business that continues to raise the bar for healthy and sustainable food. Over the past year, we’ve continued to invest in the business while also making changes to drive better profitability. Whole Foods is on an encouraging path, but to have a larger impact on physical grocery, we must find a mass grocery format that we believe is worth expanding broadly. Amazon Fresh is the brand we’ve been experimenting with for a few years, and we’re working hard to identify and build the right mass grocery format for Amazon scale. Grocery is a big growth opportunity for Amazon.”
As has been the case for four consecutive months, overall inflation is mitigating, but food prices remain higher than all other categories. In its latest report, which was released in mid-April, the Bureau of Labor Statistics’ Consumer Price Index (CPI) reported that total year-over-year (YOY) national inflation for March was 5 percent, down from 6 percent compared to the prior month. Food price increases followed that declining trend but remained at 8.5 percent YOY, a full percentage point decline from February’s number. As retailers can attest, that’s still not enough of a dip to allay concerns about more difficult economic challenges ahead. In March, three of the six largest food measuring groups showed slight price increases over the past month. Those include: cereal/bakery products (+16.5 percent YOY, a 0.6 percent increase over last month, primarily due to a continuing decline in egg prices); non-alcoholic beverages (+14.3 percent YOY, a 0.2 percent increase over last month); and other food at home (+14.0 percent YOY, a 0.4 percent increase over last month). Three other major measuring categories experienced price declines when compared to February. They were: meat/poultry/seafood/eggs (+6.6 percent YOY, a decrease of 1.4 percent over February’s results); dairy (+14.0 percent YOY, a 0.1 percent decrease over February) and fruits and vegetables (+6.1 percent YOY, a 1.3 percent decrease over the previous month).
Ah yes, there’s also Walmart news to report. The Bentonville, AR merchant recently cut more than 1,000 jobs at five of its fulfillment centers due to a reduction or elimination of weekend and evening shifts. Associates at those e-commerce facilities – which are located in Bethlehem, PA; Pedricktown, NJ; Chino, CA; Davenport, FL; and Fort Worth, TX – will be paid for 90 days and can seek employment at other Walmart e-commerce facilities or in its stores. And just before presstime, we learned that Charles Redfield, Walmart EVP and its chief merchant, will be leaving the “Bentonville Behemoth” after 32 years with the company. Redfield, who has held many positions with Walmart in his long career, was elevated to the chief merchant post in January 2022. An internal memo from CEO of the company’s U.S. operations, John Furner, indicated that Redfield was leaving to spend more time with his family. A replacement is expected to be named soon.
The Wall Street Journal reports that prior to the financial markets experiencing sharp downturns last year, private equity money was virtually a bottomless well, but since early last year many venture capitalists have turned the spigot off and PE funding has virtually dried up, especially for start-ups. Such seems to be the case for Boxed, the e-commerce distributor that served as kind of an online club store merchant, which has filed for pre-planned Chapter 11 bankruptcy. Boxed’s founder Chieh Huang is a brilliant man, but like many new entities, the company relied primarily on investor funding. It also didn’t help that when Boxed launched an IPO in 2021, it went public via the SPAC (Special Purpose Acquisition Company) route, a path that Wall Street now finds generally unfavorable. Unfortunately, that’s the sad reality for firms that solely rely on the whims of private investors. Oh, one more thing in that Journal story: because of those disappointing investments, which were impacted by rising interest rates, PE firms took less profit in order to pay debt (at a higher interest rate than expected) and also were sucked into supply chain turmoil as they faced higher labor costs and high inflation from the suppliers they relied on.
For the first time in about 18 months (since inflation provided a tailwind jet stream for grocery retailers) are we beginning to see some dents in the sales and/or earnings of some merchants. Costco, which was the literal king of the hill in terms of comp stores sales during both the COVID and inflation cycles, reported flat overall sales ($21.71 billion vs. $21.61 billion) for the month of March. Comp store revenue also dipped slightly by 1.1 percent, its first decline since 2020. Albertsons also felt a bit pf the pinch in its fourth quarter earnings for the period ended February 25. While ID sales remained strong (5.6 percent, primarily because of inflation), the Boise, ID- based grocer chain saw its Q4 net at $311.1 million vs. $455.1 million in fiscal 2021. Obviously, both Costco and Albertsons are still producing strong results, but with inflation flattening and consumer spending becoming more cautious, expect other food merchants to see further signs of balance sheet weakening.
According to the website Dealreporter.com, if a Kroger and Albertsons deal were to be approved, both companies would have to sell more than the 300-350 stores they originally proposed to divest. That’s not exactly breaking news (my divestiture number starts at 500 and could be as high as 800 supermarkets). You can debate what that final number might be, but in the end, the ruling of way-left-leaning FTC chairwoman Lina Khan and her fellow commissioners is really all that matters.
I found the comments about the Kroger-Albertsons proposed merger from Sprouts CEO Jack Sinclair to be interesting. The former Walmart executive, who’s been at the helm of Sprouts since 2019, said if the deal were to be approved it would have little effect on his 400 stores. “I think it’s neutral to us. If they drop the price of Tide or Coca-Cola it is not going to affect us. We don’t sell that anyway.” He also wondered about the impact of such a deal when compared to competing against Walmart. “I’m not sure putting two big things together to make a bigger thing, but still smaller than Walmart, is going to do anything. I don’t know how that unravels itself? There will be some efficiencies the customer gets, but it will still be more expensive than Walmart,” the Scottish-born Sinclair stated.
Could this be the end of Tupperware? The Orlando, FL-based food storage company could be heading for financial default due to continuing operating losses. It has hired a team of advisors to explore options to reduce its $700 million in long-term debt as it seeks to improve its liquidity. Shares in the company have plummeted nearly 50 percent in just the last 30 days forcing Tupperware to issue a “going concern” warning, often a sign that a bankruptcy filing is close at hand. It’s probably a good thing that June Cleaver is no longer around – news of this nature would likely bring her to tears.
Local Notes
Stop & Shop will be expanding its relationship with Flashfood, the digital marketplace that links consumers with retailers in an effort to reduce food waste. Flashfood sections will be available to more than 60 Stoppie units in the New York metro area. The two parties are planning to increase that number to about 300 Stop & Shops in the New York and New England markets in the next 12-18 months. Former The Giant Company president Nick Bertram joined Flashfood as president and COO in February.
According to the New York Post, in an effort to combat the out-of-control shoplifting rampage which has plagued New York City (and other cites as well), Village Super Markets, the second largest Wakefern member, is deploying AI facial recognition technology to track and arrest thieves, at its high-volume Fairway Market location on Broadway and West 74th Street in Manhattan. And just how bad is the shoplifting problem in the Big Apple? In 2022, retail theft increased 45 percent from the previous year. And what’s almost as scary is that city officials say that 327 suspected thieves comprised 30 percent of all shoplifters in NYC. This bail reform thing is really working, don’t ya think?
Unfortunately, we have a few obituaries to report this month, two with ties to the food industry. Leon Levine, the founder of Family Dollar, has passed away at the age of 85. A college dropout, Levine opened his first Family Dollar store in Charlotte, NC in 1959 and 56 years later when it sold to Dollar Tree there were more than 8,000 Dollar Tree locations nationally. After he retired, Leon Levine became of the largest philanthropists in the country donating hundreds of millions of dollars to hospitals, universities and Jewish organizations. And from the Charlotte Observer came this nugget about Levine’s real estate acumen: “He would look for new store locations by driving around and checking supermarket parking lots. Fresh oil spots on the pavement meant the locals drove older cars and didn’t have much money for repairs.
While not the greatest New York Knickerbocker of all-time, Willis Reed was the most inspirational. The former Knick center passed away last month at the age of 80. I don’t want to diminish Reed’s skill as a player – he was a seven-time All-star; he was the NBA’s rookie of the year in 1965; he was voted league MVP in 1969-1970; and won two NBA championships. However, it was on May 8, 1970 in Madison Square Garden that Reed’s legacy was forged. Having torn a muscle in his right leg a few days earlier in the NBA finals against the Los Angeles Lakers, Reed’s season appeared to be over. When the Knicks warmed up prior to Game 7, the 6’10” center and team captain was nowhere to be seen. Shortly before game time, he emerged from the locker room limping with his leg heavily wrapped. He started the game, made his first two jump shots and returned to the sideline. That moment of courage and inspiration helped carry the Knicks to their first NBA championship. After retiring as a player, Reed served as coach of the Knicks for a short time and also served in the team’s front office.
Finally, I was deeply saddened to hear of the passing of Alvin Schwartz, 93, former owner of Schwartz Sales (later Hagerty-Schwartz), one of the largest food brokers in Pennsylvania, who was one of the greatest peddlers I’ve ever known and just a wonderful person. Born in Poland, Alvin came to America at a very young age and worked with his father Max establishing Schwartz and Sons, which among other enterprises, sold Krakus Polish Hams to workers at coal mining companies in Northeast PA, many of whom were Polish immigrants or of Polish ancestry. That might not seem so amazing until you consider that Max and Alvin were Orthodox Jews who kept a strictly Kosher diet. There were so many funny stories and adventures with Alvin that are imprinted in my memory. But most of all, Alvin Schwartz was a mensch. He cared deeply about people, loved his country and his religion and silently contributed to many charitable organizations. One of the nicest and most altruistic people I’ve ever met, I’ll miss you, my friend.