Clearly, Acme’s president Dan Sanders is beloved by his associates and respected by the vendors. In his nearly two years at the helm in Malvern, PA, he’s worked very hard to change the view at the once great Delaware Valley retailer, despite inheriting some extreme challenges (legacy labor contracts, expensive pension funds, very little capital from corporate Supervalu).
But the scale of ineptitude displayed by the leaders who roam the halls at Supervalu corporate headquarters in Eden Prairie makes the odds of his success improbable.
“It’s like he’s an All-Star on the ’62 Mets. He’s like Richie Ashburn (the former Phillies great who was the Mets’ lone representative on that team), who was the Mets’ shining light that year. Despite Ashburn’s contributions, in the end, the Mets still lost a record 120 games,” said one food brokerage executive who listened to Sanders’ speech at this month’s AMR-MAFTO dinner held in King of Prussia. PA. “One man can’t change the course, if management won’t provide him with the tools for success.”
According to our own Maria Maggio and seven other attendees at the meeting, Sanders delivered a strong message, focusing on his personal experiences and beliefs, rather than on Acme’s specific problems.
It’s clear that Sanders’ faith is strong and he’s passionate about people and their abilities to create change. He also believes that material success is not the most important component in his life.
However, at the end of the day, he still must produce, and in this business it’s about earnings, sales, customer counts, transaction size and market share.
Much like its parent company, the five year measurement summary of all those components for Acme is not a good one.
Sanders is trying hard and perhaps his best days in the industry won’t be with Acme. It’s clear that business success is important to Sanders, but his faith and his desire to give back seem much more important.
And one more lesson from those 1962 Mets: the team’s number one draft pick was a high school phenom named Ed Kranepool who played for the worst team in baseball history as a 17 year old. In fact, Kranepool suffered through seven losing seasons with the team until the Mets hit pay dirt in 1969 when it won its first World Series. Perseverance does count.
However as the Mets ascended from the outhouse to the penthouse in that eight-year span, management also improved and the team drafted better players (Tom Seaver, Jerry Koosman, Nolan Ryan) and made shrewd trades (Donn Clendenon, Tommie Agee). Additionally, a new stadium (stores) was built and the fan base (customers) increased, too.
This is why I believe that Sanders’ best days ahead won’t be with Acme – because current Supervalu management has clearly shown it is incapable of improving or providing the components necessary for success in the rugged industry of today.
During the past month, Supervalu riffed another 800 jobs. While CEO Craig Herkert touts the glories of “hyperlocal” more “local” people are sent packing (about 75 associates at its four Northeast banners, including approximately 20 at Acme alone). Herkert and the “gang that can’t shoot straight” in Eden Prairie have deployed the “hackin’ and whackin’” move so often, his vision of the company as “America’s Neighborhood Market” is not only laughable, it’s disingenuous, hypocritical and false.
The entire Supervalu foundation seems horribly misguided. In Dan Sanders, the company has a talented, effusive and highly intelligent leader whose declining results are clearly a by-product of the direction and (lack of) tools he’s been given by his bosses in Eden Prairie, MN.
It kind of makes you wonder who the leader is and who’s the clown?
For Delhaize America, Bottom Dollar May Be The Hope, But Food Lion Still Stirs The Drink
If you live in the Mid-Atlantic region and you’re asked to assess the status of Delhaize America (DA), you might be less than praiseworthy.
While the company is effusive about the prospects of its Bottom Dollar Foods (BDF) banner, after more than a year of operating in the Delaware and Lehigh Valleys, our research indicates that there are more “misses” than “hits” when analyzing sales.
Over the past month, the big Belgian-owned retailer opened 14 Bottom Dollar units in the Pittsburgh-Youngstown area. Success in those markets is going be challenging, too, not only because other discounters (Save-A-Lot, Aldi) are already present, but also because, as the newest kid on the block, it’s almost always more difficult to become established.
And much like its core Food Lion banner, I’ve wondered exactly what does the BDF banner represent and who is it taking business from?
As we move further south into the Washington DC market, Delhaize America’s recent announcement that it will close eight stores and convert 34 Bloom stores and 12 Bottom Dollar units back to Food Lions seems like a measure of desperation. In fact, the name Bloom has become extinct.
It was only five years ago that the retailer made a big ballyhoo about changing its image in the Greater DC area by offering an upscale model (Bloom) to the many affluent consumers who live in the region and also by creating an extreme value alternative for customers in a different economic strata.
The latter concept might have been more effective if the units weren’t as large as they were (approximately 30,000-35,000 square feet; the newer stores around Philly which average about 19,000 sq. ft. work better) and had better in-stock conditions.
And at the outset, even Bloom had potential with a nice decor and service departments (it wasn’t a Wegmans or for that matter a Harris Teeter), and Bloom might have worked if Delhaize stuck with the plan. Instead, sales started out a bit softly and soon the retailer abandoned its service component. And it’s been a downhill ride from there.
Now we’re getting a revival of the Food Lion brand. Delhaize America believes that its new refreshed and enhanced look (which it has unveiled in Raleigh, NC and Chattanooga, TN) will revive the banner’s small, old and tired perception. The upgraded model may be scoring points further south, but don’t count on moving the needle significantly around Washington, DC.
Because unless you’re building large edifices such as Wegmans or Wal-Mart designed to do a million or more in weekly volume, the share of market meter typically doesn’t move much in these times of overstoring and a diversity of retailing styles.
I’ve seen the revamped Food Lion model. It’s fresher, cleaner and better merchandised than the 35,000 square foot “workhorse” which still dominates the chain’s population of stores. But it isn’t a game breaker.
In a market like Washington DC, perishables and customer service are important. Food Lion is still behind the curve in both areas. Since Food Lion abandoned its banner around DC in 2006, a lot has changed. Wegmans has doubled the number of stores in the market; Harris Teeter has added approximately 20 new units; Target has unfurled its Pfresh model; dollar stores have exploded; market leader Giant/Landover has improved its store base and subsequently its image; and Wal-Mart has added more than a dozen SuperCenters (and if there’s one merchant who Food Lion needs to defend with a wooden cross, bright lights, holy water and garlic, it’s Wal-Mart).
Given that market lineup in 2012, is Delhaize America better off today than it was when it took down the Food Lion banner in 2006?
On the corporate stage, along with the expansion of the Bottom Dollar banner in Pennsylvania, New Jersey and Ohio, the company is closing other Food Lion, Bottom Dollar and Bloom units (126 store closures in all). Of that number, 113 Food Lions in Florida (where that banner will disappear), Georgia, Kentucky, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia have closed in the past few weeks. Additionally, the company will shutter its Clinton, TN distribution center.
All these moves serve a two-fold purpose for the company: 1) to provide more productivity and efficiency as its seeks annual sales growth of 5-7 percent annually and; 2) to achieve the desired corporate initiative issue by the mothership in Brussels to save about $650 million by the end of 2012.
Sure, Delhaize would also like to add 450 new stores worldwide and become more profitable and consistent from a sales perspective (considering the impact of food price inflation, Delhaize America has struggled with comp store sales).
However, as a price for meeting its corporate savings directive Delhaize America has created a unique and controversial centralized merchandising organization that many sales reps, brokers and analysts would argue impairs vendor relations and offers less attention to store operations and local merchandising.
And at the end of the day, it’s not as though the other DA banners – Hannaford, Sweetbay, Harveys and Reid’s – aren’t important, but with more than 1,100 Food Lion stores representing about 70 percent of Delhaize America’s fleet, the international retailer desperately needs its stalwart banner to improve.
That test is just under way. Report cards will be issued later this year.
‘Round the Trade
It shouldn’t be long before A&P will have officially exited bankruptcy. On February 6 and 7, U.S. Bankruptcy Judge Robert Drain convened a hearing to examine A&P’s final reorg plan. He heard arguments from several parties who objected to certain language contained in the plan. Judge Drain rejected several of those complaints and is now in the process of a final review before the company becomes private and is led by Yucaipa Cos. leader Ron Burkle. And once Burkle has control, look for more stores closings and potential sell-offs. Two weeks before the reorg hearing, Judge Drain approved a $750 million financing plan for the Tea Company. The plan consists of a $400 million revolving loan and a $350 million term loan from J.P. Morgan Chase and Credit Suisse. One piece of speculation that is rampant: Burkle will make a play for both Shaw’s and Acme (he’s a major Supervalu stakeholder) and somehow parlay that deal into a huge Northeast holding. And if you’re of the belief (as I am) that almost all recent private equity deals are essentially real estate plays, Mr. Burkle might have another huge payday. Flipping A&P (or potentially Acme and Shaw’s) in a few years will be much harder to do than finding a buyer for Fred Meyer or Pathmark, but the real estate equity for many of these properties remains significant. And as I’ve said many times, “don’t ever bet against Ron Burkle”…more Supervalu news: Julie Dexter Berg, who as executive VP-chief marketing officer and was one of Herkert’s most highly touted acolytes, has quit to return to the West Coast. Replacing Berg is Michael Moore (no, not that Michael Moore) who joined Supervalu last year as business transformation officer. Moore has 24 years of CPG experience at P&G. We wish him good luck in his new post – he’ll certainly need it. Supervalu has also announced that its new Everyday Essentials private label brand has caused the need to eliminate older private label brands such as Richfood, Flavorite and Homelife. Other PL brands such as Shoppers Value, Culinary Circle and Stockman & Dakota will remain available…Wal-Mart has filed a motion in U.S. District Court in San Francisco seeking to dismiss a reconstructed lawsuit which alleges the planet’s largest merchant discriminated against women for a prolonged period.. A class action version of the gender discrimination suit was rejected by the U.S. Supreme Court last June. The high court implied that the allegations made by the plaintiffs were too broad and would be better served by being heard in local jurisdictions. Wal-Mart is claiming that the California suit is a thinly-veiled effort to cover all Wal-Marts nationally, not just the approximately 45,000 women in California. The Behemoth is seeking a May hearing. In a key personnel move involving Wal-Mart, Brian Cornell, CEO of its Sam’s Club unit since 2009, has resigned and will be replaced by Rosalind Brewer, who currently serves as president of Wal-Mart’s eastern U.S. business. Cornell, a former Pepsi executive, is a highly talented marketer, who is best remembered for shaping Safeway’s “Lifestyle” store format about a decade ago. Cornell said he and his wife wanted to move back to the Northeast for family reasons. Cornell, who is only 52, won’t have to be knocking on any doors to find a new gig – if he so chooses. In other Wal-Mart executives changes, Gisel Ruiz has been promoted to EVP and COO of Wal-Mart U.S. (she was EVP-people for the company’s U.S. stores); Rollin Ford is the company’s new chief administrative office (he was Wal-Mart’s chief information officer -CIO) and Karenann Terrell moves into the CIO job from her previous post as assistant CIO. Northeast… in a not so surprising move, our buddy former Acme president Peter Lynch has announced that he will be resigning his post as CEO of Winn-Dixie, once that Jacksonville, FL retailer is acquired by Bi-Lo Foods in approximately 90 days. Lynch, who truly is one of the good guys in the grocery biz noted in a statement to his associates, “Working with all of you these past seven years has been the highlight of my career. Together, we have accomplished what many said could never be done: we took a company that was challenged, and we successfully turned the company around.” I don’t think Lynch, 59, will be out of a job too long if he seeks to continue his full-time career in the food industry
Kudos to Kings/Balducci’s CEO Judy Spires and her team on the beautiful remodeling job they did on their Bedminster, NJ store. The prepared food departments (Kings’ specialty) looked great and the entire store had a real pizzazz about it. The Bedminster project was the initial effort in a total Kings rebranding (revamped logo, upgraded website and new slogan – “Where Inspiration Strikes”). Two other units in affluent New Jersey communities – Livingston and Hoboken – are also slated for similar remodelings and on February 29, the company will debut its “Balducci’s Gourmet On The Go” café in the Hearst Tower (W. 57th Street) in Manhattan… also a tip of the hat to Joe Sheridan, president of Wakefern on being named chairman of the National Grocers Association (NGA) at the trade group’s annual convention held earlier this month in Las Vegas. Other “locals” named as directors of the growing organization (which primarily focuses on the needs of independents and regional chains) include Linda Doherty (New Jersey Food Council) and Mike Stolarz (Allegiance Retail Services/Foodtown). Wakefern has also been named as primary wholesaler to Food Bazaar, operator of 16 units in Brooklyn, Queens, The Bronx, New Jersey and Connecticut. And just before presstime, Fresh Direct, the largest web-driven retailer in Manhattan, which had been volleying with New York and New Jersey over sites for its new distribution center, has elected to build its new depot in the Bronx. The agreement is part of a $128 million financing package which reportedly would provide incentives to cover the expense of the new facility over a 25 year period…on the sales and earnings front, Whole Foods had another magnificent quarter, posting a 21 percent earnings increase (to $283 million) in the 16 week period ended January 15. The Austin, TX based natural and organics merchant saw overall sales increase 13 percent to $3.4 billion while comp store revenue jumped an impressive 8.7 percent. “We continue to execute at a high level, delivering a great shopping experience for our customers while delivering great returns to our shareholders,” said Walter Robb, co-chief executive officer of Whole Foods. “This quarter we produced a 28 percent (earnings per share) increase on a 13 percent increase in sales. We are pleased with our sales momentum and are confident we will continue to leverage our sales to the bottom line as reflected in our increased operating margin and earnings outlook for the year.”…Ahold USA posted strong sales numbers, both for its fourth quarter and full-year (ended December 31). In its fourth quarter, overall sales increased five percent to $5.9 million and its identical fourth quarter sales at its more than 780 U.S. stores jumped 3.9 percent (2.9 percent ex-gas), with comp revenue up 4.2 percent. For the 52 week fiscal year ended December 31, net sales were $25.1 billion, a gain of 6.6 percent and ID revenue grew 4.9 percent (2.9 percent ex-gas). Comp sales were up 5.1 percent. The company will issue its full earnings report early next month. “We are pleased to have delivered another solid performance over the quarters, growing sales and market share in the United States and the Netherlands,” said Dick Boer Ahold’s chief executive. “We continue to be well positioned in challenging market conditions and customers remaining cautious in their spending.” Along with its recently announced acquisition to purchase 16 Genuardi’s stores, Ahold USA is continuing to expand southward. The retailer’s Giant/Landover unit announced that it has acquired two Baltimore area stores from Fresh & Green’s, which originally acquired eight Maryland Super Fresh stores in last year’s A&P auction. The two units, 41st Street. in Baltimore City and Parkville, MD were stores that Giant bid on (and finished as runner-up) at the same auction which was held in New York last May. The 41st Street unit will serve as a replacement to the chain’s old and small Rotunda store. Fresh & Green, controlled by Canadian private equity firm Catalyst Capital, has struggled from the get-go, but has improved its merchandising and marketing in recent months. Last month, it named Baltimore based MGH as its ad agency to help bring brand awareness. However, no amount of awareness is going to substantially improve Fresh & Green’s sales until they spend significant capital on store improvements and modernization …good news for our friends at Bozzuto’s. The Cheshire, CT based wholesaler, which has been making strides in the Mid-Atlantic region in recent years, was named the winner of the IGA President’s Cup, presented annually to the licensed wholesaler of the year in honor of its extraordinary effort in support of IGA’s retailers and the brand. “Bozzuto’s is strongly committed to helping its IGA retailers serve their communities in the best possible way and equally devoted to growing the power of the brand with new Bozzuto’s-supplied stores,” said Mark Batenic, chief executive of IGA. “In the course of the last year, Bozzuto’s has played a vital role in the success of its IGA retailers by providing services that go well beyond that of supplying food. Day-in and day-out, Bozzuto’s worked with IGA retailers to foster the regional connections that make the brand strong and IGA stores the ‘preferred place to shop’ in communities throughout the Northeast.” …I’m sad to report to death of three music legends who coincidentally are linked together. Passing away last month at the age of 90 was Johnny Otis (born John Veliotes), musician, impresario, bandleader and arguably the man most important in bringing rhythm & blues to white audiences in the 1950s, particularly on West Coast. In fact, so many people thought Otis was African-American, it wasn’t until he wrote and sang his signature 1958 hit, “Willie and the Hand Jive” (I Know a Cat Named Way Out Willie...) did audiences discover he was Caucasian. In fact, one of the first paragraphs of his Los Angeles Times obituary notes, “Born white, the son of Greek immigrants…” (Born white? Did the Times think he had reverse Michael Jackson surgery?). Among the many R&B artists that Otis either discovered or brought into the mainstream were Jackie Wilson, Hank Ballard (writer of the “The Twist”) and Etta James. And that’s where our story continues, because also passing on recently was Ms. James. It’s hard to describe the difficult life or the supreme talent of Etta James in a few words, but before there was Aretha, before Beyonce, before Adele, there was James, whose voice could rival any R&B singer of any generation. One listen to “I’d Rather Go Blind” (1967) is all you need to hear. James, a Rock & Roll Hall of Fame member, was 73. Also moving on to another shore was another legendary name in the music business, who wasn’t a performer. Don Cornelius, 75, creator of “Soul Train” (1970-2006) was found dead in his Los Angeles home last month of a self-inflicted gunshot wound. I know I’m dating myself, but where else could you hear great musicians like James Brown, Aretha Franklin, Stevie Wonder, Michael Jackson Marvin Gaye and Tina Turner perform on TV? Although Cornelius was certainly influenced by Dick Clark and his iconic show, “American Bandstand,” by the time “Soul Train” debuted in 1970, it provided much fresher and livelier fanfare than Clark’s “AB.” And other than Barry White and Melvin Franklin of The Temptations, who had a better bass voice? I was also deeply saddened by the recent passing of Gary Carter, Hall of Fame catcher with the NY Mets and Montreal Expos. Carter was one of the toughest and grittiest baseball players of the past 50 years whose leadership skills and passion for the game were off the charts. Carter, who was diagnosed with a brain tumor last May, was only 57…Could this be the end of Hostess Brands? The once powerhouse baker last month filed for Chapter 11 protection for the second time in eight years (the first bankruptcy lasted a near record five years). This time you’ve got to Wonder (pardon me) if the Irving, TX company can realistically emerge from another bankruptcy action. A more realistic scenario is that the company’s iconic brands are sold off to competitors such as Kraft, Flowers, Bimbo or Pepperidge Farm. After all, wouldn’t we all be in a worse place if there were no mo’ Ho Hos, Ding Dongs, Sno Balls or Twinkies?…and finally, this is the kind of headline that Wal-Mart could do without: “Police Stun Naked Sock Thief At Wal-Mart.” It appears that Video surveillance footage showed 6’4” Verdon Taylor stripping off his clothes in the parking lot of the Exton, PA Wal-Mart and then entering the store in his birthday suit. Once inside, police said Taylor walked up to the customer service line where a bag of returned goods sat on the table. Taylor pulled out a pair of socks and proceeded to put them on. When confronted, Taylor allegedly became hostile and had to be tasered. I think “tasering” him might have been a bit much, since it was clear that Taylor wasn’t on a shoplifting spree.