Midwest retail expansions favor specialty, high end

08/14/2013 04:57:00 PM
Pamela Riemenschneider

Dan GalbraithJohn Jefferson, right, Supervalu's newly-named vice president of produce merchandising, talks with Chris Lambert, a Fresh Express representative, about the company's salad mixes at the Supervalu Northern Division Sales for All Seasons Expo held in St. Paul Aug. 12-14. The Midwest retail scene is broadening its customer base, especially in the specialty segment, and traditional grocery has its sights on Wisconsin.

Austin, Texas-based Whole Foods Market Inc. has announced plans for at least seven new locations ranging from Little Rock to Lake Forest, Ill., and a fast-growing southeastern chain — The Fresh Market — has its eye on the Midwest’s biggest cities including Chicago and Kansas City.

All this is happening thanks to some weakness in existing players, said Pewaukee, Wis.-based retail analyst David Livingston.

Both Eden Prairie, Minn.-based Supervalu Inc. and Milwaukee-based Roundy’s Supermarkets Inc. have had some financial difficulties in core Wisconsin markets over the past few years, Livingston said. And that’s opened up the market for expansion.

“Meijer is the next big thing coming in Wisconsin,” he said. “It’s been a real hotbed of new store development over the past five years. Roundy’s hasn’t been able to compete as well.”

Grand Rapids, Mich.-based Meijer Inc. also is growing at home, opening its first-ever Detroit store in July.

West Des Moines, Iowa-based Hy-Vee Inc. also has its sights set on Wisconsin. The company opened its second Madison store in May. Wisconsin is doing well for the company, said chief executive officer Randy Edeker, at the opening ceremony.

“Everyone asked me today, ‘Why Wisconsin? Why Madison?’” Edeker said, in a news release. “It’s because we do phenomenal here.”

Greensboro, N.C.-based specialty grocer The Fresh Market chose Chicago suburb Lincolnshire, Ill., as its first expansion into the Midwest, opening a store in June. The company also plans to open another store in the Kansas City suburb Overland Park on Sept. 4.

This follows the trend of national retailers looking for profitable locations, and finding many untapped markets in the Midwest, Livingston said.

“You’re seeing Whole Foods and Trader Joe’s come into smaller markets with higher incomes, well-educated with college campuses,” he said. “It’s the same story with The Fresh Market.”

Livingston said he sees this one- and two-off store expansion continuing to be popular as retailers expand their presence in the region.

 

Chicago’s premium scene

Chicago also is seeing a surge in high-end and specialty retail, like The Fresh Market, Roundy’s Mariano’s banner and a higher-end suburban expansion of Pete’s Fresh Market.

Roundy’s opened a new Mariano’s location in Harwood Heights in April, its 10th in Chicagoland.

“The Mariano’s banner is doing well for Roundy’s,” Livingston said.

Pete’s Fresh Market opened its first suburban store in Oakbrook Terrace in 2012 and plans two others in the larger, suburban format in Willowbrook and Orland Park in the next few years.

Chicago-based Shop and Save Market also is expanding. The company opened its Downers Grove store May 10. The newest addition includes more than 45,000-square-feet, specializing in European imports in the grocery department and more than 550 fresh produce items.

 

Supervalu, Nash Finch transactions

Supervalu named a former Kroger perishables executive, John Jefferson, to be its vice president of produce merchandising Aug. 13. Story A9

The company also recently completed the sale of five of its banners — Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market — to Cerberus Capital Management LP in March, and followed up the sale with a better-than-expected quarterly report in July that showed stocks jump from $1.22 to nearly $8 per share.

Grand Rapids, Mich.-based Spartan Stores Inc. and Edina, Minn.-based Nash Finch Co. announced a deal for Spartan to merge with Nash Finch in an all-stock transaction valued at $1.3 billion.

The deal includes 22 distribution centers in 37 states, 177 retail stores and distribution deals to military commissaries in the U.S.

Alec Covington, Nash Finch chief executive officer, said in a conference call discussing the merger that the military commissary business Nash Finch handles was a key element in the deal.

“It positions our company for growth, and that’s something we have to focus on,” he said, during the call.



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