Kroger Adds Share in Memphis

MEMPHIS, Tenn. — Kroger Co. will expand its dominance of this market with the planned acquisition of several Schnuck Markets stores here, as that company exits the region after a nine-year run. Cincinnati-based Kroger said it has agreed to buy nine of the 12 area Schnucks supermarket locations, and it plans to convert eight of them to the Kroger banner during the next few weeks and close the remaining

MEMPHIS, Tenn.Kroger Co. [4] will expand its dominance of this market with the planned acquisition of several Schnuck Markets [5] stores here, as that company exits the region after a nine-year run.

Cincinnati-based Kroger said it has agreed to buy nine of the 12 area Schnucks supermarket locations, and it plans to convert eight of them to the Kroger banner during the next few weeks and close the remaining location. It also plans to buy eight of the Schnucks fuel centers in the market and convert seven to its Kwik Shop convenience-store banner.

Two of the acquired Schnucks locations will replace existing, smaller Kroger stores, the company said.

“Kroger has owned this market for a long time,” said one local industry observer, who asked not to be identified. “They owned this market before Schnucks came here, and they still own it.”

Schnucks has seen its market share decline in Memphis recently. It captured about 12.4% of the market last year, according to Metro Market Studies, Tucson, Ariz., compared with 15.8% in the preceding year. Kroger, meanwhile, grew its share from 29.1% to 30.4% in that time, and Wal-Mart [6], which operates four Neighborhood Markets and 13 supercenters in Memphis, grew its share from 23.6% to 24.6%.

Kroger currently has 37 stores in the Memphis area. It is buying the Union, Perkins, Germantown, Collierville, Stonebridge, Shelby, Bartlett, Truse and Horn Lake Schnucks stores. Schnucks said it will close its stores in Quince, Forest Hill and Southaven.

“Schnucks competes very favorably in other markets, but in the Mid-South, fierce competition including a growing number of non-traditional grocers and a lingering high-price perception was the one-two punch that brought us to today's announcement,” Schnucks Chairman and Chief Executive Officer Scott Schnuck said in a statement.

Sources said discounter Dollar General [7] has been very aggressive in the market, which also has a strong presence from limited-assortment operators Aldi and Save-A-Lot and local discounters like Superlo.

Schnucks had entered the market in 2002 with the purchase of the 12-unit Seessel's chain, which had previously been acquired by Albertsons.