Supermarkets Top Alternative Formats (Part 1)

1 2016alternativeformats

Now more than ever, alternative formats like mass merchandisers, natural food retailers, dollar stores and even drugstores are encroaching on supermarket food sales. The following companies from the 2016 Top 75 list of U.S. and Canadian retailers represent the alternative formats with the most food sales.

1Walmart

1. Wal-Mart Stores

Annual sales: $247.5 billion (estimated, consumables only)

2costco

2. Costco Wholesale Corp.

Annual sales: $69.4 billion (consumables only)

3CVS.jpg

3. CVS Health

Annual sales: $44.4 billion (estimated, consumables only)

4Target.jpg

4. Target Corp.

Annual sales: $34.2 billion (estimated, consumables only)

5Walgreens.jpg

5. Walgreen Co.

Annual sales: $28.3 billion (estimated, consumables only)

6Meijer_0.jpg

6. Meijer, Inc.

Annual sales: $16.9 billion (estimated)

7WholeFoods.jpg

7. Whole Foods Market

Annual sales: $15.4 billion

8DollarGeneral.jpg

8. Dollar General Corp.

Annual sales: $15.3 billion (estimated, consumables only)

9_7Eleven.jpg

9. 7-Eleven

Annual sales: $13.3 billion (estimated, consumables only)

10TraderJoes.jpg

10. Trader Joe’s Co.

Annual sales: $13 billion (estimated)

2016 Top 75 U.S. & Canadian Food Retailers & Wholesalers.

 2016-01-04_15-18-33
    1. Wal-Mart Stores Company News
    2. Kroger Company News
    3. Costco Wholesale Corp. 2016
    4. Albertsons 2016
    5. CVS Health 2016
    6. Target Corp. 2016
    7. Loblaw Cos. 2016
    8. Walgreen Co. 2016
    9. Publix Company News
    10. C&S Wholesale Grocers 2016
    11. Ahold USA Company News
    12. H-E-B 2016
    13. Supervalu Company News
    14. Delhaize America Company News
    15. Meijer Inc. 2016
    16. Sobeys 2016
    17. Wakefern Food Corp. 2016
    18. Whole Foods Market 2016
    19. Dollar General Corp. 2016
    20. 7-Eleven 2016
    21. Trader Joe’s Co. 2016
    22. Aldi USA 2016
    23. Southeastern Grocers 2016
    24. Dollar Tree 2016
    25. Giant Eagle 2016
    26. BJ’s Wholesale Club 2016
    27. Hy-Vee Food Stores 2016
    28. Metro Inc. 2016
    29. Associated Wholesale Grocers 2016
    30. Rite Aid 2016
    31. SpartanNash 2016
    32. United Natural Foods Inc. 2016
    33. Wegmans Food Markets 2016
    34. WinCo Foods 2016
    35. Demoulas Super Markets 2016
    36. Save Mart Supermarkets 2016
    37. Stater Bros. Markets 2016
    38. Unified Grocers 2016
    39. Overwaitea Food Group 2016
    40. Smart & Final 2016
    41. Ingles Markets 2016
    42. Price Chopper Supermarkets 2016
    43. Sprouts Farmers Market 2016
    44. Houchens Industries 2016
    45. Raley’s Supermarkets 2016
    46. Weis Markets 2016
    47. Tops Markets 2016
    48. Schnuck Markets 2016
    49. Key Food Stores Co-operative 2016
    50. Alex Lee Inc. 2016
    51. K-VA-T Food Stores 2016
    52. Bozzuto’s 2016
    53. Amazon.com 2016
    54. Associated Food Stores 2016
    55. Brookshire Grocery Co. 2016
    56. Central Grocers 2016
    57. The Fresh Market 2016
    58. Saker ShopRites 2016
    59. Grocery Outlet 2016
    60. Superior Grocers 2016
    61. Woodman’s Markets 2016
    62. Affiliated Foods Midwest 2016
    63. Big Y Foods 2016
    64. 99 Cents Only 2016
    65. Village Super Market 2016
    66. Affiliated Foods 2016
    67. Bashas’ 2016
    68. Bodega Latina 2016
    69. Coborn’s 2016
    70. Piggly Wiggly Midwest 2016
    71. Brookshire Brothers 2016
    72. Fareway Stores 2016
    73. Inserra Supermarkets 2016
    74. Lowe’s Market 2016
    75. Northgate Gonzalez Market 2016

Top 25 Global Food Retailers 2015.

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    1. Wal-Mart Stores 2015 — Global edition
    2. Costco 2015 — Global edition
    3. Carrefour 2015
    4. Kroger Co. 2015 — Global edition
    5. Tesco 2015
    6. Seven & I 2015
    7. Schwarz Group 2015 (Lidl)
    8. Walgreens Boots Alliance 2015
    9. AEON 2015
    10. Aldi 2015 — Global edition
    11. Target Corp. 2015 — Global edition
    12. Auchan 2015
    13. Metro Group 2015
    14. CVS 2015
    15. Casino Group 2015
    16. Woolworths 2015
    17. Rewe Group 2015
    18. Edeka 2015
    19. Albertsons 2015 — Global edition
    20. Leclerc 2015
    21. Coles Group 2015
    22. Ahold 2015 — Global edition
    23. ITM (Intermarché) 2015
    24. Sainsbury’s 2015
    25. Loblaw 2015 — Global edition

2015 Top 50 Small Chains and Independents.

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    1. Fareway Stores 2015
    2. Inserra Supermarkets 2015
    3. Marsh Supermarkets 2015
    4. Northgate Gonzalez Market 2015
    5. Lowe’s Market 2015
    6. PAQ 2015
    7. Rouses Enterprises 2015
    8. Vallarta Supermarkets 2015
    9. Cardenas Markets 2015
    10. Redner’s Warehouse Markets 2015
    11. Festival Foods 2015
    12. Fairway Market 2015
    13. Jerry’s Enterprises 2015
    14. King Kullen Grocery Co. 2015
    15. Niemann Foods 2015
    16. Homeland Stores 2015
    17. Harps Food Stores 2015
    18. Foodland Super Market 2015
    19. Dierbergs Markets 2015
    20. Lund Food Holdings 2015
    21. Lewis Food Town 2015
    22. Cosentino’s Food Stores 2015
    23. Glass Gardens 2015
    24. Roche Bros. Supermarkets 2015
    25. Kings Food Markets 2015
    26. Natural Grocers by Vitamin Cottage 2015
    27. Heinen’s 2015
    28. Martin’s Super Markets 2015
    29. Gelson’s Markets 2015
    30. All American Quality Foods 2015
    31. Ball’s Food Stores 2015
    32. Reasor’s 2015
    33. Sedano’s 2015
    34. Harmons 2015
    35. Brown’s Super Stores 2015
    36. Pyramid Foods 2015
    37. Perlmart 2015
    38. Fred W. Albrecht Grocery Co. 2015
    39. Haggen Inc. 2015
    40. Good Food Holdings 2015
    41. Miner’s 2015
    42. RoNetco 2015
    43. Stew Leonard’s 2015
    44. Earth Fare 2015
    45. B&R Stores 2015
    46. Tawa Supermarket 2015
    47. E&H Food Group 2015
    48. Mi Pueblo Food Centers 2015
    49. Town & Country Grocers 2015
    50. C&K Market 2015

Save-A-Lot IPO will fuel Western expansion

sav a lot store

Supervalu’s potential spinoff of its Save-A-Lot division will prime the discount banner for aggressive unit growth and separate a business that has little in common with the distributor’s retail and independent businesses.

“It’s a totally different animal,” said Sam Duncan, Supervalu’s CEO, speaking at an investor conference last week in Minneapolis.

Supervalu announced earlier this month it was exploring a potential public spinoff of Save-A-Lot, but cautioned a deal may not materialize. However, CFO Bruce Besanko, speaking at the same event last week, acknowledged a change was all but inevitable given the company has already spent more than $2 million exploring the move.

“There’s no guarantee it’s going to happen. But you can certainly bet that we spent money last quarter, [and] we’re going to spend money in the second quarter here to continue to march down the path, and we wouldn’t obviously spend that kind of money unless we were certainly serious about something like this,” Besanko said. “So that’s very exciting for Save-A-Lot, very exciting for Supervalu, to be able to unleash the power of that brand as a standalone entity.”

Another possibility, Besanko acknowledged, was an outright sale of Save-A-Lot. “We’ve had some inbound calls now that have expressed some interest and so that’s a possibility — there could be a combination hybrid of [a sale and IPO],” he said.

The spinoff will help fuel Save-A-Lot’s growth — particularly into the Western states like Nevada and California — where Save-A-Lot has little to no presence, Duncan said. However, Duncan pointed out that both he and Save-A-Lot CEO Richie Casteel have extensive experience in Southern California, where they previously worked with Albertsons. Duncan is also a former Ralphs president.

“The company tried hard years ago to go into the West, but really didn’t have expertise,” Duncan said. “But we know this area very incredibly well. My background is Southern California, Nevada. I ran stores in Nevada, and we’re going into Nevada. We’ll have Save-A-Lots in lots of new markets, including Los Angeles. … We’re looking for $30,000 to $45,000 in household income, that is our wheelhouse. And there is plenty of opportunities for that in the California and Nevada area.”

Walmart leads 2015 Top 25 Global Retailers.

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A shifting focus toward smaller retail formats and the strong U.S. dollar influenced Planet Retail’s list of the Top 25 Global Retailers, on which Walmart, Costco and Carrefour took the top three spots, respectively.

The ranking is based on 2015 sales in U.S. dollars, which Planet Retail has forecast for the year while taking into account historic performance, store opening projections (which are reflected in store counts provided) and an estimated comparable store growth rate.

With a projected $527.8 billion in sales, Wal-Mart Stores bests all other international retailers by a wide margin, according to Planet Retail.

“Walmart remains by far the leading player but will not rest on its laurels,” noted Robert Gregory, head of advisory for London-based Planet Retail. “In fact, there are a number of key strategic initiatives it is pursuing at home and abroad.”

These include restoring performance in some faltering international markets and focusing on e-commerce around the world.

“Walmart was initially slow to embrace e-commerce, but is making up ground fast with global e-commerce sales growing at more than 20% per annum,” Gregory said.

While the Bentonville, Ark.-based retailer has online operations in most countries in which it operates, its key markets for digital sales are the U.S., U.K., Brazil and China, according to Gregory. Walmart considers Asda in the U.K. and Yihaodian in China to be best-in-class for e-commerce, he said.

No. 2 retailer, Issaquah, Wash.-based Costco Wholesale Corp., with a projected $127.9 billion in sales, has about 70% of its 687 outlets in the U.S., according to Gregory who said it is scheduled to open 24 new stores by fiscal year 2015.

“While the growth of ancillary businesses and an expanded service offering should boost domestic sales, international club expansion will drive new member growth, which will propel a stronger bottom line,” he said. “The first store in France is scheduled for 2016, following on from entry into Spain in 2014.”

French retailer Carrefour is No. 3, with $119.8 billion in sales when converted to U.S. dollars, and 12,965 outlets.

Gregory noted that despite increasing sales in their local currency, many European and Japanese retailers declined their ranking on the list due to currency exchange rates to the U.S. dollar.

Kroger, with $116.4 billion in sales and 3,750 stores takes the No. 4 spot, followed by Tesco.

The U.K.-based retailer is coming off a “nightmare year, rocked by leadership changes, the accountancy scandal, negative like-for-like sales and a record loss,” according to Gregory. “Further disposals are likely [such as Dunnhumby] and international markets such as South Korea, as it looks to rebuild its balance sheet and generate funds to invest in the U.K.”

While the outlook for Tesco and its 7,990 stores isn’t all doom and gloom, it still has a fair amount of challenges ahead.

“Tesco is currently on a journey and recent trading has actually improved and it is actually performing stronger than rivals such as Walmart’s Asda,” added Gregory. “However, it will be a long journey and with like-for-likes at its hypermarkets continuing to decline and with store openings being scaled back, Tesco is likely to fall further down the global ranking in the coming years.”

7-Eleven parent Seven & I, is the No. 6 retailer with $101.4 billion in sales across 38,009 outlets which include its retail banners and its nonfood offerings such as department stores.

U.S. invasion

It’s followed in the ranking by Lidl parent, Schwarz Group, with $99.7 billion in sales. Earlier this summer, Lidl confirmed plans to expand beyond Europe for the first time, to the U.S., but these stores are not expected to open in the near-term and therefore did not factor into Planet Retail’s projections. Schwarz Group has also announced market entries in Serbia (Kaufland, Lidl) and Lithuania (Lidl), according to Gregory.

With $96.2 billion in sales, U.S.-based Walgreens Boots Alliance is ranked No. 8. Its position was boosted by Walgreen’s acquisition of the remaining 55% of Alliance Boots that it did not own, to form the first global pharmacy-led, health and wellbeing enterprise and the largest purchaser of prescription drugs in the world.

Japanese retailer Aeon is No. 9 on the list with $92.1 billion in sales and 19,171 total outlets. And rounding out the top 10 is Aldi, which, according to Gregory, is among the retailers who’ve slipped down the ranking due to an unfavorable EUR-to-USD exchange rate.

Aldi’s expansion plans include new stores in a range of markets including some in Western and Southern Australia and West Coast and Southern California stores in the U.S. In addition to acquiring the Bottom Dollar chain from Delhaize, it hopes to more than double its stores in the U.K. by 2022, according to Gregory.

Minneapolis-based Target Corp., No. 11 on the list, “will accelerate small-box and urban expansion, via TargetExpress and to a lesser extent CityTarget,” said Gregory. “After having opened its first TargetExpress location last summer in its home market of Minneapolis, Target is set to open eight additional locations in 2015, more than half of its total planned store openings for the year.”

With $79.9 billion in sales, France-based Auchan is the 12th ranked retailer, followed by Metro Group (No. 13) with $77.9 billion in sales.

No. 14 on the list, CVS, with $70.5 billion in sales and 7,923 stores will continue to expand organically as well as benefit from the store-within-a-store concept that will result from its purchase of Target’s 1,660 in-store pharmacies and 80 in-store clinics, Gregory said.

“A clear trend amongst all players on the ranking is the shifting focus towards smaller formats,” he told SN. “Even the likes of Walmart are trying to decrease the proportion of sales from big-box stores as they look to embrace smaller formats, such as Walmart to Go and Walmart on Campus.

“In addition, investing in stores to make them a more integral part of the online shopping experience has become a priority with all leading players introducing click and collect facilities across their store networks. Clearly, this will be part of their attempts to reinvent the weak performing big-box stores, as well as measures such as improved service, greater use of in-store technology and trying to cater to the mobile shopper in the stores.”

Other notable retailers on the list include No. 19 Albertsons, with $56.8 billion in sales, whose ranking was boosted as a result of its merger with Safeway, and No. 22 Ahold, whose $46.7 billion sales projection does not include its forthcoming merger with Delhaize, according to Gregory.

Save-A-Lot tests culture-specific prototypes

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Supervalu is trying out customized Save-A-Lot stores that cater to local customer demographics. CEO Sam Duncan said that Supervalu is testing “format and operating modifications” geared towards that appeal to different cultural groups.

“These stores have been merchandised to better accommodate the unique backgrounds, food preferences and shopping needs of many other customers in the markets we serve, which results in a more relevant in-store experience,” Duncan said in a call with analysts last week.

A Save-A-Lot spokesperson declined to elaborate further on the new program — including where the pilot stores are located or specifics on how these stores are catering to different ethnicities.

What the Minneapolis-based company did share in the call last week was that the program concentrates on exact cultures instead of trying to appeal to larger cultural groups.

“And when it comes to merchandising ethnicities, you got to be specific. When you just say Hispanic, you just can’t say one Hispanic set. There is Caribbean Hispanics. There is Hispanics from Mexico. There is different nuances of all the different ethnicities out there,” said Duncan.

The meat-cutting program rolled out to corporate Save-A-Lot stores also allows Supervalu to cater its meat department offerings to the tastes of the surrounding area, according to Duncan.

The majority of licensee Save-A-Lot stores already had meat-cutting programs prior to the rollout of this initiative, but they are now participating in the new corporate price investment and marketing aspects.

Alternative chains boost expansion.

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From Aldi to Whole Foods Market, nontraditional food retailers in recent weeks have unveiled new growth plans that ramp up their rates of new-store expansion and bring them into new markets.

While alternative-format growth has outpaced that of traditional supermarket retailers for several years, the latest growth plans from these operators represent a new level of development.

Batavia, Ill.-based Aldi, for example, the limited-assortment operator that has been one of the fastest-growing food retailers in the U.S., said it would now open stores at an even faster pace, with plans for 650 new stores in the next five years. Its plans also call for the establishment of a Southern California warehouse and headquarters to be located in Moreno Valley, Calif. — marking the chain’s first presence west of Kansas.

Whole Foods Market, meanwhile, has increased its store-count goal to 1,200 — up from the 1,000 units it has been projecting for several years — according to one Wall Street analyst.

Kelly Bania, a New York-based analyst with BMO Capital Markets, said in a report that Whole Foods executives told her they now see the company’s growth potential in the U.S. as 1,200 locations.

This is a key positive for Whole Foods,” Bania wrote, “and suggests the company remains very optimistic about its ability to continue expanding, supported in part by recent success in new markets such as Detroit, where sales are trending twice that of projections.”

Ironically, Bania’s report came out just as some industry observers had been speculating that Whole Foods was running out of room to expand, thanks to a mention in its most recent earnings report of cannibalization impacting some stores’ sales.

Karen Short, a New York-based analyst with Deutsche Bank, said she believes the cannibalization — related in part to the recent conversion of Johnny’s Foodmaster stores in the Boston area — is a short-term phenomenon, and that, in fact, Whole Foods is “significantly underpenetrated nationally.” She conducted a detailed cannibalization and market-saturation analysis, based on the number of Whole Foods locations per person per state, and concluded that the chain has plenty of room to add stores in every state in which it operates.

In addition to the reports of Whole Foods’ expansion potential, other natural and organic and specialty chains also have unveiled plans to enter into new markets, including the fast-growing Sprouts Farmers Market, Natural Grocers by Vitamin Cottage, Lucky’s Market and Fresh Thyme Farmer’s Market.

Supervalu Leads Grocery Stocks in 2013.

sav a lot store supervalu logo

Investors rewarded Supervalu for getting smaller in 2013, a year in which almost all food retailing stocks showed double-digit percentage gains in share price.

Supervalu’s stock rose more than 175% during the year, following the sale of its Albertsons, Jewel-Osco, Acme and Shaw’s/Star Market banners. It was the leading share-price gainer for 2013 among the 23 food-retailing stocks tracked by SN.

Following the sale, Supervalu was left with its core wholesale business, the Save-A-Lot limited-assortment banner and several regional chains, all under the leadership of new Chief Executive Officer Sam Duncan.

“We think the rapid rate of recovery at Save-A-Lot underscores how quickly CEO Sam Duncan is overhauling the business overall,” noted Ajay Jain, an analyst at Cantor Fitzgerald, after a recent Supervalu earnings conference call.

Two other stocks also more than doubled in 2013 — Natural Grocers by Vitamin Cottage, which saw it share price rise about 118%, to $42.45 at year-end; and Roundy’s, which rose by a similar percentage, to $9.86.

Natural Grocers by Vitamin Cottage, the fast-growing chain of small-format, natural-food stores, posted double-digit gains in comparable-store sales throughout the year. Roundy’s grew primarily on the success of its Mariano’s Fresh Market chain in Chicago, which was poised to expand even further with the acquisition of several Dominick’s stores in the market.

Both Kroger Co. and Safeway were up sharply, as Kroger continued to grab market share and Safeway shed some of its assets. Kroger’s shares were up almost 50%, to about $39.53, and Safeway was up about 77%, to about $32.57

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