The behind the scenes negotiating between Kroger-Albertsons and the FTC continues. During the past month, the two chains released an updated proposal to the big federal agency, noting that it would add another 166 stores to its store divestiture total and upgrade the original store list to include more profitable stores that it would sell to C&S. Additionally, Kroger will sell the Haggen banner (Seattle-Portland) to C&S and the Keene, NH-based wholesaler would gain different and larger distribution facilities, add a new dairy plant and receive expanded transition services from Kroger and Albertsons.
With 579 stores now potentially headed to C&S (which originally said it was willing to acquire up to 650 supermarkets) the deal is certainly enhanced. However, will it be enough to satisfy Lina Khan and her anti-big business fellow FTC commissioners or even a trial judge in Portland, OR when the case is heard in open court on August 26? I’d say the odds are improved to gain a favorable outcome, but I’m still skeptical that the deal will be approved even after appeals are heard.
One more curiosity: in its revised divestiture store list, the number of units to be sold to C&S in MD, VA, DE and DC actually decreased (from the original list) from 10 Harris Teeter stores to nine. That’s a puzzling number when you can easily make a case that at least 30 Harris Teeter and Safeway units overlap in that marketing area.
One more nugget from the aforementioned Ms. Khan, who appeared on the ABC show This Week on May 5, said her role was that of a “law enforcer” and summed up her stance against big business mergers thusly: “In many ways, we’re undertaking a deeply conservative project, making sure we’re going back to the roots of what the FTC is about, the actual text of the laws that Congress created, and making sure we’re being faithful to the law on the books and the legal precedent.” Really? Could you substantiate previous examples of when the law and precedent impeded other pending mergers?
‘Round The Trade
At Walmart, for the first time since 2004, the “Behemoth” has unveiled a new upgraded private label brand called bettergoods. The new line, which the retailer claims offers a “new elevated experience that delivers quality, unique chef-inspired food at incredible value,” features 300 items including dairy, frozen, snacks, beverages, plants, soup, pasta, coffee and chocolate that will be priced in the $2-$15 range. Obviously, Walmart is jumping on the proprietary premium private label bandwagon that has enjoyed success at Costco (Kirkland) and Trader Joe’s. The planet’s largest retailer also recognizes the tremendous growth of all “own brand” products during these challenging economic times.
More Walmart news: Rob Walton, 79, the oldest child of company founder Sam Walton, said he will step down from the company’s board next month. Brian Niccol, CEO of Chipotle, has been nominated to fill Walton’s seat. That leaves two Walton family members on the retailer’s board of directors: chairman Greg Penner (who is marred to Rob Walton’s daughter, Carrie) and Steuart Walton, who is the son of Jim Walton and grandson of Sam.
There’s never a shortage of Amazon news and first and foremost is “Godzilla’s” continued strong performance in its recently completed first quarter. Sales were up $16 billion (compared to Q1 in 2023) to $143 billion and earnings rose from $4.8 billion to $15.3 billion, Once again, Amazon Web Services (AWS) was the company’s star performer with revenue increasing 17 percent to $25 billion. Also notable was the rising contribution from Amazon’s advertising services division (retail media) which increased 24 percent to $11.8 billion. Subscription services revenue (Prime memberships), increased 11 percent, adding $10.7 billion to the top line.
According to the Washington Post, Amazon has fallen so far behind in creating new jobs at its “second headquarters” in Crystal City, VA (already one of the worst traffic clusterjams in the DC area), that its workforce actually shrank last year. When Amazon announced Crystal City (technically Arlington, VA) as the site for its satellite HQ in 2018, it promised to add 25,000 new jobs in exchange for $750 million in taxpayer subsidies. Well, the “under predicting” will be somewhat of a relief for those commuters who have to drive on Route 1.
One poor quarter by Starbucks was all it took for former CEO Howard (“Humble Howie) Schultz to start foaming at the mouth about the state of the java brewer. Under relatively new CEO Laxman Narasimhan, Starbucks’ sales decreased 1.8 percent (comps were down 4 percent) and earnings dipped 15 percent. Narasimhan blamed the challenging economic environment (after all, not everybody can afford to spend $5.95 for a grande caramel ribbon crunch frappucino) and said that Starbucks’ Q2 results “do not reflect the power of our brand, our capabilities or opportunities ahead.”
“Humble Howie,” who helped select Narasimhan as his successor in March 2023, couldn’t contain his disappointment, noting (in a LinkedIn posting) that “the stores require a maniacal focus on the customer experience, through the eyes of a merchant. The answer does not lie in data, but in the stores,” adding that the focus should be “experiential, not transactional.” Schultz is no longer CEO and stepped down from his board post last September. So, now he’s only a Starbucks shareholder (albeit a very large one) and as such he should voice his criticism in a less abrasive manner. In other words, zip it.
For once, the FTC has handed down a decision that I agree with. Kinda. Late last month, the commission banned employers from utilizing non-compete agreements to prevent most employees switching jobs to a potential competitor. The ruling applies to all workers except senior level employees and also prohibits employees from imposing new non-compete contracts on senior level executives in the future. That’s the part I disagree with, to a point. Too often in my 51 years in business companies have threatened legal action against an associate who signed a non-compete and who clearly doesn’t have the depth of trade secrets that would benefit his new employer. It’s a strongarm tactic meant to punish that employee from advancing his career with a new opportunity in the primary field in which they are skilled. Clearly, the line must be drawn if an employee does possess propriety information that would benefit his new employer and damage his old firm. Then those non-compete restrictions need to remain in place. As you can guess, this is not sitting well with a number of large organizations including the U.S. Chamber of Commerce, which quickly filed suit claiming the FTC didn’t have the power to issue a ban and, even if it did, a ban on such agreements wasn’t lawful. The ruling will likely go into effect in September – expect a slew of lawsuits in the next few weeks.
Local Notes
Wegmans is coming to Charlotte, which would make that the southernmost store in the company’s 11 store fleet. The 110,000 square foot unit will be located in the toney Ballantyne area of the Queen City and is slated to open in Q3 of 2026. Next on tap for the family-owned privately held retailer are new stores in Lake Grove, NY (its first Long Island unit) in early 2025, followed by other new entries in Rockville, MD and Norwalk, CT, later that same year. Another North Carolina store, which would be the sixth Wegmans supermarket in the state, is slated to open in Holly Springs in 2027.
Ahold Delhaize held its annual shareholders meeting on April 10 in Zaandam, The Netherlands, which was attended by 147 shareholders. CEO Frans Muller summarized the international retailer’s performance over the past 12 months: “Reflecting on 2023, it’s clear that last year was characterized by constant change, as we faced numerous challenges including high inflation, global conflicts, and increasing societal polarization. Our teams across all brands have shown resilience and agility, and thanks to the unwavering dedication of our associates, we have been able to make a difference for each of our brands’ 63 million individual customers, and for local communities. I am proud of the remarkable community initiatives undertaken by our great local brands throughout 2023, contributing over €240 million ($255.6 million) in charitable cash, product, and food donations. Only a healthy, stable company can continue to invest in local economies, sustainability, innovation, digitalization, and stores. That’s why I’m pleased that we were able to present solid results in 2023, meeting all of our key financial goals for the year. This includes generating over €1.25 billion ($1.33 billion) in cost savings, which is over €250 million ($266 million) more than we had originally planned. This enabled the brands to keep prices as low as possible for customers. 2024 will be an important year for Ahold Delhaize as we enter a phase of new momentum.”
About a month later, the international merchant released its Q1 financials which overall were decent. In fact, Muller called first quarter numbers “stable.” In the U.S., net sales decreased 0.6 percent to $14.3 billion and comps (excluding fuel) grew 0.8 percent. Ahold Delhaize said that strong growth in pharmacy was offset by the non-recurrence of SNAP benefits, the moderation of inflation rates, the divestment of FreshDirect and low gas prices. As they have done in recent quarters, the former Delhaize-owned banners – Food Lion and Hannaford – continue to set the pace, having achieved a respective 44 and 11 consecutive quarters of positive sales growth.
More locally, The Giant Company (TGC) released its third annual impact report detailing its corporate social responsibility initiatives, this year centered around its purpose of connecting families for a better future. Highlights of the report include: working with local hunger relief partners, 14.1 million meals were donated to help eliminate hunger in communities served; to honor the company’s legacy of giving back, $500,000 was awarded to 20 local nonprofits as part of its “Make a Difference” challenge; to create a more sustainable future, a total of $500,000 was donated to organizations committed to healing the planet by growing food system resiliency and reducing food waste; and by helping customers and communities find real life wellbeing, The TGC’s registered dietitians connected with more than 65,000 through over 300 virtual wellness classes and the company’s pharmacy teams helped keep neighbors healthy by administering more than 175,000 vaccinations.
“Since opening our first store in Carlisle, PA in 1923, The Giant Company has always been committed to serving our local communities, both in and outside our stores,” said John Ruane, TGC’s president. “As we celebrated our 100th anniversary last year, our efforts centered around areas where we can make the greatest impact: eliminating hunger, changing children’s lives, healing the planet, promoting wellbeing, and fostering a culture of inclusion and belonging. With this focus, we’re able to help connect families, create healthier communities, and grow local neighborhoods.
We have an update on Ahold Delhaize USA’s new automated frozen food warehouse that opened recently in Mountville, PA. Service at the new frozen depot, in which ADUSA and large temperature-controlled warehouse and logistics firm Americold are partners, is being temporarily suspended. ADUSA said it is “pausing” its deliveries from the new depot in order to give the retailer’s partner, Americold, “the opportunity to optimize its systems and reach full capacity more quickly” (software integration issues)?
At this point, the Mountville facility was only supplying Giant Food’s stores with frozens. The Giant Company’s stores were slated to be supplied by Americold a few months after the integration of the 165 Landover division stores. Clearly, that’s all changed now with no definitive timeline on when service from the Mountville depot will be restarted. It seems obvious that the other Americold frozen facility in Plainville, CT that is being built to service about 400 Stop & Shop stores (in New England and Metro New York) and is slated to open after the Mountville depot, has also been delayed, perhaps until later in 2025.
According to an SEC filing, publicly-traded Americold has invested $336 million in development capital for the two facilities and ADUSA has made a 20-year commitment to be supplied from those facilities. This obviously isn’t what either side bargained for.
In the meantime, steady and reliable C&S, which for many years supplied both Giant banners and Stop & Shop with groceries and frozen, has begun servicing Giant Food’s stores in the B-W area.
In other Giant Food news, the retailer said it will build a new replacement store in Bowie, MD. The Landover, MD-based chain will serve as the anchor tenant in the $1.3 billion South Lake Marketplace which will include 600,000 square feet of shops including restaurants and two hotels. The new Giant, which replaces a small and antiquated Giant on Crain highway is expected to open next year. Lidl has signed a lease to open a store at the former Kohl’s department store in Herndon, VA. At this time, Lidl will control the entire 105,700 square foot space, but like it has in other locations, expect them to sublease most of the square footage to other tenants.
Two family-owned Mid-Atlantic based meatpackers with rich histories have made a deal. Clemens Food Group, based in Hatfield, PA, which has grown to become an a nearly national firm over the past decade, has acquired Kunzler & Co., the Lancaster, PA-based regional pork processor which was founded in 1901 by German butcher Christian Kunzler. The price of the deal between the two privately-held companies was not disclosed, but Clemens, founded in 1895 by John C. Clemens, said it will keep Kunzler’s three packing plants (two in Tyrone, PA and in Lancaster) and continue to market Kunzler’s brands.
“It has been an honor and a privilege for the Kunzler family to have been invited to the table of our customers for over 120 years, but now is the right time to pass the company reins,” said Chris Kunzler III, former president and great-grandson of the founder. “We found a great steward to carry on the Kunzler family legacy and we look forward, with joy and anticipation, to what they will do to enhance and grow the brand and product offerings.”
I’m sad to report the death of an excellent football player – quarterback Roman Gabriel, 83, has left us. Gabriel had a very solid career in his 16 seasons in the NFL, playing for 11 years with the Los Angeles Rams and five with the Philadelphia Eagles. At 6’4” and 235 pounds, Gabriel was an anomaly for his era – a big QB who had a deft passing touch but wasn’t afraid to run over lineman or linebackers to complete a play. After graduating from NC State, Gabriel was the second player selected in the entire NFL draft in 1962 (he was actually the first overall pick in the AFL draft) and played in four Pro Bowls. In 1969, he was named the NFL’s Most Valuable Player
During the past month we also lost two great guitar players who influenced future generations of pickers. Duane Eddy, who had hit instrumental records such as “Rebel Rouser” and “Forty Miles of Bad Road,” in the late 50s and early 60s was the first player I can remember who used the whammy bar on his instrument to create more vibrato. And if you listen to any of Eddy’s early recordings, the use of echo is the foundation of his sound. Among those who have credited Eddy with influencing them were Jimi Hendrix, John Fogerty and Bruce Springsteen (listen to the song “Born to Run”). He was inducted into the Rock & Roll Hall of Fame in 1994. Eddy was 86 when he passed.
And Dickey Betts has died at the age of 80. The “other” guitar player to the late legendary Duane Allman, Betts was truly a great player in his own right. While Duane Allman was a blues player whose mastery of the slide guitar was otherworldly, Betts countered Allman’s slashing style with a more melodic jazz-oriented tone. Betts wrote three of the band’s most popular songs – “Ramblin’ Man,” “Jessica” and “Blue Sky” – but I’ll mention two other tunes where Betts’ creative playing stands out: “Midnight Rider” (where the guitar interplay between him and Allman is off the charts) and “In Memory of Elizabeth Reed,” an instrumental song penned by Betts that even the great Les Paul acknowledged as being great. And while we’re name dropping, The Allman Brothers’ “At Fillmore East” in 1970 remains my favorite “live” album of all-time (followed closely by The Who’s “Live at Leeds” also recorded and released in 1970).
In another obituary of sorts, I was also saddened to learn of the upcoming closing of the remaining 42 Sam Ash music stores. The company resonates with me because it was the place where I bought my first guitar (on West 48th Street in Manhattan) in 1968 (it was a Guild F-20 acoustic guitar). As with many other businesses, Sam Ash fell victim to online competition. Derek Rose, the company’s chief marketing officer and grandson of founder Sam and Rose Ash said, “A lot of this has been the move to online shopping. There are so many choices, and to maintain a store with that much selection is very difficult.”
