Ripple Effect
During a 12-month expedition that’s spawned dramatic ripples across the mighty supermarket seas, this year’s annual Super 50 ranking of the nation’s leading food retailers is punctuated by a swift undercurrent of mergers, acquisitions, spinoffs and wider expansion nets that are collectively redefining the ecosystem.
For this year’s annual countdown of the nation’s leading food retailers, we chose to frame our analysis within a nautical theme in a nod to the ebb and flow of the times and consumer preferences.
Like the ripples in a pond, major shifts at the source trigger currents that are ultimately felt all the way downstream. M&A activity among the larger players can be a cold splash in the face for smaller operators that must decide how to react. Far-reaching ripples can also serve to make the entire ecosystem stronger, by forcing cohorts to shore up core competencies and gird against vulnerabilities to maintain and grow market share. It can also sound the alarm for stragglers, which are required to tread water amid bigger fish in a much smaller pond.
Our Super 50 analysis breaks down select players into five “oceans,” each consisting of common characteristics akin to each — some of which swim in more than one sea:
At the Helm: Larger legacy retailers that have weathered many a storm over the years, with strategic growth, innovation and a commitment to the customer experience.
Rising Tide: Owning a strong presence in their various market areas, these grocers, through a savvy mix of tried-and-true approaches, are well grounded and willing to take risks with new concepts to forge ahead.
Beyond the Mainstream: Grocers owning the natural and organic category, or swallowing an ever larger portion of it, through persistent stewardship and faithful execution.
Changing Course: These retailers have redefined themselves, or are in the process of endeavoring to do so, as a way of better navigating the changing demands of a dynamic marketplace.
Steady as They Go: Regional players with true staying power, dedicated to their core customers and local communities.
In a titanic struggle for market share in an increasingly predatory arena, a rising tide may not necessarily be enough to lift all boats. But our Super 50 contenders each play an integral role in the tempestuous sink-or-swim supermarket ecosphere.
At the Helm
Albertsons + Safeway, H-E-B, Kroger, Publix, Wakefern, Wegmans
The retailers at the helm of PG ’s Super 50 are rugged skippers that have excelled, to varying degrees, on a national stage or in their local markets, with measured growth, economies of scale, first-rate flotillas and superior armaments, to weather stormy seas in an increasingly deep and murky marketplace. They’ve each endeared themselves to a loyal customer base by investing substantial resources in people, processes, programs and platforms to equip them to know what floats their customers’ boats.
Being an industry leader is about more than sales — it’s about market leadership through innovation, knowing your shopper, understanding long-term trends and being able to weather historically stormy seas in an increasingly competitive marketplace.
The retailers at the helm of Progressive Grocer’s Super 50 are rugged companies that have demonstrated measured growth, leveraged economies of scale, invested in consumer insights and continued to plot steady courses in an increasingly competitive marketplace.
“Wow — what a year!” exclaimed Rodney McMullen, chairman and CEO of No. 2-ranked The Kroger Co., at the largest traditional grocer’s Q4/year-end earnings call earlier this year.
Kroger scooped up Milwaukee-based Roundy’s, presumably to possess that company’s crown jewel, the Chicago-area gem Mariano’s. Further, undaunted by its failure to acquire The Fresh Market, the food retail giant is going all in on the fresh format with the launch of its Main & Vine concept store near Seattle. Meanwhile, Kroger is casting an eye on foreign markets, with reports that it’s looking to partner with Israeli investors to bid on Israel’s Mega and become an operating partner in that 127-store supermarket chain.
To enhance the customer experience, Kroger developed ClickList, a shop-online, pick-up-at-the-store service, based on what it learned from Harris Teeter’s Express Lane. The retailer is also testing Vitacost.com’s technology and ship-to-home infrastructure in Denver through a pilot with its King Soopers division, as well as piloting a related “Endless Aisle experience” at Main & Vine. Another winner for Kroger has been its corporate brand portfolio, accounting for more than $20 billion of the company’s total revenue.
All of that, plus 49 consecutive quarters of same-store sales growth and 11 consecutive years of market share growth, puts Kroger firmly at the helm of the industry.
Meanwhile, Boise, Idaho-based Albertsons (No. 3) has been on a roll since re-acquiring the banners it had previously offloaded to Supervalu Inc.
Having sold 146 stores to the ill-fated Haggen as part of its 2014 merger with Safeway, Albertsons got some of them back in the wake of the Bellingham, Wash.-based regional’s bankruptcy after its brief flirtation with becoming a significant new West Coast player.
Albertsons’ Lubbock, Texas-based subsidiary United Supermarkets acquired seven Lawrence Bros. Co. stores in west Texas and New Mexico. And Albertsons recently picked up the seven-store family-owned Paul’s Market chain, based in Homedale, Idaho — a good fit for its Intermountain division.
Elsewhere, Albertsons aims to expand its merger partner’s reach into new markets by converting Albertsons stores in Florida to the Safeway banner, a move that doesn’t come without risk.
As this issue went to press, Albertsons had unveiled plans for a new concept: a 60,000-square-foot urban Tom Thumb planned for the ground floor of The Union Dallas, a two-tower mixed-use project in the heart of downtown. Located across from the American Airlines Center, the Tom Thumb at the Union will feature one of the banner’s first wine and beer bars, a concept that Albertsons has been including in both remodels and new stores in select neighborhoods throughout the country.
To be sure, Publix Super Markets (No. 4) ranks highly among retailers with the most consumer loyalty, according to a recent Temkin Group study. The Lakeland, Fla.-based grocer aims to expand that following up the Eastern seaboard, most recently with leases for two stores in Virginia, expected to launch within the next two years.
The Old Dominion will be the 1,100-store chain’s seventh state of operation; it opened its first location in North Carolina in 2012 amid aggressive growth not only into new regions, but also across its current footprint of Florida, Georgia, Alabama, Tennessee and the Carolinas.
Publix will enter this new era with strong financials ($8.2 billion in fourth-quarter sales in 2015, a 4.5 percent increase from last year’s $7.9 billion, with comps up 3.2 percent), as well as a new leadership team. CEO Ed Crenshaw, grandson of the company’s founder, who since 2008 had led Publix to unprecedented growth, retired at the end of April and was succeeded by Todd Jones, who was president alongside Crenshaw.
Other leaders at the helm, like H-E-B (No. 6) and Wegmans Food Markets (No. 17, and celebrating a century in business this year) continue to rack up accolades as employers of choice and superlative food-shopping destinations in loyalty surveys.
Rising Tide
Giant Eagle, Hy-Vee, K-VA-T/Food City, Meijer, Smart & Final, WinCo Foods
Confronting storm surges head-on through a savvy combination of outstanding local appeal, solid deck hands and skillful store-level stewardship, these intrepid mariners maintain firm control of their fleets as a result of their disciplined practices and balanced risk-taking via groundbreaking retail concepts. With a commanding presence in their respective core marketing territories, the members of this contingent have earned admirable reputations as able navigators of often choppy grocery waters.
Establishing a commanding presence in their respective core marketing territories, a handful of Super 50 stalwarts have earned admirable reputations as able navigators of choppy grocery seas while extending their tentacles in new directions.
Such is the case of Midwest superstore retailer Meijer Inc., PG’s 2015 Retailer of the Year and No. 8 in 2016’s Super 50 ranking. The company plans to build stores in Michigan’s Upper Peninsula, Cleveland and Minneapolis in the next five years, CEO Hank Meijer revealed during the recent Western Michigan University Food Marketing Conference in Meijer’s hometown of Grand Rapids.
Earlier this year, in the wake of its 2015 entry into Wisconsin, Meijer acknowledged purchasing property in the Minneapolis-St. Paul area. The regional retailer plans to invest more than $400 million in new and remodeled stores this year across its market area, including nine new supercenters and 32 major remodels.
Meanwhile, out in Boise, Idaho, WinCo Foods, which comes in at No. 19 in The Super 50, has become a formidable force on the retail foodscape. With more than 100 stores in eight states, the fast-growing, employee-owned discount grocery chain, which boasts being the “supermarket low-price leader” in the markets it serves, has established a fiercely loyal customer base and an equally loyal workforce. Its bulk foods department, a star attraction of its stores, features 700-plus items, including many natural food products, some organics, snacks, candies, cereals, flours, pastas and spices.
Beyond the Mainstream
Whole Foods Market, Trader Joe’s, Sprouts, WinCo, Aldi, Kroger, Walmart
As organic and natural foods grow more popular with consumers, upper-deck retailers in PG ’s Super 50 rankings have been sharpening their games with expanded offerings and access. While nearly all leading food retailers are prioritizing free-from categories, the fleet of operators depicted here has secured a healthy niche in the great wide-open retail sea by leveraging their scale to move their big ships’ better-for-you offerings in the due-north direction of the mainstream.
As organic and natural foods grow more popular with consumers, retailers in PG’s Super 50 rankings have been growing their fleets with expanded offerings and access.
Take Austin, Texas-based Whole Foods Market, No. 10 on this year’s list. The pioneering “supernatural” grocer will at long last debut its first 365 by Whole Foods store in the Silver Lake neighborhood of Los Angeles this month, with two more locations to follow this year in Bellevue, Wash., and Portland, Ore. Positioned as a “quality-meets-value” format amid an increasing number of retail competitors encroaching on its native organic and better-for-you food turf, the compact 365 stores will feature an edited mix of products “that adhere to the company’s industry-leading quality standards in an environment that’s fun and convenient for shoppers,” according to the company. Additionally, 365 will offer online ordering and delivery services via Instacart.
Whole Foods’ new concept is also an attempt to play down its “Whole Paycheck” image while giving it a vehicle to compete more effectively with the likes of Trader Joe’s (No. 11), a perennial favorite in customer loyalty surveys. Its sister company, Batavia, Ill.-based Aldi (No. 13), has also made inroads over the past few years in the natural/organic space. Its SimplyNature product line, which is free of 125 ingredients, and an increased organic produce offering, as well as the reformulation last fall of all of its private-brand items to remove certified synthetic colors, partially hydrogenated oils (PHOs) and added MSG, reflect Aldi’s increasing focus on providing high quality groceries at low prices. Additionally, since 2013, the company has pursued an accelerated growth strategy that by the end of 2018 should result in nearly 2,000 stores — an almost 50 percent increase in just five years.
For its part, Phoenix-based Sprouts Farmers Market (No. 26) is rapidly enlarging its footprint and is on pace for continued growth on the heels of a strong 2015 performance. Having reached 200 stores last year and currently at 220 locations across 13 states, the fresh-focused Sprouts’ latest wave of expansion will take place in the third quarter of 2016, with 36 stores slated to open, 24 of which were announced earlier in the year. Having recently signed a lease agreement in Tampa, Sprouts is also poised to make its Florida debut.
“As more and more Americans embraced our ‘Healthy Living for Less’ model, Sprouts’ position of strength in the industry continued to grow in 2015,” said CEO Amin Maredia while discussing the company’s impressive Q4 2015 results, which included a 27 percent sales increase.
Also among the biggest purveyors of organic and natural foods are two grocery chains with reputations for being in the heart of the mainstream: top-ranking Wal-Mart Stores Inc. and The Kroger Co. (Nos. 1 and 2, respectively). Since dedicating itself to providing affordable organics in 2014, Walmart has rolled out the Great Value Organic line in Canada, making value-priced organic options available to millions who’ve never stepped foot in a Whole Foods, while Kroger’s Simple Truth and Simple Truth Organic lines similarly encompass products across the store, and the Cincinnati-based grocer’s recent strategic partnership with Lucky’s Markets, in Boulder, Colo., demonstrates what the company called a “deep ongoing commitment to providing customers with affordable fresh organic and natural foods” as a part of its Customer 1st strategy.
Changing Course
Ahold + Delhaize, Brookshire Grocery Co., The Fresh Market, Lowes (Alex Lee), Price Chopper/Golub Corp., Raley’s, Target, Southeastern Grocers, Supervalu, Walmart, Woodman’s
In the rough-and-tumble supermarket high seas, this crew of retailers is in the midst of charting new courses in search of smoother sailing and a faster cruising pace. While some are trolling for more nimble operations and sturdier crafts under the direction of new captains, others are unfurling their sails in bold new directions to better navigate the ever-changing waters with new vessels, retooled transmitters and updated itineraries to right-size their ships for the long journey ahead.
Some retailers find themselves charting new courses in search of smoother sailing and a faster cruising pace in a stormy seascape where past successes are no guarantee of continued relevance or profitability.
No. 1-ranked Walmart, the nation’s largest grocer in sheer size and volume, reported positive Q4 comps earlier this year, up 0.6 percent, with small-format Neighborhood Market comps up about 7 percent.
“Our initiatives are making it simpler and more convenient for customers to shop at Walmart,” said Doug McMillon, president and CEO of the Bentonville, Ark.-based mega-retailer. One such undertaking involves the creation of hundreds of management positions as part of a new program to enhance the fresh food offering at its U.S. stores.
Earlier this year, however, in a move seen as a bid to recapture its retailing dominance after a spate of flat or declining sales, Walmart revealed plans to close 269 stores and warehouse clubs worldwide — including 102 of its small-format Walmart Express locations — in conjunction with a major overhaul of its nearly 11,600 stores worldwide.
While the affected stores represent less than 1 percent of the retailer’s global square footage and revenue, the news is a concrete acknowledgment of the difficulties the once-unstoppable retailer has faced in a fast-changing, hypercompetitive retail landscape.
Meanwhile, Ahold (No. 5) and Delhaize (No. 7) are careening toward consummation of their proposed merger, which would create an international retailer with more than 6,500 stores and 375,000-plus associates across the United States and Europe.
To satisfy regulators, the retail conglomerates, based respectively in Amsterdam and Brussels, may need to sell off more than 80 stores in six states.
Both sides bring strong financial trends to the deal: Ahold reported a 21.4 percent increase in Q4 group sales, with online sales growth continuing to accelerate, while Delhaize posted Q4 revenue growth of 14.2 percent, and a 2.3 percent comparable-store sales increase in the U.S.
Crossing the Super 50 finish line at No. 12, Southeastern Grocers has had a new captain at the helm for the past year, President/CEO Ian McLeod, who was integral in the turnaround of Australian food retailer Coles, and is hoping to lead a similar transformation at the Jacksonville, Fla.-based company.
In tandem with a major efficiency program to power a $70 million price investment program launched in January, McLeod is on a mission to raise morale, standards and store conditions. In the first of 50 store remodels planned for this year, the company resurrected a location in the Jacksonville suburb of Baymeadows after a five-year absence, with a new fresh-focused format.
Coming in at No. 18, Supervalu is poised to alter its course by spinning off its Save-A-Lot division into a separate publicly traded company. To that end, new CEO Mark Gross has brought in two new leaders to fortify the Minneapolis-based company’s rebuilding campaign. Former C&S exec Jim Weidenheimer was tapped for the newly created position of chief innovation officer and EVP of corporate development, and Bruce Besanko was reinstated as CFO while retaining his COO duties.
Ample attention has been focused on Target Corp.’s audacious plans to realize the full potential of its billion-dollar grocery business. Ranked No. 14, Target, with slightly more than 1,800 stores, is the second-largest discount retailer in the nation, taking a back seat only to Walmart. The Minneapolis-based retailer has been immersed for the past 18 months in a strategic repositioning under Chairman/CEO Brian Cornell. Although the protracted journey has proved trickier than anticipated, Cornell and Co. have been conducting item-by-item teardowns and reinventing processes and practices to enhance freshness, assortment and convenience, which have helped Target’s food segment outpace its overall business in the back half of 2015.
As Cornell recently noted, in the near term, “[t]he addition of one grocery item to the baskets of guests who are already shopping our food assortment would add billions of dollars of incremental sales.”
At No. 28, West Sacramento, Calif.-based Raley’s 80th anniversary in 2015 signified a year easily considered to be one of the busiest in the company’s history. Last May, Jim and Joyce Raley Teel transferred majority (92 percent) ownership to their son, Michael Teel, grandson of company founder Tom Raley.
Over the past decade, Raley’s has focused on expanding products that customers want more of, including organic and natural food offerings. More recently, the chain — which operates 126 stores in Northern California and Nevada under its namesake banner, as well as the Bel Air Markets, Nob Hill Foods and Food Source brands — has dramatically risen above the churning California retail waters by wisely touting a variety of innovative offerings, including the rollouts of a food truck, farm-to-fork educational programs, new stores and a host of eco-friendly initiatives.
As one of the early pioneers of small-format, fresh-focused grocery chains, The Fresh Market, at No. 37, inked a $1.36 billion deal in March to be acquired by New York-based equity firm Apollo Global Management LLC. The offer, which is set to close in the coming weeks, followed a widely publicized strategic review, for which a consortium led by The Kroger Co. was said to be in the running. However, now that the Greensboro, N.C.-based 183-store chain is poised to unleash its full potential with an aggressive new owner and an equally enthusiastic leader in President and CEO Rick Anicetti, the next leg of The Fresh Market’s voyage will be well worth tracking.
After ending talks to sell in late 2015, 33rd-ranked Brookshire Grocery Co (BCG) is settling into a new normal under the leadership of new Chairman and CEO Bradley W. Brookshire, part of the third generation of the family to lead the Tyler, Texas-based regional retailer.
Often referred to as Texas’s second-best privately held grocery chain behind H-E-B, BGC has nimbly reacted to industry changes through the years, and while its short-lived bid to put itself on the block attracted considerable attention from supermarket operators and private equity firms alike, industry observers breathed a collective sigh of relief that the company will remain independent, at least for the foreseeable future.
Renowned for its everyday low prices and vast selection, Woodman’s Markets, at No. 43, recently expanded an online ordering and delivery service to its Milwaukee-area stores. Since the chain first launched the service in Madison several months ago, it has seen basket sizes increase six times the average in-store purchase. According to Clint Woodman, president of the Janesville, Wis.-based chain, The service “allows us to really differentiate from our competitors while providing excellent service to our customers.”
Steady as They Go
Bashas’, Big Y, Coborn’s, Demoulas/Market Basket, Ingles, Save Mart, Schnucks, SpartanNash, Stater Bros., Tops Markets, Weis Markets
Noteworthy among those on this year’s Top 50 list is an armada of regional grocers that has, by hook or by crook, found a way to forge ahead in their respective native waters by staying true to the established course of their founding missions. As fixtures in their extended local communities, this band of faithful sailors is less interested in reinventing the ship’s wheel than focusing on a productive, bountiful voyage to capture the next generation of shoppers.
Among those on this year’s Top 50 list are often unheralded grocers that continue to increase stores, sales and customer satisfaction in their respective local markets.
One company in particular, Tewksbury, Mass.-based Demoulas/Market Basket (No. 27), after a period of traumatic upheaval during 2014 that saw the ouster and reinstatement of its CEO and guiding light, Arthur T. Demoulas, has spent the past year enjoying the fruits of its restored mojo — conjured from competitive pricing; an engaged, committed workforce; and spotless stores — in the relative obscurity it prefers on its home turf of Massachusetts, New Hampshire and Maine.
Also flying under the radar, Asheville, N.C.-based Ingles Markets (No, 24), which operates in six southeastern states, posted record fiscal-year core grocery sales growth, excluding gasoline, at the close of 2015, as well as continued sales growth for the first quarter of fiscal 2016. New CEO/President Jim Lanning, an employee of the company since 1975, is poised to lead Ingles to “future growth, flexibility and development,” in the words of Chairman Robert P. Ingle II.
Expansion may also be on the horizon for Springfield, Mass.-based Big Y Foods (No. 40), which, according to a published report in its hometown paper, is looking to grow to as many as 150 locations over the next 20 years, both within its existing market area of Connecticut and Massachusetts, as well as further afield within the New England region. New locations may feature elements of the chain’s prototype Fresh Acres concept, according to Mathieu L. D’Amour, the company’s newly minted VP, real estate and development.
Sunbury, Pa.-based Weis Markets (No. 31) recently enhanced its in-store and at-home marketing strategy through a newly formed exclusive alliance with Chicago-based global marketing execution firm InnerWorkings, which is collaborating with the grocer to develop marketing print strategies, point-of-sale displays, direct mail campaigns, and loyalty programs, along with the logistical elements behind these services. The chain has also launched a shelf tag program, Nutri-Facts, that uses brightly colored icons on pricing tags to help shoppers easily identify foods that meet their unique health and lifestyle needs. The regional retailer at press time had posted a 3.6 percent sales increase to $2.9 billion and unveiled a $140 million cap ex investment in 2016 covering new stores, remodels, supply chain investments and continuing technology upgrades.
Williamsville, N.Y.-based Tops Markets LLC (No. 30) has continued to invest in its core upstate New York markets (its footprint extends to northern Pennsylvania and western Vermont), opening ground-up and remodeled locations tailored to “the history and personality of the surrounding areas,” as CEO Frank Curci noted last year on the occasion of the debut of two compact-format locations in the greater Rochester area. At press time, the chain had recently opened its 168th store, which includes a fuel station, in Westfield, Pa.
Grand Rapids, Mich.-based SpartanNash (No. 34) is set to bid farewell to longtime Chairman Craig Sturken, who is retiring and will be succeeded by President/CEO Dennis Eidson.