Taking Stock

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‘Round The Trade

Because of our deadline, we could only measure opening day sales of the newest Wegmans unit (its 98th store) in Lancaster, PA. Not surprisingly, the joint was rocking at the 120,000 square foot uber-store. While its first unit in Lancaster County might cannibalize some sales at its Downingtown, PA and Mechanicsburg, PA unit, the opening will be more disruptive to the entire Lancaster marketplace which currently includes supermarket chains Giant/Martin’s, Weis and Whole Foods (which opened in March); mass merchants Walmart and Target and a host of independents including Musser’s, Stauffer’s of Kissel Hill, Yoder’s, Oregon Dairy and Shady Maple Market…also celebrating a  big opening few days earlier was the first Sprouts Farmers Market in Philadelphia (1000 S. Broad Street). Led by hometown boy Dan Croce and former Acme president Dan Sanders, the Phoenix-based perishables-focused merchant experienced big crowds during its entire opening weekend…Amazon Go opened its first unit outside of Seattle earlier this month. The 2,000 square foot upscale and cashier less c-store offers salads, snacks, sandwiches, and meal kits. In addition to three existing units, “Go” stores are also planned for San Francisco and New York…Lidl, the most disappointing retailer of the past few years, finally restarted its store opening engine in the Washington, DC area with a ribbon cutting in Bowie, MD (its first Maryland unit) and a scheduled September 26 opening in Dumfries, VA. There are still approximately 50 sites that Lidl controls (including multiple sites in Delaware, New Jersey and Pennsylvania) and it’s anybody’s guess how many (or few) of those stores will ever open…there’s nothing like pressure from a well-capitalized hedge fund to spur a company to change direction (ask Supervalu). This time it’s long beleaguered Campbell Soup, which for more than a decade has fumbled, stumbled and tumbled its way to poor results and questionable acquisitions. First, longtime CEO Denise Morrison was shown the door and more recently activist investor Dan Loeb and his Third Point organization took a 5.65 percent equity stake in the Camden, NJ CPG company. And almost instantly, after Loeb threaten to force a sale of the company, Campbell’s announced it would look to sell international operations (Arnott’s, Kelsen) as well as its once prized refrigerated foods business (Bolthouse Farms) which combined account for more than $2 billion in annual sales. The decision to sell Bolthouse is especially eye-opening considering that Campbell’s paid $1.55 billion for it only six years ago. Previously, Loeb stated that a sale of the entire company to another food manufacturer was the only justifiable outcome. And he was clearly unhappy with what he believes is a compromise move by Campbell’s. Loeb has called for a complete turnover of the company’s current board of 12 directors. “Unfortunately, this board’s persistent failure to discharge its current fiduciary duties leaves us no choice but to seek to replace the entire board with our Shareholder slate,” the hedge fund entrepreneur wrote in a letter. Notable nominees on Third Point’s slate include recently retired Hostess CEO (and former Campbell’s exec) Bill Toler; former Blue Buffalo pet food CEO Kurt Schmidt; and George Strawbridge Jr., a major shareholder and part of the Dorrance founding family…Giant/Martin’s store in Cleona, PA (Lebanon County) has become the first Ahold Delhaize USA unit to reach zero-waste status. As defined by the EPA, zero-waste means that at least 90 percent of a store’s total waste is being diverted from a landfill or incineration…according to market research firm Price-Trak, grocery prices have increased over the last six months as compared to the deflationary trend of the past two years. According to the Rensselaer, NY-based company, key categories where increases were most pronounced included eggs (15.4 percent), frozen fruit (14 percent), shelf-stable desserts (14 percent) and pet products (8.7 percent). Price-Trak monitored 150 grocery categories in all…the Hershey Co. has agreed to acquire Pirate Brands (Pirate’s Booty, Smart Puffs, Original Tings) from B&G Foods for $420 million. Hershey will fold those brands into its Amplify snacks division (Smart Pop is its biggest brand) which it acquired earlier this year for $1.6 billion. Parsippany, NJ-based B&G, whose current portfolio contains more than 50 brands (including Green Giant, Ortega, SnackWell’s and Spice Island), will use the proceeds to pay down debt and utilize for other potential acquisitions…PepsiCo is acquiring Israeli sparkling water company SodaStream in a deal valued at $.2 billion. Six weeks before her previously announced retirement as CEO, Indra Nooyi said the purchase “fit Pepsi’s goal of making more nutritious products while limiting our environmental footprint.”…Tops Markets, the troubled Williamsville, NY retailer, has filed its reorganization plan with U.S. Bankruptcy Court. The new plan will reduce Tops’ debt and provide a “sustainable capital structure and provide the financial flexibility” to create a stronger competitor. As part of the reorg, Tops will close 10 stores in Central and Western New York. The company filed for Chapter 11 protection in February 2018…Procter & Gamble, long known for product innovation, is apparently trying to corner the market on Internet acronyms. The giant Cincinnati-based CPG firm is attempting to trademark popular phrasings such as “LOL,” “NBD” and of course, the often used “WTF,” which seems anathema to the P&G’s long-standing image as a conservative company…Supervalu announced that it has agreed to sell 19 of its 36 Shop ‘n Save stores in the St. Louis area to Schnuck’s, the family-owned regional chain that has been a dominant player in the St. Louis market for nearly 80 years. Fourteen of the stores are in Missouri and five are located in Southern Illinois. The deal is expected to be consummated late next month. With new owners UNFI unwilling to be burdened by SVU’s declining corporate store performance, all four remaining retail banners are on the sales block. Earlier this month, the company closed eight Shop ‘n Save stores in Western MD, Central PA and WV and has also been actively marketing its Shoppers Food & Pharmacy stores (about 50 units) in the B-W market. Six months ago, Supervalu sold 23 Farm Fresh units and closed 15 others in the Tidewater region of Virginia. Likely last to be sold/closed will be its eight-unit Hornbacher’s division in North Dakota and its largest and most desirable banner – Cub…more Sears and Kmarts are set to close. Yes, 46 more units (33 Sears, 13 Kmarts) are ready to become extinct in the next two months. Only a handful are in the Mid-Atlantic/Northeast – Newark, DE; Milford, CT, Riverhead, NY (Kmarts); and Holyoke, MA; Taunton, MA; Salem, NH; Manchester, NH; Mays Landing, NJ; Glens Falls, NY; New Hyde Park, NY, and Fairfax, VA (Sears). The numbers under Sears Holdings CEO “Slow Eddie” Lampert don’t lie. When Sears and Kmart merged in 2005, there were about 3,500 stores between the two banners. Today, that number is approximately 900. Moreover, the Hoffman Estates, IL retailer has lost an incredible $11.2 billion since 2010. That truly is reverse Midas touch material. And yet “Slow Eddie” still doesn’t seem to get it. He’s laying much of the blame for his company’s historic failures on the significant expense of funding Sear’s pension plans. There’s no question that retirees’ pension funds are costly (he knew this when he acquired the flagging company in 2004), but to blame the massive failures of Sears and Kmart on pension-related issues is like Richard Nixon blaming Watergate on bad “plumbers.”…the increasingly popular Natural Products show (Expo East,) which held its annual convention earlier this month, will be leaving its longtime Baltimore base after next year’s show. The reason: it has outgrown the space at the aging Baltimore Convention Center. The 2020 show will shift to Philadelphia where the convention center is twice as large…according to many reports, the nationwide shortage of truck drivers has reached 180,000 and as many in our business who are directly associated with logistics and distribution know, this is a critical and worsening situation. The country’s largest retailer, Walmart, has unveiled a plan to attract new drivers by offering referral bonuses of up to $1,500 and will also accelerate the training process for new drivers. Additionally, the “Behemoth” will launch a national television ad that will highlight its 7,500 truckers, who comprise one of the nation’s largest fleets…a couple of months ago I reported on the dissatisfaction of several licensees over the new Save-A-Lot management team led by former Lidl U.S. president Kenneth McGrath, who took the helm at the Earth City, MO discount merchant about 18 months ago. Now several more licensees, which control 60 percent of S-A-L’s stores, have chimed in to express their frustration with the new policies and direction of the company. Quick message to McGrath: you’d better become a better listener and take a harder look at who pays your meal ticket. Quickly! Let the licensees have more flexibility on how they operate their stores and greater input about the how to improve the overall company…there are several notable obituaries to report this month. I was saddened to hear of the sudden passing of Bill Donovan, whose grocery career spanned nearly 40 years. Beginning at Acme after graduating from the University of Delaware in 1978, he rose steadily through the ranks and, along with his compadre Bernie Ellis, headed the big Malvern, PA-based chain’s merchandising department in the 1990s. The “Bernie & Bill” show then moved to Giant/Landover and ultimately to AWI/C&S. Bill stayed there until he retired in 2015. I can’t remember anyone whom I had more industry “debates” with than Bill. Some were philosophical, others more heated, but that’s what I admired so much about him – he passionately believed his viewpoint was correct and didn’t easily back down. Bill Donovan also had a king-sized brain. He knew a lot about a lot of things, especially the grocery business where he was a deep thinker and a creative merchant. Many people knew Bill as the ultimate tough guy. However, if you really knew him, that wasn’t the case. If he trusted you, you’d realize that he could be very compassionate and caring. Bill, you’ll be missed  – rest in peace…from the political sphere, the passing of Senator John McCain, 81, was also sad, but so many lessons in grace, honesty and courage could be learned from a man who was imprisoned in a North Vietnamese prison of was camp for more than five years (and refusing preferential treatment to leave early because his father was an Admiral). As he approached death with great dignity and bravery, McCain revealed in his memoir published in May, “It’s been quite a ride. I’ve known great passions, seen amazing wonders, fought in a war and helped make peace. I’ve lived very well and I’ve been deprived of all comforts, I’ve been lonely as a person can be and I’ve enjoyed the company of heroes. I’ve suffered the deepest despair and experienced the highest exultation, I made a small place for myself in the story of America and history of my times.” Wow! McCain also twice ran unsuccessfully for president and leaves a legacy that is unique and powerful…Neil Simon, 91, the Pulitzer Prize winning playwright and screenwriter whose unforgettable comedies included “The Odd Couple,” “The Sunshine Boys,” and “Brighton Beach Memoirs,” passed away last month in New York City. Beginning his career in the early 1950s as a staff writer for Sid Caesar’s great TV show “Your Show of Shows” with other notable cohorts such as Mel Brooks, Larry Gelbart and Carl Reiner, Simon soon migrated to writing comedic screenplays. His first hit was “Come Blow Your Horn” (1961) which was also made into a film starring Frank Sinatra. At one point in the late 1960s, he had four shows running on Broadway at the same time. All told, Simon received 16 Tony nominations (winning three times) and earned four Oscar nominations and a Pulitzer Prize. In 1983, the former Alvin Theater was renamed the Neil Simon Theater, making him the only living person to have a Broadway theater named after him…and, it was sad to hear of the death of actor Burt Reynolds, who in the 1970s was Hollywood’s most popular movie actor and whose films were huge box office successes. Some of those films, such as “Smokey and the Bandit” and “Cannonball Run” (and subsequent sequels of both), were mocked for their corniness and impacted Reynolds’ reputation as a quality actor. However, Reynolds, 82, was indeed a fine actor. His roles in “Deliverance” (1972), “The Longest Yard” (1974), “Semi-Tough” (1977),“The End” (1978) and “Boogie Nights” (1997) proved his acting mettle. And, earlier this year I saw “The Last Movie Star,” a semi-autobiographical movie about Reynolds’ life, in which he starred. Reynolds was also slated to appear in Quentin Tarantino’s next film, “Once Upon A Time In Hollywood” which opens next summer. Clearly, his acting skills were very much underrated. All told, the man who once posed nude in a 1972 issue of Cosmopolitan, and also played halfback for Florida State, was one of the most interesting characters of the last 40 years and will be remembered by many of his fans for his engaging personality and quick wit.