Safeway Exploring Options To Sell More Genuardi’s Markets In The Delaware Valley

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It’s been a rocky ride ever since Safeway acquired Genuardi’s Family Markets in early 2001 and now it appears that the big Pleasanton, CA chain may be looking to cut ties with its struggling Delaware Valley entity.

Multiple sources have told Food Trade News that Safeway has contacted several retailers and wholesalers to determine their interest in acquiring stores from the chain’s struggling division.

Those same sources told us that the process was being handled from Safeway’s corporate offices in Pleasanton, CA and there was no “information book” available.

“For obvious reasons, Safeway wants to handle this process on a discreet basis,” said a retailer who claims to have knowledge of the situation. “The process is ongoing and is being handled by officials based at corporate headquarters. There is no ‘book’ that has been published listing specs for all stores; rather the process has been more individualized.”

Asked if Safeway might just be “information gathering,” the retail source said that would be unlikely since some of those retailers interested have already toured stores with Safeway officials.

Other trade observers viewed a potential Genuardi store sell-off as not surprising.

“This has been a downward spiral for a decade,” said an executive with a large food brokerage organization based in the Delaware Valley who has covered Genuardi’s for more than 35 years. “From the first few months after Safeway acquired the chain from the Genuardi family, it changed for the worst. The merchandising changed, the marketing approach changed, the product mix changed and ultimately the chemistry of the family-driven organization significantly eroded.”

An independent retailer that competes with Genuardi’s agreed.

“There was no logic for Safeway to have changed the organization as radically as did. While consumers reacted negatively to those changes, the last few years have been more telling for all of us with new competition and the economy affecting all of us.”

The numbers substantiate Genuardi’s decline. When Safeway completed the deal in February 2001 for a reported $600 million, the Plymouth Meeting, PA regional chain amassed sales of approximately $1.06 billion at its 40 stores. It controlled 6.96 percent of the Del-Val market at the time.

Today, there are 30 stores trading under the Genuardi’s banner (two former Genuardi’s units in New Castle County, DE were switched to the Safeway banner a few years ago). Annual sales at those stores are approximately $777 million, or 3.97 percent of the market.

Over the past three years, Genuardi’s has closed six stores, two of which (Warrington, PA and Feasterville, PA) were acquired by Ahold USA’s Giant/Carlisle unit.

Of course, any potential store closing/acquisition discussion usually begins with Ahold, which would not comment on its interest level in existing Genuardi’s stores.

“You’ve got believe that Giant has an interest in some of these units, not only based on past history, but because its non-union status matches up with Genuardi’s also being unorganized,” said an executive with a major DSD firm who currently services both chains.

“Frankly, I think it’s a smart move if Genuardi’s wants to dump more stores or withdraw from the market,” said an executive from another chain retailer. “By acting now, it beats both A&P/Pathmark and Acme the punch in terms of other stores potentially being available and its non-union status certainly gives it more flexibility, too. Surely, Safeway must have depreciated this asset by now, so now the possible departure of 30 stores won’t cost the company very much, aside from pride.”

Other non-union retailers that might have an interest in some Genuardi’s locations include Delhaize America (Food Lion/Bottom Dollar), Weis Markets and several independent retailers.

A spokesperson for Safeway would not comment specifically on the store sales speculation, but did add, “We are constantly viewing all aspects of our operations so that we can provide our shareholder’s maximum value.”