Tuesday, November 17, 2015

Legacy Grocery Stores: Musical Chairs Don’t Drive Sales

Recently Supermarket News reported that Kroger was buying Roundy’s grocery store chain as a “fixer-upper”.   Once again that got me thinking about Safeway, Albertsons, A&P, Hagen, I could go on.  Is there any legacy grocery store that is not a “fixer-upper”. Sure Kroger and Publix stock price is firm; but customer frequency and migration are hitting them as well.  Let’s say what every serious foodservice professional knows the grocery store business model has changed, and many grocery operators have not. 

Foodservice Solutions® Grocerant Guru® stated “moving the chairs around the deck of a sinking ship or grocery store will not keep the sinking ship or grocery store afloat.”  Today Aldi is the leading Chicago grocery store chain yet hardly anyone mentions that. Why?  

Simple put grocery store industry trade magazines gloss over the fact that Aldi is winning the hearts and minds of the US consumer. Those same trade magazines struggle to admit that legacy grocery stores that were around in the 1960’s, 1970’s and 1990’s are simply fading away.  That fact is they are fading away. 

Walmart has lost the price advantage positioning to low cost grocery retailers the ilk of WinCo, Aldi, and will lose more soon to Lidl.    WinCo, Trader Joe’s, Aldi, and soon Lidl are growing units; while Costco continues to garner a share larger share of stomach.    

The team at Foodservice Solutions® does not believe that any of the of the legacy retailers left operating today has a plan for fixing what ails them.  And what ails them is the grocerant niche filled with Ready-2-Eat Heat-N-Eat fresh food. Most legacy grocery stores appear focused on stocking the shelves with products of yesterday rather than consumer products of today.  They appear working for slotting fees not customers. 

Walmart particularly seem stifled with a supply chain that worked great for 30 years, however now that supply chain  seems to have become the Achilles heel of a once proud chain too entrenched to move on. I once thought Walmart’s problems were centered around it’s footprint but since have been advised, apprised, and reminded of their supply chain conundrum. 
Here is a little background on the Chicago market from my friend Bill Cross; “The financial acquisitions and partner swapping that is leading to consolidation in the US grocery business continues with Kroger’s announcement it has come to terms to purchase Roundy’s, the Midwestern chain which also owns the upscale Chicago banner Mariano’s.

Kroger, which has 2,623 supermarkets in 34 states under a variety of banners, including Harris-Teeter, is looking to strengthen its reach in the upper Midwest and Chicago’s urban market. While Walmart remains the largest retailer in the nation, Kroger bills itself as the largest full-service grocery chain. Sales in 2014 totaled $108.5bn.

Additionally, Kroger has 782 convenience stores, 326 jewelry stores and the online retailer Vitacost.com. With Walmart and Target clearly in its sights, the company is also looking to open mixed retail stores, and not just be known for food. Chicago has been a large blank spot with only the modest Food 4 Less stores. In the past, Jewel-Osco and Dominick’s dominated the city’s grocery business, but Jewel has fallen on hard times, and Dominick’s closed in 2014. Currently the discounter Aldi is the leading Chicago grocery chain, so Kroger likely sees plenty of opportunity in the upper end of the marketplace where Mariano’s has stolen market share from Jewel and Whole Foods, though Mariano’s saw same-store sales decline 3.4% in the most-recent quarter.”
Simply put legacy grocery stores are in free fall.   

Years ago industry consolidation indicated that consumer prices would rise.  That is not the case today.  What appears to be industry consolidation is simply moving the chairs around the deck of a sinking ship.  That will not keep the sinking ship afloat according to our own Grocerant Guru®.  Who predicts more legacy grocery store closing in 2016? Who predicts greater growth from Aldi, Lidl, Wawa, and 7-Eleven all garnering a larger share of stomach?  The Grocerant Guru®. 

Since 1991 Foodservice Solutions® of Tacoma, WA has been the global leader in the Grocerant niche.
Invite Foodservice Solutions® to complete a Migration Marketing assessment, grocerant program assessment. For brand, product placement, menu positioning assistance simply visit: www.FoodserviceSolutions.us  today.  

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