Taking Stock

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Food Lion Revampment Won’t Offset Fierce Competition In Richmond

Give Food Lion its due. Of all the operating companies (brands) in the new Ahold Delhaize matrix in the U.S., no other banner has performed better over the past two years. Granted, its average volumes are considerably less than sister company Hannaford and also that of new step-siblings Giant (Carlisle and Landover) and Stop & Shop, but its “Easy Fresh and Affordable” renovation program has produced positive results in the North Carolina markets where the revampments have been completed – 10 percent sales growth in Wilmington; 3 percent in Greenville and 8 percent in Raleigh.

Now, the Salisbury, NC-based chain is taking its store improvement effort to Richmond where it operates 71 stores in the entire marketplace (approximately 45 of those units are in the metro Richmond area).

“Food Lion is proud to have been a part of the greater Richmond community since 1984, and we are excited to bring our newest format to this market,” said Meg Ham, Food Lion president. “We look forward to making significant investments in our stores, our customers, our associates and our communities to offer a new grocery shopping experience. We want to ensure our customers can easily find fresh, quality products to nourish their families at affordable prices every day, delivered with caring, friendly service every time they shop.”

However, Food Lion will find the going much more difficult in the capital of the Old Dominion than in its border state to the south.

Even with the eventual withdrawal of Martin’s (eight stores still open) later this year, Food Lion (and every other food retailer) has been adversely impacted by two humongous Wegmans openings during the past year. While the Rochester, NY-based uber-merchant hasn’t cratered the market, when you extract more than $100 million a year from a middle-sized market you’re gonna create a fairly high level of disruption.

Later this summer, Publix will debut the first of the 10 stores it acquired from Martin’s about a year ago. The Lakeland, FL juggernaut is reportedly spending more than $5 million per store in improvements and you can bet that the morale of the Publix associates will in no way resemble the moribund attitudes that have plagued Martin’s in Richmond for the past four years (and truthfully, based on the way they’ve been treated, who can blame them?).

However, the biggest threat to Food Lion – not only in Richmond, but in many areas of the southeast – is the upcoming debut of Lidl. While the German-based discounter won’t admit it, it seems pretty obvious that Food Lion was right in the crosshairs when Lidl began planning its U.S. entry in 2013. While Kroger may have been the most impacted retailer when Wegmans entered the market (based on compatible operating styles), the Lidl matchup won’t be a good one for Food Lion, which still counts on price, limited perishables and increasing its private label sales as key components of its success. Lidl’s go-to-market formula prioritizes those same components as well.

The fun begins on June 18 when Lidl cuts the ribbon on about 20 stores in Virginia, North Carolina and South Carolina. Lidl has approximately a dozen leases signed in the Richmond area with about three stores expected to open in the company’s first six weeks of operation. Thus far, we’re told, Lidl has reportedly inked about 125 deals in a geography ranging from New Jersey to Georgia. About 40 percent of its new stores could be in direct competition with Food Lion.

Gaining market share in Richmond has been a challenge for every retailer over the past three years. In 2016, with the Wegmans entry, the stakes were raised higher. Now with Publix and Lidl about to debut, the pressure to even maintain comp store sales becomes even more daunting.

Something’s gotta give.