THE SLOW. S H A K E O U T. By Al Urbanski. Mergers and acquisitions we re f
ew among chains populat- ing PRO G R E S S I V E GRO C E R's. Super 50 list ...
COVER STORY
THE SLOW SHAKEOUT By Al Urbanski
M
ergers and acquisitions were few among chains populating PROGRESSIVE GROCER ’s Super 50 list this year, but consolidation within these organizations did play a significant role in shaping our list of the top 50 supermarket chains in the United States. As Wal-Mart continues to spread its price-dominance across the land, conventional supermarket chains are picking their spots and wholesalers are trimming their retail operations in an all-out effort to compete with greater focus and efficiency. It is a time when hard choices are being made and acted upon, when large retail operations are undergoing internal shakeouts as they determine the size and scope of the supermarket industry in the early 21st century. “It’s a consolidation in which major chains are pulling back not for immediate financial considerations, but in order to make more money with fewer stores,” observes Hal Clark, president of Tr a d e Dimensions. The Wilton, Conn.-based operation, a sister company of
W W W. G R O C E RYNE TWORK.C OM
Internal consolidation takes over as grocer y companies seek their rightful places on the food chain.
Pro g re s s i ve GRO C E R , compiled the Super 50 from its database of 32,776 supermarkets. A l b e r t s o n ’s , w h i c h dropped one place to No. 3 on this ye a r’s Super 50, began a compre h e n s i ve re evaluation of its business last year under the direction of a new chief executive, General Electric veteran Larry Johnston. Aside from selling off 80 Osco Drug Stores in New England, the Boise-based company shed 80 unprofitable operations in the aftermath of its American Stores acquisition. At least that many more are slated for closing, and the chain announced plans to leave large markets in Texas and Tennessee. “We must prepare ourselves for a new order,” Johnston told fellow supermarket chief executives at this year’s FMI Midwinter Conference in Phoenix. “This time the change will be significant and permanent. The industry must make bold, tough decisions and add new business disciplines. It’s time for Joe Albertson to meet Jack Welch.” Jacksonville, Fla.-based Winn-Dixie (No. 8) is one of the chains decisively paring operations, even though its acquisition of about half
AP RIL 1 5, 2002 • PROGR ESSIVE GROCER •
17
COVER STORY
of Jitney Jungle’s stores brought its 2001 store total to 1,141, a few more than it had on last year’s list. Long an adve r s a ry of the Bentonville gang in its southern base, Winn-Dixie has decided to battle price with increased service. It pulled unprofitable locations from troubled regions and
c.e.o. Joseph Fisher. Almost half of the No.23 chain’s 200-plus stores—including the banners Big Be a r, P&C Foods, and Qu a l i t y Markets—have gotten Euro-style remodels heavy on fresh produce, high-end baked goods, and organic offerings (see PG, Fe b. 15). Fisher also hailed the posi-
the Kmart business to rival Fleming, perhaps a serendipitous move in light of Kmart’s recent tro ubles). Of the 550 stores still run by Supervalu, nearly a third are under the Save-A-Lot and Shop ’n Sa ve banners, limited-assortment discount formats that go over well with consumers in the
Disappointing results at the Cincinnati-based chain could stem more from its significant nonfoods operations, such as its Fred Me yer stores and jewe l ry shops. Following the company’s third quarter, c.e.o. Joseph Pichler announced layoffs tied to poor sales in general merchandise, jew-
The internal consolidators
The share-grabbers
The niche-exploiters
Many chains are putting the finishing touches on the consolidation of their expanded stables, trimming a number of unprofitable stores and regions over the past two years.
Some strong chains have taken the opportunity to expand and reinforce their market shares.
Chains that cater to special niches — such as health food or limited assortment value — increased their presence.
No. of Stores Winn-Dixie Supervalu A&P Fleming Penn Traffic Giant Eagle Harris Teeter Nash Finch Eagle Food Centers
1999 1,188 648 545 291 259 189 149 138 88
remodeled other stores to fit its Wi n n - Dixie Ma rketplace concept. Larger than conve n t i o n a l supermarkets, they proffer services such as pharmacies, photofinishing, and food courts. Added services and enhanced appearances in-store seem to be having a resuscitating effect up North as well. Left for dead three years ago, Syracuse, N.Y. - b a s e d Penn Tr a ff i c is now about 40 stores lighter and has shed nearly $1 billion of debt under new
18W• W PROGRESSIVE W. G R O C E RY NETWOR GR OCERK.C • APRIL OM
15, 2002
2001 1,141 550 519 116 221 120 143 123 64
No. of Stores Kroger Safeway Delhaize Wal-Mart Meijer Bashas’
tive results of Penn Traffic’s holiday merchandising programs, private label sales, and new cost reduction programs. Wholesale companies, which for years shored up their businesses by acquiring stores, are also easing away from operating s u p e r m a rk e t s — c o n ve n t i o n a l sized ones at least. Eden Prairie, Minn.-based S u p e rv a l u ( No. 10) cut back its retail operations by more than 15 percent in the last two years (and also gave up
1999
2001
No. of Stores
1999
2001
2,328 1,445 1,286 721 131 92
2,429 1,568 1,464 1,103 153 128
Aldi Smart & Final Whole Foods
599 184 104
755 221 130
current economic climate. Bigger retail playe r s — t h e biggest, in fact—are riding the trend, too. Although it recently announced that its fourth-quarter earnings were off 5 percent from the previous year, No. 1 Kroger simultaneously declared it would go ahead with plans to open 45 Food 4 Less stores. Many of the warehouse-style, discount operations will reside mostly in the Chicago market, including one in a former Dominick’s store.
elry, and floral operations. The value equation work e d well for niche players A l d i and Smart & Final, both limited a s s o rtment chains with fore i g n roots that posted strong growth last year. Smart & Final, owned by French retailer Casino Guichard-Perrachon, jumped 12 spots on the Super 50 to No. 32. Aldi, short for Albrecht Discount and owned by the billionaire A l b recht brothers of Ge r m a n y, Continued on page 24
APRIL 15, 2002 WW • W. PROGRESSIVE G R O C E RY N EGROCER T W O R K . C• O18 M
A M E R I C A’S 50 LARGEST SUPERMARKET CHAINS Company Name
1 2 3 4 5 6 7 8 9
No. of Supermarkets ($2M+ sales)
2001 Supermarket Sales (millions)
Square Feet Selling Area (thousands)
No. of Checkouts
Full-Time Equivalent Store-Level Employees
Store Formats
1
Kroger Cincinnati, Ohio Joseph A. Pichler, c.e.o.
2,429
$46,726
88,292
27,391
231,881
Pacific (655) East North Central (499) Mountain (369)
Conventional (2,284) Supercenter (145)
2
Safeway Pleasanton, Calif. Steven A. Burd, c.e.o.
1,568
31,451
56,553
15,040
118,382
Pacific (845) Mountain (285) South Atlantic (137)
Conventional (1,564) Limited Assortment (4)
3
Albertson’s Boise, Idaho Lawrence R. Johnston, c.e.o.
1,713
30,207
59,758
16,777
151,392
Pacific (599) Mountain (303) West South Central (286)
Conventional (1,713)
4
Wal-Mart 1,103 Bentonville, Ark. H. Lee Scott Jr., c.e.o., Wal-Mart Stores, Inc.
28,247
67,415
30,772
305,070
West South Central (284) South Atlantic (275) East South Central (165)
Supercenter (1,073) Conventional (30)
5
Ahold USA Chantilly, Va. William Grize, c.e.o.
1,245
24,104
49,415
15,079
103,072
South Atlantic (487) Middle Atlantic (321) New England (207)
Conventional (1,238) Limited Assortment (7)
6
Delhaize America Salisbury, N.C. R. William McCanless, c.e.o.
1,464
15,231
42,463
12,291
65,522
South Atlantic (1,237) East South Central (101) New England (85)
Conventional (1,464)
7
Publix Lakeland, Fla. Charles Jenkins Jr., c.e.o.
687
14,624
27,345
7,647
73,095
South Atlantic (683) East South Central (4)
Conventional (687)
8
Winn-Dixie Jacksonville, Fla. Allen R. Rowland, c.e.o.
1,141
13,012
44,354
11,786
86,579
South Atlantic (729) East South Central (239) West South Central (155)
Conventional (1,141)
9
Great A&P Tea Montvale, N.J. Christian Haub, c.e.o.
519
8,540
16,392
5,740
39,245
Middle Atlantic (259) East North Central (147) New England (43)
Conventional (519)
10
Supervalu Eden Prairie, Minn. Jeffrey Noddle, c.e.o.
550
7,396
16,404
5,207
35,077
South Atlantic (188) East North Central (136) West North Central (67)
Conventional (276) Limited Assortment (261) Supercenter (13)
11
H-E-B San Antonio, Texas Charles Butt, c.e.o.
278
7,057
10,508
3,458
35,785
West South Central (278)
Conventional (278)
12
Shaw’s East Bridgewater, Mass. Ross McLaren, c.e.o.
187
4,320
7,526
2,355
17,511
New England (187)
Conventional (187)
13
Meijer Grand Rapids, Mich. Jim McLean, c.e.o.
153
3,939
7,819
4,543
59,083
East North Central (145) East South Central (8)
Supercenter (153)
14
Pathmark Carteret, N.J. James Donald, c.e.o.
142
3,906
5,940
2,232
17,012
Middle Atlantic (138) South Atlantic (4)
Conventional (142)
15
Defense Commissary Agency Virginia Beach, Va.
196
3,616
5,525
2,426
13,129
South Atlantic (57) Pacific (42) West South Central (23)
Commissary (196)
187
3,536
7,602
2,576
28,014
West North Central (176) East North Central (11)
Conventional (187)
10 11
12 13 14
15 16
16
Hy-Vee West Des Moines, Iowa Ronald Pearson, c.e.o.
SUPER 50 METHODOLOGY AND NOTES P ROGRESSIVE GROCER’s Super 50 was derived from Wilton Conn.-based Trade Dimensions’ database of 32,776 supermarkets selling a minimum of $2 million apiece per year. Stores selling under $2 million operated by Super 50 chains were not included in the calculation of the total number of stores or total sales volume. The Super 50 attempts to count only the supermarket business of listed chains, though some operate diverse formats. Hypermarkets and supercenters sell extensive selections of general merchandise. For these two formats, Trade Dimensions estimated the square footage and sales volume of the items typically sold in the traditional supermarket formats: grocery, health and beauty care, household chemicals,
20 •
Chief Trading Areas (No. of stores)
PROGRESSIVE GROC ER • APRIL 15, 2002
and paper goods. This equivalent square footage and sales volume was entered into calculations for the listing. Warehouse clubs such as Sam’s Club and Costco represent a substantial volume of food sales, but they have been omitted from the Super 50 ranking because of sales to businesses and institutions in institutional packaging not directly competitive with supermarkets. Trade Dimensions estimates that the 501 Sam’s Clubs would add $18.5 billion of supermarket-equivalent sales to the Wal-Mart total, lifting total sales to $46.7 billion, a virtual tie with No. 1 Kroger. Trade Dimensions further estimates that sales of supermarket items at the 279 Costco warehouses would add up to $16.5 billion, placing the chain at No. 6, ahead of Delhaize (Food Lion). Estimates of $3.4 billion in supermarket sales for 130 BJ’s Wholesale Clubs would put BJ’s at No. 17, ahead of Aldi.
W W W. G R O C E RY N E T W O R K . C O M
A M E R I C A’S 50 LARGEST SUPERMARKET CHAINS
Company Name
2001 Supermarket Sales (millions)
Square Feet Selling Area (thousands)
No. of Checkouts
Full-Time Equivalent Store-Level Employees
Chief Trading Areas (No. of stores)
Store Formats
17
Aldi Batavia, Ill. Chuck Youngstrom, c.e.o.
755
3,197
9,895
3,460
16,358
East North Central (333) Middle Atlantic (112) Pacific (108)
Limited Assortment (755)
18
Raley’s West Sacramento, Calif. Michael J. Teel, c.e.o.
149
3,069
6,535
1,585
10,202
Pacific (110) Mountain (39)
Conventional (149)
19
Giant Eagle Pittsburgh, Pa. David Shapira, c.e.o.
120
2,965
5,428
2,158
13,900
East North Central (70) Middle Atlantic (45) South Atlantic (5)
Conventional (120)
20
Wegmans Rochester, N.Y. Daniel Wegman, pres.
62
2,678
4,463
1,360
14,686
Middle Atlantic (62)
Conventional (62)
21
Stater Bros. Colton, Calif. Jack H. Brown, c.e.o.
155
2,671
4,122
1,342
6,796
Pacific (155)
Conventional (155)
22
Golub/Price Chopper Schenectady, N.Y. Neil M. Golub, c.e.o.
100
2,399
4,107
1,317
10,986
Middle Atlantic (71) New England (29)
Conventional (100)
23
Penn Traffic Syracuse, N.Y. Joseph Fisher, c.e.o.
221
2,304
7,158
1,761
11,304
Middle Atlantic (141) East North Central (63) New England (10)
Conventional (205) Supercenter (16)
24
Super Kmart Centers Troy, Mich. James B. Adamson, c.e.o.
123
2,264
6,416
3,333
33,411
East North Central (43) South Atlantic (19) West South Central (19)
Supercenter (123)
25
Ingles Markets Asheville, N.C. Robert P. Ingle, c.e.o.
205
2,247
7,799
1,968
10,170
South Atlantic (179) East South Central (26)
Conventional (205)
26
Harris Teeter Matthews, N.C. Fred J. Morgenthall, pres.
143
2,219
4,632
1,368
11,905
South Atlantic (138) East South Central (5)
Conventional (143)
27
Whole Foods Market Austin, Texas John Mackey, c.e.o.
130
2,209
3,704
1,276
14,445
Pacific (34) South Atlantic (32) East North Central (16)
Limited Assortment (130)
28
Fleming Lewisville, Texas Mark S. Hansen, c.e.o.
116
2,073
4,989
1,314
8,469
West North Central (42) Pacific (27) West South Central (22)
Conventional (116)
29
Weis Markets Sunbury, Pa. Norman S. Rich, pres.
163
1,950
6,012
1,590
10,523
Middle Atlantic (138) South Atlantic (25)
Conventional (163)
30
Schnuck Markets St. Louis, Mo. Craig D. Schnuck, c.e.o.
90
1,909
4,630
1,144
9,842
West North Central (59) East North Central (31)
Conventional (90)
17
18
19
20 21 22
23
24
25
26
27
28
29 30
31
Brookshire Grocery Tyler, Texas Bruce G. Brookshire, chairman
137
1,638
5,000
1,327
7,754
West South Central (137)
Conventional (137)
32
Smart & Final City of Commerce, Calif. Ross E. Roeder, c.e.o.
221
1,509
3,125
909
3,921
Pacific (196) Mountain (13) South Atlantic (12)
Warehouse (221)
33
DeMoulas/Market Basket Tewksbury, Mass. William J. Shea, chairman
58
1,508
2,436
695
6,378
New England (58)
Conventional (58)
34
Bashas’ Chandler, Ariz. Eddie Basha Jr., chairman
128
1,419
3,731
959
6,829
Mountain (126) Pacific (2)
Conventional (128)
35
Save Mart Modesto, Calif. Robert Piccinini, c.e.o.
96
1,392
3,297
803
4,662
Pacific (96)
Conventional (82) Warehouse (14)
36
Roundy’s Pewaukee, Wis. Gerald F. Lestina, c.e.o.
69
1,360
3,298
840
6,655
East North Central (69)
Conventional (69)
37
Nash Finch Minneapolis, Minn. Ron Marshall, c.e.o.
123
1,360
3,816
979
7,737
West North Central (105) East North Central (12) Mountain (4)
Conventional (123)
31
32
33
34
35
36
37
22
No. of Supermarkets ($2M+ sales)
• PROG RESSIVE GR OC ER • APRIL 15, 2002
W W W. G R O C E RY N E T W O R K . C O M
A M E R I C A’S 50 LARGEST SUPERMARKET CHAINS Company Name
No. of Supermarkets ($2M+ sales)
2001 Supermarket Sales (millions)
No. of Checkouts
Full-Time Equivalent Store-Level Employees
Chief Trading Areas (No. of stores)
Store Formats
38
Marsh Indianapolis, Ind. Don E. Marsh, c.e.o.
111
1,331
3,445
925
7,762
East North Central (111)
Conventional (111)
39
Spartan Stores Grand Rapids, Mich. James B. Meyer, c.e.o.
102
1,123
3,080
813
5,629
East North Central (102)
Conventional (102)
40
Lowes Food Stores Winston-Salem, N.C. Curtis Oldenkamp, pres.
105
1,100
3,331
867
5,621
South Atlantic (105)
Conventional (105)
41
Big Y Foods Springfield, Mass. Donald H. D’Amour, c.e.o.
46
1,037
1,715
566
4,242
New England (46)
Conventional (46)
42
WinCo Foods Boise, Idaho William D. Long, c.e.o.
36
1,017
2,306
559
4,140
Pacific (26) Mountain (10)
Conventional (36)
43
K-VA-T Food Stores Abingdon, Va. Steven C. Smith, c.e.o.
86
993
2,470
734
4,756
East South Central (65) South Atlantic (21)
Conventional (86)
44
Minyard Food Stores 74 Coppell, Texas Liz Minyard, Gretchen Williams, co-c.e.o.’s
915
2,593
730
5,037
West South Central (74)
Conventional (74)
45
Fiesta Mart Houston, Texas Donald L. Bonham, chairman
43
881
1,754
473
4,294
West South Central (43)
Conventional (43)
46
Wild Oats Market Boulder, Colo. Perry Odak, c.e.o.
104
852
1,958
712
5,346
Pacific (40) Mountain (27) West South Central (9)
Limited Assortment (70) Conventional (34)
47
Big V Supermarkets Florida, N.Y. James A. Toopes Jr., c.e.o.
32
818
1,477
399
3,417
Middle Atlantic (32)
Conventional (32)
48
Houchens Industries Bowling Green, Ky. Jim Gipson, c.e.o.
168
750
2,452
871
3,857
East South Central (131) South Atlantic (25) Middle Atlantic (9)
Limited Assortment (123) Conventional (45)
49
Eagle Food Centers Milan, Ill. Jeffrey Little, c.e.o.
64
730
2,018
559
4,153
East North Central (54) West North Central (10)
Conventional (64)
50
King Kullen 46 Westbury, N.Y. John B. Cullen, Bernard D. Kennedy, co-c.e.o.’s
716
1,690
520
3,288
Middle Atlantic (46)
Conventional (46)
38 39
40
41
42
43
44
45
46 47
48
49
50
Continued from page 18
rose three places to No. 17. Western phenomenon Smart & Fi n a l’s success in retail is almost an accident. Stocking only about 10,000 items including bulk sizes of paper products, groceries, and cleaning supplies, the stores’ traditional clientele was small businesses, restaurants, and catere r s . But Sm a rt & Final, unlike large warehouse operations such as Sam’s Club and Costco, charges no
24
Square Feet Selling Area (thousands)
• PROG RESSIVE GR OC ER • APRIL 15, 2002
membership fees. Regular consumers are free to drop in—and they do in great numbers at stores up-and-down the West Coast and in Idaho, Ne vada, Arizona, and Mexico. The chain has established an eastern beachhead in Fl o r i d a , where it continues to expand. (And allow us take this opportunity to clear up the origins of the name of Sm a rt & Final for those who confuse it with a chain of cut-rate funeral parlors. It is
taken from the names of the two men who bought the business in 1914: J.S. Smart and H.D. Final.) Aldi continues to trade on its cult-like following of bargain-seekers, gradually expanding out from its Illinois base to more than 20 contiguous states ranging east-west f rom Virginia to Nebraska and n o rth-south from Wisconsin to Georgia. Aldi locations have grown from about 600 to more than 750 in the last two years, none of them
larger than 25,000 square feet nor c a r rying more than 1,000 items. Food offerings focus on center-ofthe-plate fare like fro zen and canned entrees, and brand names are few, but the jaw-dropping values appeal to a sizeable expanse of consumers. Recent specials noted at Aldi include a package of six frozen Salisbury steaks for $1.79, a cheese pizza kit for $1.99, and a 13-inch color television for $74.99. Continued on page 26
W W W. G R O C E RY N E T W O R K . C O M
Continued from page 24
A shopper quoted at a new North Carolina Aldi’s by the Raleigh News & Ob s e rve r sums up the appeal: This is a heck of a drive [for me]
but, hey, you cut your food bills in h a l f. I was coming out of Kro g e r with $180 of groceries [each week]. This was $73.” On the other end of the super-
market spectrum, large chains played on their strengths to expand their m a rket shares. Acquisitions in the industry were limited to a few mids i zed chains last ye a r, and Ne t h e r-
lands-based Ahold made the most of them, picking up the largest block of Grand Union stores in the Northeast and adding the Bruno’s chain in the Southeast. The moves helped solidify No. 5 Ahold USA’s position on the eastern seaboard, with the company’s s t o re total growing by a third. It s other banners include Stop & Shop in New England, Giant Carlisle and Giant Landover in the Mid-Atlantic, and Bi-Lo in the Carolinas. Safeway moved ahead of Albertson’s into the No. 2 position largely on its acquisition of Philadelphia-area gem Ge n u a rd i’s. The Pl e a s a n t o n , Calif.-based chain of more than 1,500 stores announced that its fourth-quarter sales increase of 7 percent was mainly the result of that acquisition. Like Albertson’s, Safeway showed double-digit earnings growth last year (14 p e rcent), which c.e.o. St e ve Bu rd attributed to, among other factors, continuing improvements in shrink control, buying practices, and privatelabel growth. Continued strong operations at Hannaford Bros. and Food Lion keep No. 6 Delhaize America growing, with the Salisbury, N.C. company re p o rting an 18-percent sales increase in 2001. Food Lion last year announced the initiation of a series of competitive programs aimed at Wa l - Ma rt. They include a new scheduling system to ensure enough associates are in-store at high-traffic times, a doubling of quality assurance teams for fresh produce and meat, and a De p a rtment of Consumer Insight to aid decisions on s t o re location and product assortment. Fi n a l l y, PRO G R E S S I V E G RO C E R i s pleased to welcome to the Super 50, at No. 50, King Kullen Grocery, the Long Island, N.Y., chain still run by the founding Cullen family that claims to have pioneered the concept of the modern supermarket. And the first shall be last. ■ W W W. G R O C E RY N E T W O R K . C O M