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Food Trade News
Stoppie Strike Effect Impacts Ahold Delhaize Comps, Profit
The 11-day strike at Stop & Shop last spring cost parent company Ahold Delhaize $345 million, according to Jeff Carr, the retailer’s chief financial officer. Approximately $224 million of sales was lost directly from the work stoppage with an additional $121 million in revenue lost during the ensuing recovery period.
Carr also noted that the company’s overall hit on its underlying income was $100 million That impact reflects the loss of margin on the $224 million. Other contributing impact factors included additional in-store and distribution shrink and increased markdowns.
Carr made his comments on August 7 at the retailer’s analyst conference call following release of its second quarter 2019 financials for the period ended June 29.
However, strong performances from the company’s other U.S. operating divisions – Giant/Martin’s Giant Food (Landover), Hannaford and particularly Food Lion – helped offset the devastating hit at Stop & Shop as the Amsterdam-based retailer eked out a 0.2 percent comp-store sales increase at its 1,971 U.S. supermarkets, 10 more stores than at the end of last year.
Total U.S. revenue was $10.99 billion, but operating income at its U.S. stores decreased 15.3 percent to $369 million. That decline can be fully attributed to the adverse impact of the strike. Moreover, Ahold Delhaize’s underlying operating margin dipped 70 basis points to 3.6 percent.
Carr also acknowledged that pre-strike sales levels at the Quincy, MA chain (ADUSA’s largest brand) had not fully returned.
“The main impact has been on transactions. It hasn’t been on the basket size, which hasn’t really been impacted by the strike. It’s really been getting the last one or two percentage of customers back into the store,” Carr explained.
Stop & Shop has ramped up its marketing and advertising initiatives in recent months in an attempt to attract customers to return to their previous buying patterns.
Six weeks after the strike ended, ADUSA announced that Giant Food president Gordon Reid would be relocating to the Boston area to assume the helm at Stop & Shop which has 416 stores in New England and Metro New York (only the company’s approximately 240 New England stores were impacted by the work stoppage). Reid took the place of veteran Stop & Shop executive Mark McGowan who has left the company.
One of Reid’s most important responsibilities will be overseeing Stop & Shop’s 51 Long Island stores (that number could grow if and when the FTC decides the status of the company’s bid to acquire 37 King Kullen stores in Nassau and Suffolk County which was announced last January).
About $150 million is pegged to improve all current stores on “the Island” and CEO Frans Muller was encouraged by the progress already made by the Long Island market leader.
Under its “Reimagine Stop & Shop” plan, the Long Island upgrades will utilize the learnings gleaned from when the program began in October 2018 at 21 Hartford, CT units. During the conference call, the Dutch retail veteran said among those “learnings” was focusing more on center store and sharpening its pricing.
“We are still in the testing phase, but we learned from the first testing in Hartford to do a better job in Long Island,” Muller stated.
At its other U.S brands, Food Lion’s results continue to excel. The Salisbury, NC merchants posted its 17th consecutive quarters of comp store sales gains as it continues to aggressively remodel its large store fleet (about 1,000 stores) and rollout the chain’s “Easy, Fresh and Affordable” operating and merchandising model. About 80 percent of its stores have now been upgraded with another 115 units targeted for the next six months.
Ahold Delhaize also addressed its digital sales growth. For its most recent quarter, online sales were $249 million, a 14.4 percent increase which it said was achieved mainly by expansion through its Giant/Martin’s and Food Lion’s brands. Approximately 483 stores are now utilizing those click-and-collect links with more than 100 more stores slated to be included before year’s end. About 80 percent of those sales are being delivered by its Peapod unit (ADUSA also utilizes Instacart for delivery services)
Target Launches New Flagship Private Label Line
Target announced that it will be launching a new private label food line called “Good & Gather” next month. The new brand, which will start rolling out with 650 products on September 15, will become the flagship food line for the Minneapolis-based retailer and will include four lines: kids, organic, seasonal and signature. By the end of next year, there will be over 2,000 items under the new label. According to the company’s corporate press release, “the idea behind Good & Gather is great food—from dairy and produce to ready-made pastas, meats and more—made for real life. It’s all the good stuff you love without artificial flavors, synthetic colors, artificial sweeteners and high fructose corn syrup. Plus, there are plenty of everyday staples like milk, eggs and other favorites that never have those ingredients anyway. So even on your busiest days, you can enjoy delicious, quality food at a fantastic value.”
In conjunction with the launch, Target will be phasing out its Archer Farms and Simply Balanced brands and will be reducing its Market Pantry line.
“Our guests are incredibly busy and want great-tasting food they can feel good about feeding their families,” stated Stephanie Lundquist, executive vice president, Food & Beverage,Target. “We saw this as a huge opportunity for Target to help. So our team got to work on our most ambitious food undertaking yet, reimagining our owned food brands to serve up convenient, affordable options that do not cut corners on quality or taste. Good & Gather is our way of helping even the most time-strapped families discover the everyday joy of food.”
According to industry analysts, this expansion in the company’s private label offerings is an attempt for the retailer to become more competitive in its grocery sales.
Shane Sampson To Depart From Albertsons
Albertsons Companies announced on August 19 that Shane Sampson, executive vice president and chief marketing & merchandising officer, has decided to leave the company at the end of its second fiscal quarter on September 7, 2019.
“Shane has been instrumental in building the Albertsons Companies we know today – both at a division level and nationally,” said Vivek Sankaran, President & CEO of Albertsons Companies. “Since 2013, he has helped our team turn around operations in addition to building a robust merchandising and marketing function to help support our 2,200 locations. He launched our e-commerce business in key markets and strengthened it in areas where it had operated since 2002, and accelerated the growth of our Own Brands business by envisioning a faster, smarter way to connect with customer needs. He has been a champion for omnichannel growth both internally and with our supplier community. Throughout his years with Albertsons and in the industry, he has mentored countless thousands in running great stores. I know that he will do great work in whatever he chooses to take on next.”
From his first job in the industry as a courtesy clerk, Sampson has spent over 35 years in the grocery industry working at several chains. He built his career with Albertson’s Inc., working his way up through the company’s ranks, culminating in serving as president of both the Florida and the Intermountain divisions. He left the company in 2002 and spent several years with Sam’s Club. He returned to Albertson’s LLC’s Southern division at its inception and served as vice president of marketing & merchandising when he left to accept the role of senior vice president of sales and operations at Giant Food of Landover. In 2013, He rejoined the Albertsons team when offered the role of president of Shaw’s and Star Market, and in 2014, he relocated to Chicago upon being named president of Jewel Osco. Sampson was appointed executive vice president and chief marketing & merchandising officer at Albertsons in January of 2015.
The company has launched a search for a successor.
Albertsons Companies operates stores across 34 states and the District of Columbia under 20 banners including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen and Carrs, as well as meal kit company Plated based in New York City.
Giant To Acquire Musser’s 3 Stores In Central PA
Giant/Martin’s continued its acquisition spree with the announcement today that it has agreed to purchase Musser’s Markets, the three-store Central Pennsylvania family-owned independent that began operations in 1925 in Buck, PA (Lancaster County).
The purchase marks the fourth strategic “infill” acquisition that Giant/Martin’s has made in less than a year. Other than its deal to buy five Shop ‘n Save stores in Maryland, Pennsylvania, Virginia and West Virginia from UNFI/Supervalu earlier this year, the regional chain has focused on buying family-owned independents. Late last year, the Carlisle-based Ahold Delhaize USA brand acquired the four store Darrenkamp’s group (keeping one store and closing three others), and in July it consummated a deal to purchase high-volume single-store operator Ferguson & Hassler in Quarryville, PA, also in Lancaster County.
Giant/Martin’s will keep all three Musser’s units – Columbia, Lebanon and its store on the Buck/Quarryville line – operational (there was some speculation that the latter store might close because of its proximity to the Fergie’s store in Quarryville). The deal is expected to close in late October and Giant/Martin’s plans to reopen the three stores about a week later.
Musser’s, a fourth-generation business, was dealing with many of the same issues – increasing competition, family perpetuation and capital needs – that other independent retailers are currently facing, particularly in a rapidly evolving Lancaster County landscape, which in the last 18 months has become more chain dominated. Those chains include stalwarts Giant and Weis Markets and newcomers Wegmans, Whole Foods and Aldi.
A bit further east in Philadelphia, Giant/Martin’s is also making news with the announcement that it will open its first Center City conventional supermarket next year. The 65,000 square foot two-story unit will be part of the city’s River Walk project (23rd and Arch Streets), an 8.5 acre mixed-used development that abuts the Schuylkill River.
While dominant in the Philly suburbs for more than 30 years, Giant only operates one traditional supermarket within the city, on Grant Avenue (which opened in 2011) and that unit has the feel of a more suburban store being located in Northeast Philadelphia.
However, earlier this year, the Giant began to penetrate Center City with the opening of the first of four urban small format stores – a 9,500 square foot Heirloom Market on Bainbridge Street. Earlier this month, the second Heirloom unit opened on Chestnut Street.
Later this year, other Heirloom stores will open on North Second Street and on South Street in Center City. The River Walk unit will not only strengthen Giant’s presence in the city, where significant urban regentrification is continuing, but should provide some sizzle, too.
Giant/Martin’s Breaks Ground On New Two-Level Urban Flagship Store in Downtown Philly
Giant/Martin’s held a groundbreaking ceremony where the retailer’s president Nicholas Bertram, Pennsylvania Department of Community and Economic Development (DCED) Secretary Dennis Davin, Philadelphia Mayor Jim Kenney, and PMC Property Group president Ron Caplan formally announced plans to build a 65,000 square foot store set to anchor the Riverwalk mixed-use development project. The two-level format is expected to open in the fall of 2020 and will create over 200 job opportunities.
“Like the city of Philadelphia, Giant continues to grow and innovate – becoming part of this new incredible Riverwalk project helps cement our commitment to Philadelphia,” stated Bertram. “We’ve always been dedicated to bringing quality groceries to the people of our home state of Pennsylvania, but this new Philadelphia store – as well as our new Giant Heirloom Markets throughout the city – represent the future of Giant: fresh solutions for the way families live now.”
The store, which will feature high open ceilings to allow natural light and city views into the space, will be located in the Logan Square neighborhood within walking distance to Center City. It will also have an outdoor terrace and an onsite parking garage exclusively for Giant customers. The produce marketplace will have over 600 varieties of fresh produce with the spotlight placed on local product and the location will boast the largest plant-based department of any other Giant/Martin’s in the company.
“Giant has become an integral part of the Philadelphia region, both as a business serving our communities and as a tremendous partner to our area’s nonprofits. Not only has Giant done a great deal to improve the health and wellbeing of Philadelphians over the years, its recent growth has also brought hundreds of high-quality jobs to our neighborhoods. The announcement of Giant’s new flagship store is an exciting development for the city,” said Philadelphia Mayor Jim Kenney. ‘’
Plans for the Riverwalk store highlight Philadelphia’s central role in the company’s recent growth strategy and is in addition to a $70 million investment Giant/Martin’s announced in April 2018 to grow its store network across the Commonwealth by constructing six new stores, remodeling two locations and opening four new fuel stations through the end of this year. Giant/Martin’s will soon open a new store in East Stroudsburg and has plans to open two more Giant Heirloom Markets in the Philadelphia neighborhoods of Northern Liberties and Queen’s Village.
Giant/Martin’s has 158 stores in the state of Pennsylvania and employs nearly 29,000 associates in the state.
Rite Aid Appoints Heyward Donigan As New CEO
Rite Aid Corporation has named Heyward Donigan, 58, as its new chief executive officer and a member of the board, effective immediately. As planned, John Standley, who served as CEO for the Camp Hill, PA-based drug chain since 2010, will leave the company which operates nearly 2,500 stores in 18 states.
“Today’s announcement is an important step in positioning Rite Aid for the future, and we are confident that Heyward is the right person to lead the company in capitalizing on the opportunities in the evolving healthcare environment,” said Bruce Bodaken, chairman of Rite Aid’s Board of Directors. “Over the past several months the Rite Aid Board conducted a thorough search, and Heyward’s strong senior executive experience, proven leadership capabilities and consistent track record of driving profitable growth, as well as her broad healthcare knowledge and digital shopping technology expertise set her apart. Her skillset will be invaluable as we work to deliver on the full potential of our business and create additional long-term value for our shareholders, associates, customers and patients.”
Donigan has spent 30 years in the healthcare industry, most recently (since 2015) as the president and chief executive officer of Sapphire Digital (formerly Vitals), which designs and develops omnichannel platforms that help consumers choose their best fit healthcare providers. Prior to Sapphire Digital, Donigan was president and chief executive officer of ValueOptions, then the nation’s largest independent behavioral health improvement company, where she helped the company surpass $1 billion in annual revenue. Previously, Donigan served as executive vice president and chief marketing officer at Premera Blue Cross, where she was responsible for driving growth across the individual, small group, mid-market and national account businesses.
Earlier in her career, Donigan served as senior vice president of all operations at Cigna Healthcare. She also held executive roles at General Electric, Empire BCBS and U.S. Healthcare, and previously served on the boards at several public companies, including Kindred Healthcare.
Donigan graduated with a Bachelor of Arts in English from the University of Virginia and holds a Master of Public Administration from New York University.
“I am deeply honored to have been selected to lead a company with such a strong brand, deep culture and dedicated team of associates. I see tremendous opportunity to revitalize the company’s position as a leader in meeting the health and wellness needs of customers and patients through our store and pharmacy benefit management platforms. I look forward to working with the talented Rite Aid team, as we continue to support the needs of our customers and patients and drive growth, improved performance and shareholder value,” said Donigan.
Bodaken also acknowledged Standley for his many contributions to Rite Aid. “On behalf of the board, I want to thank John for his numerous achievements in helping to reshape Rite Aid in the face of an evolving environment during his tenure. In particular, I want to thank him for his leadership in guiding the company through some incredibly challenging times. His commitment to facilitating a smooth transition for Rite Aid is greatly appreciated, and we wish him the best in his future endeavors.”
“I’d like to thank our talented Rite Aid team for their dedication and support in taking great care of our customers and patients throughout my tenure,” said Standley. “I have tremendous confidence in this team and I’m excited about the future prospects of this company.”
Donigan will certainly be challenged in her new role. After the Federal Trade Commission partially blocked the drug chain’s attempt to merge with rival Walgreens in 2017, Rite Aid has scrambled to improve sales and earnings. It ultimately sold approximately 2,000 stores to Walgreens, but it found it difficult to operate successfully as a declining third-place entity against both Walgreens and CVS.
A year ago, Rite Aid attempted another merger, this time a $24 billion deal with grocery chain Albertsons, but the proposed deal was killed by Rite Aid’s board even before shareholders voted on the proposal.
Subsequent to that, Rite Aid replaced Standley as chairman (elevating board member Bodaken; Standley remained chief executive) and in March 2018, announced it would begin a search for a new CEO. It also riffed 400 executives.
A few months earlier, Rite Aid was put on notice by the New York Stock Exchange that it was in jeopardy of being delisted because its share price fell below the $1 mark for 30 consecutive days. Rite Aid’s shareholders then authorized a rare 1-for-20 reverse stock split. The drug chain’s shares have lost about 50 percent of their value over the past 12 months.
In accordance with New York Stock Exchange Rules, on August 12, 2019, Rite Aid also announced that Donigan will be granted an employment inducement award, consisting of a restricted stock award with a grant date fair value equal to $2,000,000 (which will vest in equal annual installments on each of the three successive anniversaries of her commencement date) and nonqualified stock options with a grant date fair value equal to $2,000,000 (which will vest and become exercisable in equal installments on each of the four successive anniversaries of her commencement date).
11 Grocery-Anchored Mixed-Use Developments That Are Underway in the DC Metro Area
A recent article on bisnow.com highlighted 11 grocery-anchored developments that are underway in the Washington, DC metro area. The commercial real estate news website outlined grocery stores that are or will be built into mixed-use developments from Rockville to Shaw to Southeast DC to Alexandria. The regional projects consist of three Wegmans, two Harris Teeters, two Aldis, a Trader Joe’s, a Whole Foods, a Lidl, and a Target.