Taking Stock

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Poor Locations, Tough Competition Force More Stores Closings For The Fresh Market

“A man’s gotta know his limitations,” said Clint Eastwood in the movie Magnum Force, the  second film in which the iconic actor played San Francisco police inspector Harry Callahan.

Sometimes supermarket organizations need to know their limitations, too. And in the case of specialty merchant The Fresh Market (TFM), failure to acknowledge its shortcomings has led to yet another round of store closures.

This time it’s 15 stores in nine states, including two in Virginia and one in North Carolina (North Charlotte), not far from TFM’s headquarters in Greensboro. Over the last three years, the perishables-driven retailer has closed its fledgling operation in California,  withdrawn from the Texas market as part of shuttering 13 stores and closed five stores in the Mid-Atlantic, Midwest and Southeast (two in New Jersey, one in Virginia, one in Illinois and one in Florida).

In that short cycle, The Fresh Market has also been acquired for $1.36 billion by large private equity fi rm Apollo Global Management (2016) and 18 months later, named a new CEO, veteran retailer Larry Appel, The Fresh Market’s fourth chief executive or interim CEO since 2015. Appel has subsequently brought in other new senior executives in an attempt turn the company around.

And yet, things don’t seem much improved from where they were eight years ago when original owner Ray Berry, who founded the company in 1982, took the company public.
It’s not that TFM isn’t a good merchant. It’s just not good enough.

For many years as a privately-owned retailer, The Fresh Market was successfully opening 20,000 square foot upscale stores in small cities primarily in the Southeast where populations were growing and many shoppers hadn’t experienced the type of perishables and prepared foods selection and merchandising that TFM offered.

As the company continued to expand and move into new geographies, particularly in the Northeast and its short-lived foray into California, not only was TFM the new kid on the block, there were also other existing retailers who offered similar type fare. And in many cases, executed in a superior fashion.

And then there were the locations. The Fresh Market paid premium prices for a lot of its real estate, especially in the Northeast and on the West Coast. Even more shocking were some of the specific markets that the company entered, where it was obvious to many that the demographics of the area most likely wouldn’t support the type of sales TFM needed to become successful.

The two soon-to-be-closed Virginia stores are an example of each problem. The company’s store in Charlottesville, which opened in 2014, was a good demographic choice: plenty of millennials and Gen-Yers, living in a middle to upper-middle income college town. Sure, there was competition from existing operators Kroger, Harris Teeter and Giant Food, but TFM’s research indicated it could fi nd a comfort zone among those larger chains. What they should have also known was that Whole Foods’ new replacement store, which opened in 2011, was generating much higher sales than its original store. Additionally, Wegmans
announced in 2013 that it would be entering Charlottesville. Game over. “A man’s gotta know his limitations…”

In the case of the upcoming store closing in Winchester, VA, which opened only two years ago, it begs the question, “Why Winchester?” What inspired the company to target a market that’s got little affluence and lots of blue collar residents? To be fair to CEO Appel, the decision to enter Winchester was made by previous management. But then again, “A man’s gotta know his limitations…”

For 2018, The Fresh Market has acknowledged that no new stores will open and the status of 12 potential new units which were announced last year remains up in the air.

While Apollo Global might be providing some financial security for The Fresh Market (and also taking the retailer out of public financial scrutiny), the big PE firm hasn’t seemed to do much to improve the fortunes of its only supermarket property. Don’t expect much future help, either – it’s just not a PE thing.

TFM is stuck in that “mushy middle” of upscale merchants that aren’t quite good enough to compete in the big league of retailers that also operate in the Mid-Atlantic, Northeast and formerly Texas and California. What’s effective in Macon, GA or Mobile, AL ain’t necessarily going to work in Ashburn, VA or Montvale, NJ.

“A man’s gotta know his limitations.”

Keptner Joins Wakefern As Senior VP-Marketing

Supermarket industry veteran Erik Keptner has been named senior VP-marketing for Wakefern Food Corp., the nation’s largest retailer-owned cooperative, with member companies that own and operate supermarkets under the ShopRite, Price Rite Marketplace, The Fresh Grocer and Dearborn Market banners. He began with the Keasbey, NJ wholesaler on July 9.

Keptner brings nearly 20 years of experience to his new role at Wakefern, where he will develop marketing and merchandising strategies which he hopes will build upon the company’s legacy of successful retail brands.

Keptner joins Wakefern from Giant/Martin’s (a division of Ahold Delhaize USA), Carlisle, PA, where he served as senior VP-sales, merchandising and marketing. He will oversee Wakefern’s digital commerce and analytics, advertising, corporate merchandising, private label and own brand as well as its social media and digital advertising divisions and report directly to Wakefern executive VP Chris Lane.

“Erik came up in the grocery business at a pivotal time for the industry, and throughout his career has demonstrated an unwavering commitment to implementing consumer centric marketing and merchandising strategies,” said Lane. “He’s a proven leader, and we are very excited to welcome him to the Wakefern team.”

“Wakefern has a long history as a respected industry leader. I look forward to joining the team and working with the 50 cooperative member families that make up this esteemed retailer,” said Keptner.

Before assuming his last role at Giant in 2014, Keptner served as executive VP-marketing for Ahold USA. Previous Giant Food/Ahold USA jobs included senior VP-marketing and consumer insight from 2009 to 2012, and senior VP-marketing and communication for Giant/Martin’s.

This is an excellent addition to Wakefern’s leadership team. I’ve known Erik for more than 20 years (he just turned 46) and he’s got one of the sharpest marketing minds in the business, especially when it comes to consumer-centric shopping behavior. Moreover, he’s a great team player who is really going to help the big co-op, which doesn’t have many weaknesses, but could stand a more modern approach to supermarket marketing. Keptner will fill that void. He will work closely with Lane, who many in the industry see as the successor to current Wakefern president and COO Joe Sheridan.

Congratulations on the new gig.

‘Round The Trade

Two years ago, it appeared that Albertsons had big plans to revive its once large Florida operation when it converted the three remaining Albertsons-bannered stores in the Sunshine State to Safeway and charged the retailer’s Eastern division with oversight of those three units which were located in disparate locations – Oakland Park, Largo and Altamonte Springs. Nearly $30 million was spent on remodeling those three large supermarkets and they were rebranded as Safeways. At the time, there was talk that Albertsons would make a bid to acquire some or all of struggling Winn-Dixie’s (Southeastern Grocers) stores in Florida, which, of course, never materialized. Fast forward 30 months later and close that book. With the Rite Aid merger now on the front burner (shareholders’ vote is set for August 9), Albertsons has sold those three units to (who else) Publix, which will reopen them by the end of 2018. If you live in Florida, the old joke about having a Starbucks on every corner would also apply to Publix, which now has
nearly 800 supermarkets in the state. And this wouldn’t be the first time the two big retailers have done business. Ten years ago, as it was downsizing its Florida operations, Albertsons sold 49 of its stores to the boys from Lakeland. By the way,the Albertsons/Rite Aid deal will be largely decided on August 9 when Rite Aid shareholders vote to approve the merger. There’s been some pushback from Rite Aid holders, so stay tuned…Harvest Fare Supermarkets, owned by the dynamic father-son team of Jim and Scott Streett, will open their third Baltimore-area store this September on Wabash Avenue in Baltimore  City. That location for many years housed the Food King store operated by the late Herb
Beckheimer and Bernie Meizlish. In September 2016, Food King sold its two stores (the other unit was located on Annapolis Road in Baltimore) to the three Flores brothers, who operated four supermarkets in south Florida. The Annapolis Road location closed several months ago and sales at the Wabash store slipped significantly after it had been acquired. This is a real opportunity for Jim and Scott, who also operate supermarkets in the Hamilton section of Baltimore and in Fallston, MD. Good luck, guys…Giant/Martin’s will be turning one of the two stores it closed last month in Lancaster, PA (North Reservoir Street) into an ecommerce hub. The hub will encompass 38,000 square feet and allow for
curbside pickup which will be delivered directly to a customer’s car. The converted store will bring about 150 jobs back to Lancaster. “We’re seeing double-digit growth in online ordering and grocery delivery, said Giant/Martin’s president Nick Bertram. “We are rededicating ourselves to the Lancaster market, and we want this cutting-edge facility to be unique – something the Northeast (Lancaster) neighborhood will be proud of while we meet this demand. We’re excited because the ecommerce hub will allow us to increase capacity quickly. Grocery shopping is changing and the pace is accelerating; as customer-centric company, the innovation is the cornerstone of our go-to-business strategy. Our
ecommerce hub will drive growth while helping our customers to shop how they want, when they want, and most importantly, where they want.” This will be the fifth Giant unit that will partner with its digital grocery delivery affiliate Peapod in the Keystone State. And one more Giant related note: while there’s been virtually no attention paid to the status of its once promising small format division, we can confirm that plans are still in “go” mode at the Carlisle, PA division for its three stores that were planned for  Philadelphia. We’re told that while revised plans are still being developed, the company plans to open those three stores which were first announced in March 2017. Another thing we can tell you is that they won’t be bannered as bfresh.…on June 28, BJ’s Wholesale Club officially launched its public offering. The stock opened at $17 per share, the high-end of its projected range, and in the two ensuing weeks has spiked to $25 per share…BJ’s biggest rival, Costco, continued its impress streak of dynamic comp-store sales in the U.S. Comps were up 7.7 percent (excluding gas) at the club merchant’s U.S. units. The company said same-store revenue for food increased in the mid-single digits and that Costco’s ecommerce sales rose nearly 28 percent…analysts are predicting that Amazon’s “Prime Day,” held for a 36-hour period on July 16 and 17, will smash all previous records and generate $3.4 billion in sales. One reason for the ambitious prediction: Whole Foods will
participate in the event for the first time. That means Amazon “Prime” members will receive an extra 10 percent off on hundreds of sales items as well as other selected discounts. And from July 14-17, those holding an Amazon Prime Visa card will receive a 10 percent rebate on purchases up to $400. Amazon is expected to heavily promote its own brands and should also expect a significant increase in new “Prime” members of which there are currently more than 100 million globally. Last year’s “Prime” Day garnered about $2.4 billion…J. M. Smucker has sold its bakery business (Pillsbury, Martha White, Hungry Jack) to private investment firm Brynwood Partners for $375 million. The Orrville, OH
manufacturer plans to use the proceeds from the deal to further develop its pet food, coffee and snacking businesses. Two months ago, Smucker acquired Ainsworth Pet Nutrition (maker of Rachel Ray’s dog food) for $1.9 billion…jet.com, a unit of Walmart, will open a 200,000 square foot distribution center in the Bronx this fall that will help accelerate same-day and next-day deliveries (including groceries) in the metro New York market. While pressure from a lot of fronts (labor unions, local politicians) has prevented Walmart from building bricks and mortar stores in New York City, the world’s largest retailer is slowly gaining traction in the fi ve boroughs through use of its ecommerce businesses. And
speaking of “the city,” while we’ve devoted a lot of ink in this column over the past few years to the struggles of New York City-based retailers such as Fairway, D’Agostino’s and Gristedes, it appears another Big Apple icon is headed for rocky waters. Dean & Deluca is in the midst of a major restructuring as it closes stores and attempts to refocus on its core business in New York and northern California. According to the New York Post and several other sources, the company, now owned by Thai entrepreneur Sorapoj Techakraisi, which acquired D&D in 2014, has been closing stores rapidly over the past year, and now operates 18 stores nationally as well as nine licensed stores overseas. Its sole store in the Mid-Atlantic, located in the posh Georgetown section of Washington, DC, is a shadow of its former self with no fresh meat, seafood or produce being sold at the next level above “insult pricing.” The Post story tells of pending lawsuits from suppliers (confirmed by us) and early termination of leases which has angered landlords. Even in Manhattan it is struggling and recently backed out of new stores plans for three prospective units in the Meatpacking district, near Wall Street and in the Graybar Building on Lexington Avenue. It has also hired financial investment firm Emerald Capital Advisors to help with its financial mess. To say that Dean & Deluca in no way resembles its former upscale and exotic stature would be a gross understatement. As I’ve said many times, when you go from great to (far) less than that in the perishables arena, you’re done or overdone. Today, not only is Dean & Deluca a shadow of its former self, it just isn’t a very worthy shopping
experience. And as it can only do, the Post summarized D&D’s dilemma with just one sentence: “Can’t afford that $45 box of cookies at Dean & Deluca? Neither can Dean & Deluca”…a few obits to report this month, including two from the animal kingdom. But fi rst, our sincerest sympathies to the Sumas family, who operate Village Super Markets (the second largest Wakefern member with 30 stores), on the death of one of their patriarchs, James “Jimmy” Sumas who passed away earlier this month at the age of 84. Jimmy Sumas, along with his father, Nick, and his uncle, Perry, worked in the family’s grocery store in South Orange, NJ which originally opened in 1937. The success of that store led the Sumas family to become one of the early members of Wakefern and Jimmy was one of the prime reasons for the rapid expansion of Village ShopRite beginning in the late 1950s. The company went public in 1965. In 1999, he was elected as chairman of the company and in 2002 he was named CEO. Jimmy Sumas was a man who truly loved the business and will be remembered for his dedication to the employees of the company where he commanded both love and respect…Tab Hunter, once a Hollywood heartthrob in the 1950s has passed away. Hunter, who appeared in more than 75 film and television roles in a career that spanned more than 60 years, will probably be best remembered for his role as baseball player Joe Hardy in the 1958 movie “Damn Yankees.” In 1981, he unexpectedly became popular once again when he appeared in John Waters’ absurdist comedy “Polyester” that also featured 300-pound transvestite Divine. Hunter was 86….and both Duke (the dog) and Koko (the gorilla) have moved on to animal heaven. Duke (real name Sam), who gained fame as one of the first Bush’s Beans company mascots, died late last month in Apopka, FL. Of course, Bush’s has had several golden retrievers play Duke over the years, but his passing was acknowledged by spokesman and company executive Jay Bush (who appeared with him in the company’s commercials) who stated, “While Sam has not worked with us in years, we are saddened by the news of his passing and are grateful to have him depict Duke.” Koko is dead, too. The 46-year old gorilla died last month at the
Gorilla Foundation’s preserve in Woodside, CA. Koko first gained fame in 1978 for her ability to communicate with humans using sign language. In 2012, with help from her trainers, Koko learned how to play the recorder, proving to researchers that primates could learn to control their breathing, something that had been assumed to be beyond their abilities…and stay tuned next month when I’ll be discussing some “creative” new retailer money grabs including Ahold Delhaize’s “fair share” program, Kroger’s 90-day payment terms and Whole Foods’ new vendor fee structure.