FMI: Smaller firms shorted in chain divestitures - The Packer

FMI: Smaller firms shorted in chain divestitures

06/25/2002 12:00:00 AM
Doug Ohlemeier

(June 25) WASHINGTON, D.C. — Store spin-offs required by recent retail mergers and consolidations have not given independent and smaller grocery chain owners a fair shot at acquiring divested stores. That’s what the nation’s leading supermarket industry association contends.

The Food Marketing Institute is urging the Federal Trade Commission to re-examine its divestiture policies. FMI says the policies favor sales of blocks of stores to single buyers over independent retailers and small grocery chains that could buy a smaller number of stores.

“A number of our smaller firms feel like they didn’t have a chance of getting some of the sites that follow mergers and acquisitions. They’re viewed as not being a viable competitor,” said Michael Sansolo, president of FMI’s independent operator division. “Some of these smaller operations, while not able to buy all of the stores available, can buy the pieces that can make them very viable operations and suppliers to the community.”

Ray Klocke, president of The Klocke Advantage consulting firm, Alamo, Calif., said retailers should be able to unload their assets in ways that maximize their return on investment.

“There shouldn’t be a law that requires you to do it one way or another,” he said. “It doesn’t seem like much of a story. If I’m the guy going out of business, I should have the option of selling them together or independently.”

Retail consultant Dick Spezzano, president of Spezzano Consulting Service inc., Monrovia, Calif., said he disagrees, saying the government should look at ways to provide independents some kind of priority in the bidding process.

“Long-term, this would benefit consumers, whom the FTC is supposed to protect,” he said. “In a lot of cases, the independents are shut out and relegated to the leftover stores that nobody wants.”

FMI says it’s asking for equal, not special, treatment.

“There is no sound basis for rigid rulemaking requiring respondents to divest all of one firm’s stores,” FMI president and chief executive officer Tim Hammonds stated in testimony the organization submitted to the FTC at a June 18 Washington merger investigations and remedies hearing.

“The staff should be more open to mixed store packages, especially in cases where the buyer of the divested stores is an experienced supermarket operator or grocery wholesaler,” he stated. “Independents and small firms believe they face closer scrutiny of their financial viability, experience, supply arrangements and business plans than large chains.”

Spezzano cited retailers such as Albertson’s Inc., Boise, Idaho, unloading a large number of stores when exiting markets such as Houston.

“You see who’s buying those blocks, which are quite large,” he said. “A four-store independent chain can’t buy eight stores. If they want to grow, they could buy one or two. Such action really precludes them (the independents) from getting any kind of traction on the store counts.”

Sansolo said the effort remains one of educating the FTC about the issue.

“It’s important we work with them and make them sensitive to the changes in the marketplace,” he said.

The divestiture issue remains a political issue, Spezzano said. He said he doesn’t think FMI’s efforts will succeed.



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