Tom KarstMilwaukee-based Roundy’s Inc. plans to put Mariano’s banners on 11 stores from the Dominick’s chain that Pleasanton, Calif.-based Safeway has put up for sale. These 11 stores and five Mariano’s stores under construction bring the chain’s total number of stores to 29.For Chicago produce marketers, it’s out with an old chain and in with new retail forces in the wake of Safeway’s decision to close its 72 Dominick’s retail stores at the end of 2013.
The end of the Dominick’s Finer Food chain came 95 years after its 1918 beginning, when Italian immigrant Dominick DiMatteo opened a deli at 3832 W. Ohio Ave. in Chicago.
A second Dominick’s opened in 1934, and in 1950 its corner store concept grew into a 14,000-square-foot retail space on W. North Avenue, according to the company’s website. The chain went on to become one of the largest in Chicagoland, reaching more than 20% market share by the 1990s.
Dominick’s had upwards of 120 stores when Safeway took over the chain in 1998, but the number eroded steadily over 15 years.
In October, Dominick’s 72 stores accounted for about 7.4% of supermarket sales in the Chicago market, according to the Shelby Report.
About that time, Safeway officials made public their decision to exit the Chicago market by early 2014, shortly after it announced plans to pull out of Canada. Dominick’s lost $35.2 million through the first 36 weeks of 2013, according to Safeway officials.
Supervalu Inc., Eden Prairie, Minn., also recently pulled out of Chicago, selling its stores, including the Jewel-Osco banner, to New York-based private-equity firm Cerberus Capital Management LP.
Dominick’s officials told the state of Illinois that it plans to close all of its Chicago-area stores by the end of the year, resulting in the loss of 5,633 jobs.
Jewel announced it purchased four of the 72 Dominick’s stores, with plans to retain about 450 workers and keep the Dominick’s banner until after the holidays, according to a report in the Chicago Tribune.
Growth mode for Mariano’s
On Dec. 2, Milwaukee-based Roundy’s Inc. said it signed an agreement to acquire 11 Dominick’s stores from Safeway in a $36 million cash and lease assumption transaction. The stores will be converted to the Mariano’s banner in the Chicago market.
“This acquisition is transformational in terms of Mariano’s expansion plans in the Chicago metropolitan area, allowing us to open 11 additional stores in 2014 in prime locations with great market demographics,” Robert Mariano, chairman, president and chief executive officer of Roundy’s, said in a news release.
“These key locations will seamlessly integrate into and complement our existing base of 13 Mariano’s locations as well as our five additional 2014 Mariano’s locations now under construction.”
The stores will be converted to the Mariano’s banner in early 2014, according to the release.
The exit of Dominick’s is the biggest story in the Chicago retail scene, said Bill Bishop, chief architect of Barrington, Ill.-based Brick Meets Click and Willard Bishop Consulting.
“That is going to take a major chain player out of the market, which is going to have some effect,” he said.
Shift from union shops
While Jewel and Mariano’s have snapped up some stores, retail observers say there are several candidates to buy the Dominick’s stores.
Jewel and Dominick’s are union shop retailers, but Dick Spezzano, owner of Spezzano Consulting Service, Monrovia, Calif., said independent retailers are on the rise.
“Everything coming into that town is nonunion,” he said.
Wage rates of $14 per hour and less give independents the advantage compared to union rates.
“The conventional chains are weaker there than they have been in some time, with the announcement by Safeway that Dominick’s is for sale by piecemeal method,” Spezzano said.
Spezzano speculated that Food for Less, a division of Kroger, may pick up some stores. Jewel could buy more stores as well, he said.
Independent retailers may pick up several Dominick’s stores, Spezzano said.
As those Dominick’s stores change hands, Bishop said the net effect will be increased competition in the Chicago market.
Some of the stores won’t reopen as supermarkets, but will be converted to another type of retail shop. If half of the stores are sold to other supermarkets, Bishop predicted each store under new management may see an increase in business of up to 50%.