Supervalu will benefit from Marsh’s bankruptcy, said Supervalu Inc. President and CEO Mark, at the RBC 2017 Consumer & Retail Conference on Wednesday
The two company’s agreement began last summer, nearly a year before the Indianapolis-based Marsh Supermarkets filed for bankruptcy and began the search for a new owner.
“The market is ever increasingly competitive and the competition is not lessening. It puts stress on our customers and it also gives an opportunity,” said Gross. “We got the Marsh business. The Indianapolis market (is) competitive. Meijer came into that market. Kroger turned up the heat in response to Meijer.”
Gross said that the distributor attempted to help Marsh once the failed grocer became Supervalu’s client.
“Part of what we said to Marsh is, ‘you’ve got to cut your overhead expenses, you’ve got to take advantage of our back office,’” said Gross. He feels other grocers in similar positions may look at Marsh’s slow adaptation rate and learn from it.
As for Supervalu, Marsh’s fall gives it an opportunity to stock the stores that will remain and gain new clients when buyers absorb other locations.
“Our goal in those cases is that, for the most part, the locations that the customer owned were good grocery locations. Their execution in that box was probably not optimum. But there should be a grocer in that location and there should be a grocer that we supply,” said Gross.
“There are 40 stars in the Marsh universe today and I’d like to supply 30 of them,” he added.
Gross also discussed retail’s role in the distributor’s overall plans. “I’m a grocery wholesaler,” Gross said during a presentation. “I’ve run retail, but I am first and foremost a wholesaler. That is where our strengths lie. That is our core business and that is where our growth lies.”
The comments come on the heels of Supervalu’s sale of Save-A-Lot retail stores to Canada’s Onex last fall. The sale price nearly hit $1.4 billion.
“With the successful completion of the Save-A-Lot sale, we are well positioned for the future with a stronger balance sheet, the opportunity to more strategically invest in our business, and the ability to more keenly focus on our core business as a leading grocery wholesaler,” Gross said in a statement at the time of the sale.
Nearly a quarter of a year later, Gross is pleased with the decision to move further away from retail, a segment that he referred to as “test lab” on Wednesday.
Saying that retail allows Supervalu to “serve its customers better” by allowing the distributor to be exposed to the retail experience firsthand, Gross is “not sure you need 200 stores or 220 stores to have a test lab.”
Bill Kirk, US Food Retail Analyst for RBC Capital Markets and the discussion’s moderator, released a statement after the event agreeing with Gross’s decision to reduce the company’s retail footholds.
“With the sale of Save-A-Lot, Supervalu’s exposure to macro and competitive pressures is reduced,” said Kirk in the statement. “With easing deflation/eventual inflation, a very strong wholesale win pipeline, and under-appreciated real estate portfolio, we believe SVU has significant upside.”
Supervalu is based in Eden Prairie, Minn., and operates a range of grocery formats and merchandising programs through a network of 2,012 stores.