Chains have new owners; union threatens strike

06/30/2011 02:23:00 PM
Dan Gailbraith

LOS ANGELES — Two Southern California-based supermarket chains have come under new ownership during the past year, and the region’s three major chains faced the possibility of a labor strike as summer got under way.

Commerce-based Smart & Final Inc., owned by Apollo Management LP, a private equity firm, sold its Henry’s Farmers Market group to Phoenix-based Sprouts Farmers Markets LLC in April.

Henry’s stores are located throughout Southern California, while Sprouts has about 100 stores in Arizona, Colorado, Texas and California that offer a wide range of natural and organic foods. Sprouts also operates some stores in Texas under the Sun Harvest Farmers Market name.

Sprouts reportedly will have $1 billion in annual sales and about 7,000 employees.

It also could have as many as 200 stores within three to four years, many in Northern California as well as in Ventura, Santa Barbara, the Central Coast and the Inland Empire, east of Los Angeles, said Dick Spezzano, president of Spezzano Consulting Services, Monrovia.

“They seem to do well no matter where they go,” he said.

All locations eventually will operate under the Sprouts Farmers Market banner.

The stores were expected to start shipping out of the former Stater Bros. distribution center in Riverside, Calif., starting this summer, Spezzano said.

Both companies, though separately owned, were established by the Henry Boney family of San Diego, which will manage the new company. Apollo Management Group is the majority owner.

Last fall, Eden Prairie, Minn.-based Supervalu Inc. sold its 14-store, Carson, Calif.-based Bristol Farms division to Bristol Farms management and Endeavour Capital, an investment firm experienced in grocery and retail businesses.

The company reportedly has about 1,500 employees and does more than $200 million a year in sales.

Supervalu picked up the Bristol Farms division in 2006 when it acquired the Alberstons chain.

Spezzano said Supervalu trimmed personnel and improved Bristol Farms’ bottom line before selling the chain at a “significant discount” from what Albertsons paid for it.

Health care remained a sticking point early this summer as United Food and Commercial Workers Local 770 negotiated with Southern California Ralphs, Vons and Albertsons supermarkets on behalf of 62,000 unionized grocery store workers.

“We’re so far apart, if something doesn’t happen soon, we will have a strike,” Rick Icaza, union president, said at a June 9 news conference.

The chains would not comment on terms of the contract proposal, but the union said they were asking employees to pay more for health care premiums, deductibles and co-pays.

The workers, whose contract expired in March, authorized a strike but continued to work as a federal mediator supervised negotiations.

Each of the chains is owned by a larger corporation. Ralphs is owned by Kroger Co. of Cincinnati; Vons/Pavilions by Safeway Inc. of Pleasanton, Calif.; and Albertsons by Supervalu.

Area grocery workers last went on strike in 2003 for about five months, resulting in lost sales that took years to recoup as shoppers altered their buying habits.

Overall, store counts in Southern California have dropped over the past five to 10 years for Vons and Ralphs, while the number of San Bernardino-based Stater Bros. Markets locations has remained flat, Spezzano said.

El Segundo, Calif.-based Fresh & Easy Neighborhood Market, launched in 2007, continues to expand. The store has 175 locations in California, Nevada and Arizona.

Although the company has lost an estimated $900 million to date, Spezzano said losses were declining every year, and the chain should be profitable by 2013.

Monrovia-based Trader Joe’s, which now has more than 350 stores throughout the U.S., has a format similar to Fresh & Easy and continues to have the highest sales per square foot in the industry, Spezzano said.

“Trader Joe’s is the gold standard for that kind of operation,” he said.

Lastly, ethnic chains, such as Superior Super Warehouse, Vallarta, Northgate and Cardenas, continue to prosper in Southern California, Spezzano said, as does the growing PFresh perishables format at Target stores.



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