Nearly 90 days after it was named the successful bidder for 27 Kings and Balducci’s stores at a U.S. Bankruptcy Court auction in New York, Acme Markets received clearance from the Federal Trade Commission (FTC) to complete the $96.4 million deal.
The FTC allowed all 27 stores that Acme purchased to remain intact. The transaction was finalized on January 23. It is also believed that Acme Markets, a division of Albertsons, will continue (for now) to operate the 19 Kings and eight Balducci’s stores as a separate division with the upscale regional chain operating from its Parsippany, NJ headquarters and with most of its approximately 125 headquarters associates becoming Acme employees.
However, sources told us that Acme will review all aspects of the deal and, after analysis, changes are likely in the June-August period. And unlike the phase-in protocol that was originally planned where Acme was going to purchase and convert about five stores a week over a five-week period, the Malvern, PA-based chain will now acquire all 27 stores at the time of closing and all stores will remain open and continue to carry the Kings and Balducci’s banners.
In related news, Albertsons Mid-Atlantic division named Jim Thatcher as general manager and VP-merchandising and marketing for Kings and Balducci’s. He was previously director of retail support-Eastern for Albertsons and has a long career in the industry, including stints at Save A Lot, Navarro Discount Pharmacy and Fleming COS Companies. He began his career in Albertsons in Florida in 1975. Thatcher will report directly to Jim Perkins, president of the Mid-Atlantic Division.
To review the course of events that led up to the FTC ruling, let’s begin on August 23, when Kings/Balducci’s owner KB US Holdings (part of Qatar-based GSSG Capital), filed for Chapter 11 bankruptcy protection.
At that same time, it was announced that New York private investment firm TLI Bedrock, which offered $75 million for the regional chain and was deemed best bidder at the time, was officially granted stalking horse favorable status by the U.S. Bankruptcy Court (Southern District of New York) prior to a formal auction of the retailer’s stores.
TLI Bedrock had a 30-day window of exclusivity that began on July 13 to negotiate with Kings/Balducci’s five UFCW labor unions (Locals 342, 360, 371, 1464A and 1500) to hammer out potential changes in existing labor contracts and pension funds but failed to reach agreement. TLI Bedrock termed the bargaining as an attempt to “modify a few discreet, minimal and limited” aspects of their labor agreements. The unions saw it differently especially when the hedge fund tried to create a new annuity-driven pension plan in an attempt to especially separate itself from the large shortfall in its largest plan with UFCW Local 360.
Union officials told us that despite the significant shortfall in the Local 360 plan, they were wary of a new owner that was seeking more than “moderate” change. One union official also said that he was not confident that another new private equity owner without supermarket experience was capable of leading Kings and Balducci’s (prior to KB US Holdings, the retailer was controlled by New York investment firms Angelo Gordon & Co and MTN Capital). About 1,900 of the retailer’s approximately 3,000 associates are unionized.
At the formal auction, which was held virtually on October 14, Acme stepped up and outbid TLI Bedrock by a substantial margin and was awarded the 27 stores it bid on (there were originally 34 stores in the entire lot, but five stores were not part of the auction. KB Holdings is seeking buyers for those stores). A key reason for Acme’s interest was the relationship that it and Kings had with the United Food and Commercial Workers. In particular, one UFCW Local (360) whose members are part of a multi-employer pension plan that is currently about $60 million underfunded. The only two retailers that remain in that plan are Kings and Acme (other retailers that have gone out of business or sold their stores were also previously part of that plan). If TLI Bedrock were to acquire Kings/Balducci’s and negotiate a new separate plan (which the hedge fun tried to do), Acme would be the only retailer supporting that pension fund with nothing to show for it.
With the acquisition, Acme adds an additional 27 stores to its 175 Mid-Atlantic store base. However, there will be challenges, including purchasing a retailer that, because of substantial debt, has been unprofitable despite strong retail sales across the industry that have been aided by the impact of COVID-19 shopping habits. In the 52-week period ended July 20, 2020, Kings/Balducci’s posted an $8.6 million loss on sales of $590 million.
The Kings stores that Acme will acquire are located in: Boonton, NJ; Bedminster, NJ; Chatham, NJ; Cresskill, NJ; Florham Park, NJ; Garwood, NJ; Hillsdale, NJ; Hoboken, NJ (Shipyard Lane); Livingston, NJ; Mendham, NJ; Midland Park, NJ; Morristown, NJ; Short Hills, NJ; Summit, NJ; Upper Montclair, NJ; Verona, NJ; Whitehouse Station, NJ; Garden City, NY; and Old Greenwich, CT.
The Balducci’s stores that Acme will acquire are located in: Alexandria, VA; Bethesda, MD; Greenwich, CT; McLean, VA; Rye Brook, NY; Scarsdale, NY; Westport, CT; and Baltimore, MD (To-Go).
The stores that KB Holdings US is attempting to sell are located in: Bernardsville, NJ; Hoboken NJ (River Street); Maplewood, NJ; Ridgewood, NJ; and Warren, NJ.
As ASG’s New Owners, Garcia And Wiscovitch Have Real Opportunity To Change Landscape
I received a call from a veteran chain retail executive who competes against some of the banners that Associated Supermarket Group controls in the Metro NY market. He called after reading our online story about ASG’s two top executives – CEO Joe Garcia and executive VP Zulema Wiscovitch – acquiring control of the retail solutions organization from AUA Private Equity, the PE firm started by former Goya executive Andy Unanue, who bought ASG (then Associated Stores) from founders and entrepreneurs Harry Laufer and Ira Glober in 2012.
“So, what’s really going to change?” asked my retailer friend. “Joe was already chief executive, Zulema has long been second in command and there’s still private equity money at the foundation of the deal.”
All valid facts, missing one key point: this is the first time that Garcia and Wiscovitch have their own names on the door. Sure, Freedom3 Capital (F3C, their investment partner) will have a say in the direction and focus of the company, but the new leadership team will have direct control of the day-to-day decision making, something that’s crucial when dealing with the nuanced and ultra-competitive independent landscape that is part of doing business in the nation’s largest metro market, particularly in New York City’s five boroughs.
As caretakers for eight years, AUA was correct in stating that it transformed ASG from a loosely-run services organization to one with much more structure and a greater retail footprint. But AUA also failed on its first two chief executive choices.
Bob Sigel (2012-2015) certainly was smart enough to lead an organization, as proven by his skills when he ran Millbrook Distribution Services, the large HBC/GM distributor (now owned by UNFI) that was started by his father, Mort in 1960 in Worcester, MA. But his perceived arrogance by both ASG’s retail customers and its associates proved to be damaging. When former P&G executive Bob Striano took the helm in late 2015, there was hope that his lower-key, more strategic approach would lead ASG in a different direction. Striano also fizzled, unable to connect with the diverse membership base.
In that nearly six-year period, ASG not only lost customers (and sales), but its gritty, street-oriented culture was also diminished.
Finally, in 2018 that began to change when AUA installed Garcia as chief executive. Of course, Garcia had been at ASG since 2013 and was a proven and respected commodity in the industry from his many years as SVP at wholesaler White Rose. Wiscovitch, too, was a highly thought of “inside” executive who had a deep Rolodex of contacts, especially within the Hispanic community dating back to her Anheuser Busch days, which only increased when she was named executive director of the National Supermarket Association (NSA) in 2010.
After years of losing market share, things began to turn around in the past 24 months. New members such as upscale and growing merchant Uncle Giuseppe’s (nine stores) joined ASG and existing operators like like Giunta’s Meat Farms and Lincoln Market expanded their store bases, too.
Even before the headwinds of COVID-19 impacted sales, ASG was already on pace to have its best year since AUA acquired it. As long ago as 2018, Garcia and Wiscovitch had been interested in securing equity in a business they’ve been involved with for many years and thought that early last year the timing was right that AUA might consider selling.
After 10 months of negotiations which really heated up in July, they put together an offer that ultimately was accepted by AUA.
Now it’s their baby. As the faces of a nearly $1.7 billion enterprise, Joe Garcia and Zulema Wiscovitch have an opportunity to continue ASG’s progress more forcefully and directly. They both understand the complexities of a unique market with highly differentiated entrepreneurs as customers, they know the key players and certainly have the ambition, intelligence and street smarts to succeed. We wish them the best of luck.
‘Round The Trade
In what I consider to be somewhat of an underreported story, Walgreens is selling its pharmacy wholesale business (Walgreens Alliance Healthcare) to distributor AmerisourceBergen for $6.5 billion in a cash and stock deal. This is an important move for Walgreens, which already owns a 30 percent stake in AmerisourceBergen, as it will allow the struggling drug chain to focus more on its core business especially at a time when, unlike grocery chains, it has been adversely impacted by the effects of the coronavirus. Gaining $6.3 billion in cash will certainly help, and it should be aggressively utilized to improve declining store conditions where customer service is well below average and the stores themselves look like they are racing through the 90s.
Back to Walmart news: Marc Lore, the Behemoth’s chief e-commerce executive, will be exiting the company at the end of this month. The news is not surprising since Walmart had rolled jet.com, the company that Lore founded and sold to Walmart in 2016 for $3.3 billion, into its core business. Even though Lore’s role at the world’s largest merchant had diminished over the last year, he certainly served as the catalyst to accelerate Walmart’s e-commerce business, which has been growing exponentially, especially in the last 24 months. Lore, who is only 49, is actually a two-time winner in the “sell and cash-out” derby, having founded diapers.com and selling it to Walmart rival Amazon for $500 million in 2010. I’m certain we’ll be hearing more about the Bucknell graduate in the next few years. Walmart CEO Doug McMillon told a virtual audience at this month’s Consumer Electronics Show in Las Vegas that many of the changes all retailers have made during the pandemic will remain in place, especially the reliance on technology application. “We’ve got to get better at forecasting demand, so artificial intelligence and the way we use data is really important. We’ve got to build the necessary capacity for delivery,” he stated. McMillon served as keynote speaker for one of the largest and most important conventions in U.S. business which was held virtually for the first time. Walmart, in conjunction with Tysons Corner, VA start-up firm HomeValet, will be testing a temperature-controlled box for consumers who want their groceries to be delivered to their front door. The boxes will have three temperature-controlled zones for frozen, refrigerated and dry items. The pilot program will begin this spring at homes near Walmart’s headquarters in Bentonville, AR.
And if there’s Walmart news, there’s almost certainly going to be Amazon news, too. The Seattle-based juggernaut has closed its Prime Pantry unit which, in 2014, was its first foray into online grocery delivery. As “Godzilla’s” grocery business has expanded, operating Prime Pantry as a stand-alone unit became somewhat obsolete. However, Amazon fans, there’s no need to worry. Virtually all of the products that Prime Pantry offered are now available on Amazon’s home page. The king of the internet is growing its presence in the friendly skies as well. While airlines continue to struggle during the pandemic, Delta and WestJet just got a little bit healthier thanks to Amazon’s purchase of 11 Boeing 767-300 jets to supplement its Amazon Global Air delivery network. These are the first airplane purchases by the company (it had always leased planes), which will convert those aircraft from passenger to cargo vehicles. Amazon’s air fleet now totals 85 planes. And in the next two months, we’ll find out if Amazon becomes a (partially) unionized company. About 6,000 associates at its Bessemer, AL distribution center will vote over a six-week period culminating on March 29 to potentially become members of the Retail Wholesale and Department Store union (RWDSU). Expect other unions, especially in urban areas in the Northeast and Midwest, to also attempt to organize later this year.
As it readies for an initial public offering, Instacart has hired former Goldman Sachs executive Nick Giovanni as its new CFO. Giovanni spent more than 20 years with the Manhattan investment firm where he most recently headed up the firm’s global technology, media and telecom group. Expect Instacart’s IPO effort to take shape in the next six months. The San Francisco-based delivery firm could be valued as high as a stunning (and somewhat puzzling) $30 billion when the company goes public.
Albertsons, a company whose annual revenue exceeds $60 billion but only has a market cap of about $8 billion (Instacart’s annual sales are approximately $14 billion), continued its recent successful financial trend. The Boise, ID-based supermarket chain (second only to Kroger in volume for pure-play grocers), posted across-the-board gains in all metrics in Q3 which ended on November 30. Sales increased from $14.1 billion to $15.4 billion; earnings rose from $54.8 million to $123.7 million; and comp store revenue grew a healthy 12.3 percent (BTW, 12 percent is about the median same store sales increases that most retailers have reported for their most recently completed operating quarters). Additionally, Albertsons’ e-commerce business skyrocketed, growing by 225 percent during the 12-week period. “During the quarter, we continued to gain significant market share within both fuel and food in both dollars and units and experienced strong growth across geographies, regardless of the level of COVID restrictions in place. This gives us confidence in the sustainability of our competitiveness in the future,” Albertsons CEO Vivek Sankaran told analysts in the post-release conference call on January 12. “We had over 6 million new households shopping with us this quarter, and we are retaining existing customers. Those who shopped with us last quarter have returned this quarter at a higher rate than in Q2,” he noted. “Customers continue to consolidate trips, and we continue to see fewer trips per household but larger baskets. And these households are spending more with us compared to last year. Actively engaged households in our loyalty programs have increased 17.5 percent year over year and encompass nearly 40 percent of transactions and 50 percent of sales. These customers spend 4.1 times more than non-active customers.” And in a message that mirrored Walmart’s CEO Doug McMillon, Sankaran noted, “We firmly believe some consumer behaviors adopted during the pandemic will continue post-pandemic, and we believe increased use of digital offerings will be one of the key behaviors that sticks. To capitalize on this trend, we are investing over $300 million in cap-ex and op-ex to accelerate our offerings in this area during fiscal year 2020 to launch new capabilities that build on our strengths as well as drive scale and profitability.”
Kroger, the nation’s largest pure-play grocery chain released its top 10 trending foods of 2020 – based on annual sales growth – and heading the list was zero-calorie soft drinks. Many of the other entries weren’t quite as health/calorie conscious as the number one item. Those “couch potato” items included heavy whipping cream, party size bags of variety chocolates, flavored potato chips and four-cheese Mexican blend shredded cheese. The Cincinnati-based merchant also unveiled its top food trends for this year and leading the pack was “future-proof foods” – products that aid immune health, energy levels and stress management. Other items to make the top seven trenders include “Ketorian” foods – items that offer low-carb and high-fat guidelines but are plant-based. Another interesting prediction was that consumers will continue to seek more products that are more international and those that replicate some of their restaurant favorites.
UNFI outgoing CEO Steve “the Spinmeister” Spinner was in typical form at the recent ICR Conference held virtually earlier this month. The outgoing chief executive told the group of investors and businessmen that “this is really an exciting time to be at UNFI” (if he said it, then it must be true). Among the nuggets that Spinner disclosed were that UNFI will have paid down the remaining $1 billion in debt it accrued to acquire Supervalu in 2018 by the time its fiscal year ends in July. And getting back to UNFI’s ownership of Shoppers Food (and the larger Cub Foods chain), Spinner said he expects both banners to be sold within the next two years. UNFI CFO John Howard, who also spoke at the conference, said the two regional retailers have generated about $100 million in EBITDA.
Local Notes
The Giant Company (TGC) has unveiled its revamped subscription-based grocery delivery program. The Carlisle, PA-based Ahold Delhaize USA brand will now offer “Choice Pass” to its Giant Direct and Martin’s Direct e-commerce customers. The new program provides unlimited free delivery and pickup for the price of $98 a year which represents a $21 savings from the regional retailer’s former subscription plan PodPass. Other grocery delivery options are still available including a monthly option of $12.95 for unlimited free pickup and delivery. For individual orders, the pick-up fee is $2.95 with a minimum order of $30 required; the delivery fee for an individual order is $7.95 with a minimum order of $60. “Currently, one-third of our customers engage with us digitally. As that number grows, given the renewed interest in subscription services, especially grocery delivery, Choice Pass also positions us for future growth in the expanding digital landscape,” said Matt Simon, TGC’s chief marketing officer. “And as we look forward, we’ll continue to explore ways to strengthen our e-commerce platform to not only meet the increasing demand but to also offer a seamlessly integrated online experience to our online customers.” The retailer first introduced the Giant Direct brand in February 2019 when it debuted its first e-commerce hub in the Lancaster, PA. By July 2019, the company already reached the milestone of opening its 100th pick-up location in Carlisle.
Trader Joe’s has confirmed two more New York City future store locations. A 17,000 square foot store on Jackson Avenue in Long island City is expected to open in late summer. Also, TJ’s has signed a new lease for a 28,000 square foot unit in the soon-to-be constructed Urban League Development Center (a 17-story project) on 125th in Harlem. That store is slated to open in 2023 and joins two other Trader Joe’s currently under construction in Manhattan – 1st Avenue and 59th Street (a former Food Emporium) as well as 55th and Broadway. Trader Joe’s currently operates 12 stores in the five boroughs.
Also growing is Korean retailer H Mart which last month opened its newest store, a 40,000 square footer in Little Ferry, NJ. That store is the specialty merchant’s eighth unit in the Garden State. It also operates seven stores in New York and about 70 units nationally covering 14 states.
Lidl has ambitious plans for its Long Island stores in 2021, the year it hopes to complete the conversion of the 27 Best Markets it acquired in 2019. Lidl will also be closing its Great Neck and West Islip stores due to size and lease issues. Current Best Market units will close, too, but will re-emerge as Lidls less than a mile away from those stores in Garden City Park and in another Riverhead location. Next month, the German discounter will close its W. Babylon, Commack and Shirley Best Yet stores and eventually convert them to the Lidl banner. We’ve also learned that Lidl has purchased a parcel on White Horse Pike in Somerdale, NJ (Camden County) for $2.85 million. We’ve been tracking that site as a potential Lidl location for almost two years and now it seems the land deal is done and a new Lidl will be built in the near future…. another German merchant, HelloFresh, the most successful of all the meal kit entities, has opened a new 127,000 square foot distribution center in Totowa, NJ. The new DC is expected to complement the e-merchant’s Newark, NJ warehouse and will also serve as a production facility.
We’ve got more than a few obits to announce this month. Pete Marino, former senior VP- frozen and dairy for Genuardi’s, has passed on from complications of COVID-19. What a great guy Pete was – a warm, thoughtful and caring person, he was a true old-school gentleman. He spent more than 40 years with the Genuardi family and was especially beloved and respected by the vendors. It was slightly more than a year that ago I saw Pete at a holiday party and as usual, he was as gracious as ever, sporting a big smile and telling a few “war stories” from his career.
Four more baseball Hall of Fame members have also passed away during the last month. Phil Niekro, arguably the greatest knuckleball pitcher of all time, is gone at 81. A struggling minor leaguer who perfected his knuckle ball over many years, Niekro did not make his major league debut until he was 26 years old and didn’t become a starting pitcher until three years after that. From that point on, until retiring at the ripe age of 48, Niekro baffled hitters with his darting, spinless pitch. Spending most of his career with the Atlanta Braves, he was inducted into the Hall of Fame in 1997. Bob Uecker, the Hall of Fame broadcaster who was often the designated catcher when Niekro pitched, was asked his approach to catching a ball that danced all over the strike zone: “I don’t really catch the ball; I wait until it rolls to the backstop and then pick it up.” Niekro and his younger brother Joe hold the all-time record for career wins by brothers with 539 , surpassing the mark of 529 held by brothers Gaylord and Jim Perry.
We also learned of the death of Don Sutton, another “iron man” pitcher. The Alabama-born hurler, who joined the Dodgers in 1966 at the age of 21, never missed a start due to injury for 22 consecutive seasons (20 of which he pitched more than 200 innings). All told, he won 324 games and is tied with Nolan Ryan for 14th on the all-time list. After the Dodgers released him in 1980, Sutton pitched for Houston, Milwaukee, Oakland and the Angels. After retiring he became an excellent broadcaster, primarily for the Braves. He was inducted in the Hall of Fame in 1998.
And perhaps the greatest Dodger in terms of “bleeding blue,” Tommy Lasorda, has also died. The Norristown, PA native, who never really lost his Philly accent, had a forgettable playing career (three seasons) but a tremendous second act as a manager. Beginning at the end of the 1976 season and continuing until 1996, Lasorda’s career record with the Dodgers was 1,599-1,439. He managed longer than any other skipper except for Connie Mack, John McGraw and Walter Alston, the man he replaced. Lasorda also coached the U.S. Olympic baseball team that won a gold medal at the 2000 Sydney Olympics. As successful as he was as a manager, it was Lasorda’s effervescent personality and dedication to the Dodgers that made him one of baseball’s all-time great characters. Lasorda, who had cardiac problems for many years, quipped after a 2012 heart attack, “I’ve already told my wife that when I do go, I want our home schedule attached to my tombstone. I want people who are in the cemetery visiting their loved ones to say, ‘Let’s go to Lasorda’s grave and see if the Dodgers are playing home or away.’ Hey, I love this organization so much I want to be working for it even after I’m dead.” Lasorda, 93, was elected to the Hall of Fame in 1997.
Just before presstime, the great Henry Aaron died unexpectedly at the age of 86. Simply stated, “Hammerin’ Hank” was one of the 10 best baseball players of all time. Here are just a few of his career highlights: 755 lifetime home runs (which was the record until “Cheatin'” Barry Bonds surpassed it); 3,771 hits; 2,297 RBIs; and a .305 batting average. In addition, Aaron was a 25-time All-Star. He won three Gold Gloves and was elected to the Hall of Fame in his first year of eligibility in 1982. In a career that merited hundreds of platitudes, former Phillies pitcher Curt Simmons had one of the best: “Throwing a fastball by Henry Aaron is like trying to sneak the sun past a rooster.” Aaron began his career in 1954 in Milwaukee with the Braves and stayed with the team when it moved to Atlanta in 1966, playing there until 1974. Ironically, Aaron ended his career in Milwaukee with a two-year stint playing for the Brewers. More than just a seminal player, Hank Aaron was a great ambassador for the game. He was an early activist in the civils rights movement (in his typical understated manner) and gave time and money to countless charitable causes involving minorities and underprivileged children. Sadly, the deaths of Niekro, Sutton and Lasorda mean that eight baseball Hall of Famers have passed away in the last 10 months.
From show biz, we learned of the death of Siegfried. I’m talking about Herr Fischbacher, the German-born magician and animal handler (he was the one who wasn’t bitten by a tiger). Fischbacher was 81 when he died earlier this month. He and his partner Roy Horn, who died last May, teamed up to perform what was arguably the greatest exotic animal act of all time. The duo began performing together in 1959 and made their Las Vegas debut eight years later. In 1987, Steve Wynn signed Siegfried & Roy to a five-year, $57.5 million contract to perform at his newly built Mirage Hotel in Sin City. They sold out their shows for 30 consecutive years (48 weeks a year) and were still at the top of their game when their act ended abruptly in 2003 after one of their prized white tigers, Mantecore, nearly killed Roy during a performance. It was later thought that Horn had suffered a stroke, leading Mantecore to grab him by the neck and drag him off stage.
