A big buy, smaller stores, retail excellence and groceries on the go
Our review of 2018 begins with a nearly $3 billion acquisition and concludes with the most profound impact Amazon’s acquisition of Whole Foods Market last year has had on independent grocers this year. For our year in review, we have compiled what we believe are the top 10 stories about or impacting independents in 2018.
1. Supervalu acquired by United Natural Foods Inc.
Supervalu common stock ceased trading prior to market open on Oct. 22 and was delisted from the New York Stock Exchange after United Natural Foods Inc. (UNFI) completed its approximately $2.9 billion acquisition of the Eden Prairie, Minnesota-based company. The announcement initially was made in July during the Supervalu National Expo.
UNFI Chairman and CEO Steve Spinner, who leads the combined entity, said the transaction is a milestone as the union will “create North America’s premier food wholesaler with significant scale, reach and choices for our customers.”
Supervalu serves more than 3,000 independently owned and operated stores.
Sean Griffin, previously Providence, Rhode Island-based UNFI’s chief operating officer, now serves as Supervalu CEO and heads the integration committee, which includes executives from both companies. Anne Dament, EVP retail, marketing and private brands, and Mike Stigers, EVP wholesale, report to Griffin.
Look for an update on integration efforts on Jan. 16, UNFI’s 2019 investor day.
2. Lipari Foods moves further into manufacturing—and Florida
Warren, Michigan-based Lipari Foods now is supplying customers in Florida. Thom Lipari spoke with The Shelby Report about the expansion during the company’s food show in late April.
“We’ve decided to grow that area and expand our footprint. Hopefully, within the next year or two, we’ll be able to cover everything from Wisconsin all the way down to the tip of Florida on the East Coast,” Lipari said. “That’s our goal right now.”
For now, the company is servicing those Florida customers without a local warehouse but the company could open one there when volume picks up.
Don Symonds, director of events and trade relations, said one thing that has helped the company grow is that Lipari Foods has been expanding its manufacturing business.
“We have a division called JLM Manufacturing, which includes a confection repacking program,” said Symonds. “We bought Pic-A-Nut out of Detroit, so we are a nut roaster and packager now. We bought Eastside Deli Supply out of Lansing, Michigan.”
Lipari purchased Jim’s Cheese as well, so it also is a cut-and-wrap cheese manufacturer.
“All those manufacturing divisions are helping us grow our business a lot,” Symonds said.
Lipari Foods also this year introduced a new product line under the Inspired Organics label.
“We are going to make some real inroads to that whole segment of the business,” Lipari said. “The consumer is changing and moving toward organic or natural foods, cleaner foods—that’s where the industry is going and we want to make sure we’re on the leading edge of that.”
3. Fareway president and COO retires after 50 years of service
Frederick R. Greiner retired as president and COO of Fareway Stores Inc. on Sept. 1. He worked for the Boone, Iowa-based company for 50 years and had served on the board of directors since 1991.
Greiner began his career in Independence, Iowa, in 1968. After high school, he served from 1972-74 during the Vietnam era in the U.S. Army. He returned to Fareway after his service, transferring to Winterset, Cherokee and Boone. Greiner managed the Boone store from 1983-89 and then joined the corporate office as district supervisor. He served in many leadership roles until elected president and COO in 2006, replacing Robert L. Cramer.
“Fareway has been a tremendous company to work for, and I’m truly grateful for the opportunities I’ve been given in this family-owned company,” said Greiner. “I’ve had some of the best colleagues to work with throughout my career.”
Greiner served on the Iowa Grocery Industry Association board for 10 years and was chairman from 2002-03. The organization recognized him as Retailer of the Year in 2006.
4. AWG has a record-breaking year
Kansas City, Kansas-based Associated Wholesale Grocers (AWG) reported record consolidated net sales of $9.70 billion and distributed a record $203.4 million in year-end patronage at its annual shareholders meeting on March 28.
AWG’s cooperative sales increased 10.5 percent over fiscal 2016 to $8.48 billion. Total distribution of cooperative benefits returned to shareholders was $576.9 million, another record. Total members’ investment and equity ended the year valued at $550.6 million, an all-time high.
Due to strong results from AWG’s subsidiaries and gains harvested from non-operating investments, the trading value for class “A” shares increased 10 percent to $2,200 per share.
“AWG achieved these financial results primarily due to strong sales and widespread membership growth,” said AWG President and CEO David Smith. “To all the new members that joined AWG in the past year, thank you. While we were blessed by strong sales growth, we’re most proud of the $50 million in cost of goods reductions our members have received and will carry forward to be more competitive in their respective markets. Those reductions began in the fall of 2016 because of our overall initiative for improved vendor-partner relationships and from aggregating what is now $22 billion in annual buying power of our member stores, which surprisingly would rank them as the nation’s sixth largest retail grocer.”
AWG Chairman of the Board Barry Queen said that while there were “bright spots in many areas, the explosive growth in the Chicagoland area was the most impressive. I think we went from a negligible market share to the wholesale leader to independent grocers there all in a single year. The new members there are a great addition to our cooperative family, and we are excited to learn from them as they’re fine operators.”
5. Innovative new formats debut in Iowa and Michigan
Some regional independent chains put the brakes on expansion to figure out the right size for new stores, as large supermarkets seemed passé in the wake of digital shopping. In 2018, strong independents forged ahead with different types of stores.
Hy-Vee HealthMarket is a destination store with healthy attributes but also a community market where all the old favorites and staples are available for the weekly shop. The first one opened on July 31 in West Des Moines, Iowa. It appeals to a range of shoppers in just 15,700 s.f. Unique features include an Orangetheory Fitness center that is separated from the market by an interior door, and a hydration station with kombucha and cold brew coffee on tap.
Hy-Vee also plans to open 10,000-s.f. convenience stores with fuel pumps. Dubbed Fast & Fresh, the convenience and meal solutions stores will open in Altoona, Davenport and Des Moines, Iowa. They also may open in Lakeville and Gem Lake, Minnesota.
Meijer opened Bridge Street Market on Aug. 29 in its headquarters city of Grand Rapids, Michigan. The 37,000-s.f. supermarket anchors a development spanning a city block and is situated alongside apartments and an office and retail building.
It is “new territory for us, but we believe this is not only a smart business move and addresses the need for new ways to serve our changing customers, but it also positively impacts our community,” said Meijer President and CEO Rick Keyes.
Bridge Street Market features three garage-style doors that open onto the sidewalk along Bridge Street and dedicated parking on the main level of a connected parking deck. It houses a Mayan Buzz Café coffee shop, a beer, wine and liquor counter and basic cleaning, and health and beauty care products as well as fresh and prepared foods and Meijer and national brand products.
Meijer also this year debuted a new convenience store concept adjacent to its headquarters. It is the first Meijer convenience store to include a separate full-service Starbucks. Other offerings include produce, snacks, wraps and grab-and-go meals.
6. Jewel-Osco’s Cygan dies unexpectedly
Mr. Doug Cygan, who had been president of Jewel-Osco for just over a year, died July 5 at age 55. A source close to Mr. Cygan said that he had been hospitalized in June for a blood infection possibly related to an emergency hernia surgery.
“Doug was a popular president, a strong leader within the company and in the community. Everyone at Jewel-Osco is devastated by his passing,” said Jewel-Osco Director of Public Affairs and Government Relations Mary Frances Trucco.
Mr. Cygan was named president of Jewel-Osco in May 2017 after serving as VP of marketing and merchandising. As president, Mr. Cygan led 186 Jewel-Osco stores in Illinois, Indiana and Iowa.
Mr. Cygan’s retail career began at Jewel-Osco in April 1980 as a part-time clerk, and he spent his entire career there. As he completed his education at Western Michigan University, he stayed with the grocery store chain and moved into roles of greater responsibility, including store director, marketing director, VP of fresh merchandising and VP of grocery merchandising. He was named VP of marketing and merchandising in 2011.
Mr. Cygan earned a bachelor’s degree in food distribution from WMU. He held positions on the advisory boards of WMU and NorthPointe Resources, a private, nonprofit provider of developmental disability and behavioral health services. He also served on the board of directors for the Greater Chicago Food Depository and the Northern Illinois Food Bank.
“Doug Cygan was a Chicago legend and industry titan,” said Frank Gambino, director of food/CPG marketing at WMU. “Not too often do you see someone rise from pushing carts to become president of a major retail company. Everyone who ever called on Jewel knew Doug. Doug was a class act, always willing to help and collaborate. One thing I always cherished about Doug was that he never lost sight of his humble beginnings. He was grounded and good-hearted. He stayed involved with his alma mater right up until the end.”
Paul Gossett replaced Cygan. Gossett began his career with parent company Albertsons in 1977 and previously served as president of Shaw’s and Star Market in New England.
7. North Dakota grocer receives national recognition
The Women Grocers of America (WGA) presented third-generation grocer Kristi Magnuson Nelson, president and CEO of Grand Forks, North Dakota-based Hugo’s Family Marketplace, with the Woman of the Year Award in February. The WGA operates under the National Grocers Association (NGA) umbrella. Magnuson Nelson serves on the NGA board of directors.
Magnuson Nelson grew up working in the family grocery business. Since taking on the roles of president and CEO in 2007, she has led Hugo’s expansion to a total of 10 grocery stores in Grand Forks, Grafton and Jamestown, North Dakota, and East Grand Forks, Crookston, Thief River Falls and Park Rapids, Minnesota, as well as five liquor stores in Grand Forks, East Grand Forks, Jamestown and Grafton. Hugo’s employs about 1,400 workers.
Next up for Hugo’s will be a downtown store in Grand Forks that will be part of a mixed-use building that includes 50 residential units.
NGA President and CEO Peter Larkin said Magnuson Nelson “has proven herself to be a true leader throughout her career in the food industry. Her vision and leadership have been an integral part of the success of Hugo’s Family Marketplace, and she is a steadfast champion for the independent supermarket industry.”
8. Buehler’s bagger repeats as retailer takes Ohio’s top spot for fourth straight year
Ellissa Chambliss of Buehler’s Fresh Foods defeated competitors from across Ohio to claim the title of the Ohio Grocers Association (OGA) Best Bagger Champion at an Aug. 9 competition held at the Buehler’s Wooster Milltown location.
This is the second year in a row Chambliss claimed the state title and the fourth consecutive year that a Buehler’s Fresh Foods bagger will represent Ohio at the national bagging championship, which will be hosted by the National Grocers Association (NGA) in February in San Diego.
Brady Long, also of Buehler’s Fresh Foods, took home the national title at the 2017 NGA Show.
Chambliss received OGA’s “ceramic bag” award and $1,000 in addition to the trip to San Diego and the chance to win $10,000.
OGA has held the statewide competition each year since 1987. The state championship drew 25 contestants this year.
“The OGA puts on a fun event, and we love to participate every year. We’ve been fortunate enough to have won this competition four years in a row in addition to the national championship in February 2017 in Las Vegas,” said Dan Shanahan, president and COO of Buehler’s Fresh Foods, which has 13 stores in Ohio. “It’s nice to be able to say that our baggers are the best in the state as well as the country.”
In Missouri, Cosentino’s Price Chopper in Kansas City again had that state’s best bagger, marking two winning years in a row for the grocer.
9. AFPD name change: Midwest Independent Retailers Association to officially debut next year
Once known as the Associated Food & Petroleum Dealers Inc., the AFPD is changing its name to better reflect the group’s mission. The Michigan-based organization now will be known as the Midwest Independent Retailers Association (MIRA).
“With our growth into Illinois as well as our continued growth in Ohio and Michigan, we decided to move away from our old title, which is AFPD, to the new title, the Midwest Independent Retailers Association, which will take effect officially in 2019 with our new logo and new website,” said Auday Arabo, president and CEO. “It’s really to showcase that we’re independents first and foremost and independent-strong.”
10. Independents offer curbside pickup, partner with Instacart and Shipt
Amazon purchased Whole Foods Market in 2017, but the changes spurred by that transaction really took hold in 2018. Store expansion slowed and new markets that did open tended to be smaller, more urban and high tech. Grocers across the country also sped up plans to offer curbside pickup and/or home delivery.
The most recent pickup and delivery story comes from Meijer. The grocery company has expanded its service to include store pickup at 227 Meijer supercenters in six states (Michigan, Ohio, Indiana, Illinois, Kentucky and Wisconsin), for nearly 11 million households. Meijer Home Delivery and Meijer Pickup orders are fulfilled by Shipt. Meijer Pickup is available at any Meijer store that offers home delivery and it is included as part of a Meijer Home Delivery membership, which costs $99 per year and covers all orders totaling $35 or more; a $7 fee is charged for smaller orders.
Boone, Iowa-based Fareway said in September that it is considering expanding its e-commerce offerings and hopes to launch a pilot program in the near future. Fareway may add a fulfillment center to accommodate online ordering. It already operates FarewayMeatMarket.com, which ships to 48 states from the company’s Boone, Iowa, distribution center. It originally launched as farewaymeats.com in 2013. It also opened the first Fareway Meat Market in Iowa this year following Nebraska openings in 2015 and 2016.
Hy-Vee has teamed with Shipt and Instacart for same-day delivery to complement its Hy-Vee Aisles Online service.
Circling back to Amazon, it only this year launched curbside grocery pickup at Whole Foods Market stores. Of the 14 cities where it is offered, just two are in the Midwest: Dayton, Ohio, and Omaha, Nebraska.
Amazon also offers Prime Now delivery from Whole Foods Market in 63 cities, with more to come before the end of 2018.