Mike Stigers has had enough time to observe the daily grind, meet the member/owners and assess the culture of the largest wholesale grocery co-op in the U.S. So, it wasn’t surprising that the first “outside” day-to-day leader at Wakefern would be making some changes.
However, few would have predicted that his new alignment would include the departure of three key senior executives – Bryant Harris, chief merchant; Steve Henig, chief customer officer; and Bill Mayo, chief administrative officer, the latter two with more than 60 years of experience at the Keasbey, NJ-based juggernaut.
However, a review of what’s happened over the past eight years would reveal that Wakefern has been restructuring itself to some degree since the now-departed (in 2022) Chris Lane was promoted to executive VP in 2016. One of his tasks was to find and help develop the next generation of Wakefern leaders, both internally and with the co-op’s member/owner base.
Indeed, Lane did make some hard decisions involving personnel, but the truth be known, between retirements, the need to bring in outside talent and more quickly develop younger middle managers with potential, was a necessity. Unfortunately for Lane, despite his intelligence and leadership ability, sometimes being “The Turk” can be dangerous.
Stigers’ role is similar. With the retirement this January of iconic president Joe Sheridan retired after 48 years, Mike Stigers joined the co-op in June 2023, bringing with him a new leadership perspective to a company whose retailers amassed $19.6 billion in sales last year.
Perhaps the first clue about the future came in August when he brought in John Jantson as interim chief information officer, replacing the popular Cheryl Williams, who had been with Wakefern for 22 years. Jantson and Stigers worked together at Supervalu and UNFI for three years.
A week after Harris, Henig and Mayo exited, Wakefern announced that industry veteran Darren Caudill would be joining the company in the newly created position of chief sales officer. As was the case with Jantson, Caudill and Stigers worked together at Supervalu and UNFI for a decade, most recently at its Minnesota-based Cub Foods unit, where Stigers was chief executive and Caudill was senior VP-sales, merchandising and marketing. Prior to his stint at Supervalu/ UNFI, Caudill spent more than 30 years with Kroger.
In talking to about a dozen sources including Wakefern associates, member/owners and vendors, most mentioned that Wakefern internally functioned with too many silos, a system that made it harder to create cohesion and maximize communication among team members. “As the entire grocery business has become more complex, it seemed that many people operated in their own lanes. I’ve been calling on Wakefern for more than 30 years and there’s much more of a bureaucracy than there ever was,” said a New Jersey-based vendor.
By essentially combining the sales and marketing jobs, Wakefern will have streamlined its organization process. Still, having one person oversee both roles would be a mighty tall task for anyone, let alone someone who has never left the Midwest and is described by several vendors who’ve called on Caudill as having “old school values with a tireless work ethic.”
And perhaps that’s exactly the type of person Mike Stigers was looking for.
FTC Decision On Kroger-Albertsons Merger Delayed; Skepticism Prevails
My, oh my, how quickly things change. Not so long ago, in this column, I wrote that it seemed an announcement from the FTC regarding the Kroger-Albertson was coming on January 17. Then I got word that the ruling would be pushed back to sometime in mid-February.
Now, according to a statement on January 15 from both large retailers and C&S Wholesale Grocers (which has agreed to acquire 413 stores from Kroger and Albertsons, a number that could expand to 650 supermarkets if further divestitures are required) the merger will now likely occur in mid-2024 because of several items that remain unfinished.
“We remain in active and ongoing dialogue with the Federal Trade Commission and individual state attorneys general regarding our proposed merger and divestiture plan. We believe our merger with Albertsons and the comprehensive divestiture to C&S will result in the best outcomes for customers, associates and our communities. In light of our continuing dialogue with the regulators, we are updating our anticipated closure timeline. We currently anticipate that the closing will occur in the first half of Kroger’s fiscal 2024. While this is longer than we originally thought, we knew it was a possibility and our merger agreement and divestiture plan accounted for such potential timing. We remain committed to closing the transaction and providing the meaningful and measurable benefits that we promised when we originally announced the transaction,” the combined statement said.
Also delaying the outcome of the deal is a separate newly-filed lawsuit by the Washington State attorney general Bob Ferguson, who’s been a thorn in the side of Kroger and Albertsons since the merger was first announced in October 2022.
“This merger is bad for Washington shoppers and workers,” said Ferguson in a statement. “Shoppers will have fewer choices and less competition, and, without a competitive marketplace, they will pay higher prices at the grocery store.”
In the Washington filing, the AG’s office wrote, “Defendants have always known that the removal of such a robust competitor would harm competition. When rumors of the Proposed Transaction began circulating, one Albertsons’ Vice President wrote ‘you are basically creating a monopoly in grocery with the merger so [it] makes no sense,’ followed by ‘[i]t’s like AT&T and Verizon wanting to merge.’ Another Albertsons’ Vice President agreed: ‘[t]here is no way that they could buy all of us – too many competing markets.’”
From the outset Kroger and Albertsons have said that non-union retail powerhouses like Walmart and Amazon will become even more powerful and less accountable if the deal is blocked.
Kroger also said in its statement that it will invest $500 million to reduce prices beginning day one of the merger and another $1.3 billion to enhance the customer experience.
“The merger will mean more fresh, affordable food is available to more people in more communities,” the Cincinnati-based grocer said.
Kroger also reiterated its commitment to maintaining union jobs and will invest $1 billion to raise wages and comprehensive benefits.
C&S Wholesale Grocers also said it would protect existing union workforces and maintain all collective bargaining agreements and is committed to retaining frontline employees and further investing for growth.
While multiple labor unions have vigorously protested the planned deal, Kroger noted, “This is the best outcome to secure the future of union jobs in the American grocery industry.”
Even with a protracted delay, I agree with other trade observers that while adding C&S to the fold to lighten the store overlap issue (and protect jobs) was a good plan, the level of skepticism from business analysts, labor unions, politicians and even indirectly from an industry trade group (NGA) makes me wonder if this deal is headed for prolonged litigation.
Critics aside, as it has from the outset, the final ruling lies in FTC chairwoman Lina Khan’s hands. And while it would be difficult to argue that she and her agency have not done their due diligence in examining all aspects of the deal, the final decision remains subjective. That said, there’s nothing in Khan’s previous writings and rhetoric that would indicate she’s softened her opinion of mega-mergers.
So, if the FTC does seek to block the Kroger-Albertsons deal via the administrative complaint route, clearly both retailers will file suit contesting the agency’s action.
And while that path is often slow and disruptive (especially for two merchants that have been designing post-merger plans for that past 16 months), suing the FTC has proven to yield a positive outcome for a number of companies targeted by Khan’s group since she was appointed to head the agency in June 2021. Those include: Booz Hamilton’s attempt to acquire cybersecurity firm EverWatch; United Health Group’s purchase of Change Healthcare (insurance reimbursement); the merging of U.S. Sugar and Imperial Sugar; and two big tech deals – Meta’s $400 million acquisition of Within and Microsoft’s $69 billion deal to buy Activision.
And Khan’s biggest showdown lies ahead when she and Amazon will face off in what promises to be the mother of all business-related confrontations in generations.
If Khan (whose term expires this September) chooses to block the Kroger-Albertsons merger (or demands an unreasonable number of further store divestitures), I believe the two retailers would have a strong case to present to a district or circuit court judge. However, unlike Meta and Microsoft, which have very deep pockets and plenty of time to legally pursue their challenges, the retail food business doesn’t allow that luxury. That’s especially true in Albertsons’ case, as its core institutional shareholders have wanted to find a final exit strategy for more than five years.
The roller coaster ride, while delayed again, is almost over, relatively speaking – a decision will be likely rendered in the next six months. Kroger and Albertsons are hoping the ruling is favorable. However, I’m not that optimistic and believe there’s going to be more court time to follow where the short-term winners are always the lawyers.
‘Round The Trade
Just before presstime, CVS, the nation’s largest pure-play drug retailer, announced it will close several pharmacies located within Target stores, a deal that dates back to 2015, when CVS acquired Target’s pharmacy and clinic business for $1.9 billion. CVS wouldn’t specify the number of stores, but analysts expect dozens of pharmacies to shuttered in the period between February and April of this year. In 2021, the Woonsocket, RI-based organization said it would close about 900 units over a three-year period. Then, in August 2023, the company said it would be laying off 5,000 associates in a belt-tightening maneuver.
Online generated grocery sales declined 1.2 percent to $95.8 billion in 2023, according to data released by research firms Brick Meets Click and Mercatus. In an analysis of several digital touchpoints, the survey indicated that order frequency among monthly active users (MAUs) declined for the second year in a row – last year’s dip was 6 percent. Even average order values, not adjusted for inflation, only grew 3 percent with pickup orders dominating the category when compared with delivery and ship-to-home. Clearly, the urgency to buy online has significantly declined as COVID fears are more normalized. Additionally, in most cases it costs more to have groceries delivered and, given that inflation over the past three years has increased between 25-30 percent (on a compounded basis) and concerns about the economy persist, online purchases were headed for an adjustment versus 2020 and early 2021. The bigger question is: what will the percentage of grocery purchases be in a few years? Twenty-five percent? Ludicrous. Twenty percent? Unlikely. However, if you wagered 13-15 percent of the total pie by 2027, you are probably in the ballpark.
Shortly before we went to press, the National Labor Relations Board (NLRB) said that an administrative judge should order 23 closed Starbucks stores to be reopened. Those stores were illegally shuttered, the NLRB argued, because of attempts to organize those units. The case is slated to be heard this summer.
Local Notes
There’s going to be a changing of the guard at Big Y Supermarkets, the successful regional chain that includes 70 supermarkets in Connecticut and Massachusetts. Effective January 26, Michael D’Amour will take over the president and CEO roles from his uncle, Charles L. D’Amour who will become executive chairman of the Springfield, MA-based retailer’s board of directors. Michael D’Amour has been COO since 2019 and represents the third generation of family leadership of Big Y. Charles is the son of co-founder Gerald D’Amour, who along with his brother Paul, founded the supermarket organization in 1936. Michael D’Amour is Paul’s grandson. Additionally, Richard Bossie, who has been serving as senior VP-retail operations and customer experience, has been elevated to become executive VP and chief operating officer.
“For nearly 90 years, Big Y has been proud to honor the legacy of our founders, Paul and Gerry D’Amour, as a family company focused on our employees, our customers and the communities we serve. It’s been an honor to have been personally connected with our company and to have had the privilege of working alongside my father, uncle, cousin Donald and sister Claire,” said Charles D’Amour. “I have worked closely with Michael D’Amour, other members of our third generation of family members, along with the rest of our leadership team, who are all well poised to lead our company and continue that legacy of service. I have the utmost trust and confidence in Michael and Rick to continue our company’s growth and success. With their appointment to these roles, I’m pleased that our Big Y board of directors holds them in the same highest regard and confidence.” A classy statement delivered by one of the brightest people in our industry.
From the obit desk, Trixie has died. No, not my childhood dog, but Joyce Randolph who played that character in the legendary sitcom, “The Honeymooners.” Randolph played the better half to Art Carney (sewer worker Ed Norton) for a six-year period in the 1950s. Originally from Detroit, the former Joyce Sirola’s career lasted 56 years. And at age 99, Randolph outlived the rest of the cast which included Jackie Gleason (Ralph Kramden, who died in 1987), Audrey Meadows (Alice Kramden, who died in 1996); and Carney (who died in 2003).