COPPELL, Texas — Minyard Food Stores here said last week it has signed an agreement to outsource its warehouse and distribution functions to Associated Wholesale Grocers, Kansas City, Kan., as part of its “transformation strategy” to build on its niche strengths and reduce costs.
The company also re-emphasized its commitment to its fresh-focused, Latino-themed Carnival Super Markets banner as its primary growth vehicle.
“Outsourcing distribution will enable us to free up assets by tightening overhead and make us more competitive by increasing efficiency and reducing our costs of delivering product to the shelves,” Michael D. Byars, chief executive officer, told SN last week. “It will also free up assets and resources that can be reinvested in the stores.”
Minyard's said it plans to disclose “a series of detailed transition measures and milestones for all affected operations” in the next few weeks. “As we continue to make improvements, we will become the lean, focused organization that is necessary to compete in the rapidly changing retail environment,” Byars noted.
According to Byars, Minyard's strategy will also encompass the following actions:
Selling or leasing its 722,000-square-foot distribution center and related assets here to another operator.
Closing or consolidating underperforming locations, remodeling others and seeking potential acquisitions in the Dallas-Fort Worth marketplace.
Upgrading retail technology systems and back-office functions.
Giving consideration to changing the company's corporate name to “Carnival” to reflect the new emphasis.
Minyard's, which was sold by the Minyard family to a Texas-based private investment group in 2004, operates 65 stores in the Dallas-Fort Worth Metroplex, including 23 under the Carnival banner, 24 conventional Minyard stores and 18 Sack 'n Save warehouse stores. Annual sales are running around $850 million, the company said.
Gary Phillips, president and CEO of AWG, said in a prepared statement that the wholesaler is “pleased that Minyard Food Stores has selected us to supply groceries to their Dallas-Fort Worth metro stores. AWG looks forward to working with the Minyard team in the near future.”
Byars said the company expects the transfer of distribution to AWG to take place over a period of six to eight months, with shipments expected to begin this fall from a new 850,000-square-foot facility AWG is scheduled to open in Oklahoma City.
As for the 20-year-old existing facility, “we are actively looking for a new operator, who will likely require our employees to keep it functioning,” he noted. “Wherever possible, we will work to find our employees new jobs within our organization.” The change could affect up to 231 Minyard's warehouse employees.
The facility, located in what Byars said was an attractive location near the Dallas-Fort Worth airport, stocks dry groceries, perishables, health and beauty care, and direct-store-delivery items. Minyard's currently buys general merchandise from Promotions Unlimited, Racine, Wis., and specialty items from Gourmet Awards, St. Augustine, Fla. It also buys Hispanic products from a variety of sources, including suppliers in Mexico and Central America and independent vendors in the Dallas area and in south Texas.
“The good thing about our agreement with AWG is that we have the flexibility to do whatever we think adds the most value, including buying some products locally and warehousing them in Oklahoma City,” Byars told SN. “We intend to continue to buy our Hispanic needs on our own, and we're still reviewing DSD, general merchandise and specialty categories to determine whether or not we should go through AWG.”
The decision to outsource warehousing and distribution was made for financial and strategic reasons, he said, after the company spent 18 months evaluating its options. “Our primary focus is to be a retailer, and we felt AWG's $5 billion volume would help us improve our buying power and free up cash to utilize at the retail level,” Byars told SN.
He said the decision to invest in and strengthen the Carnival format is based on the success of the flagship Carnival store that opened in late August in the Oak Cliff area of Dallas and the success of four remodeled Carnival locations that opened in the Dallas area earlier in the year.
The 56,000-square-foot flagship store is a signature format that communicates everything Minyard's hopes to be in terms of product mix, variety, pricing, quality, service levels and store standards, Byars told SN last year, just before the store's opening.
Offerings include authentic Mexican prepared foods, a fresh juice bar, a carniceria (meat department) and pescaderia (seafood department), a scratch bakery, a tortilleria, an expanded produce section, a pharmacy featuring herbal remedies and other specialty items used in Mexico, an in-store clinic, bilingual signage and aisle markers, and individual registers in each service department.
“The popularity among shoppers [of the flagship store] has outstripped even our most optimistic expectations, and our four remodeled stores are running as much as 25% over their year-ago performance,” Byars pointed out.
In a speech to employees that was scheduled for delivery last week, Byars said the company will utilize Carnival as its growth vehicle “to ensure that our stores remain fresh, relevant and in tune with the needs and demands of our customers.”
“‘Relevant’ is, in fact, a critical word in the retail grocery business,” he added. “Too many supermarkets continue to offer the same old products in the same old ways. But if we are to compete successfully against the big boxes and small independents of this world, it's clear we must swim free of that sea of sameness.
“With our ongoing focus on the Carnival banner, we are beginning to separate ourselves from the pack. Using the Carnival name, we're fulfilling the needs of our customers in the neighborhoods we serve better than ever.
“Our flagship store's popularity validates our strategy,” he continued. “We know now, with absolute certainty, that the Carnival banner is our growth vehicle that clearly differentiates us from our competition.”
Minyard's expects to remodel at least two existing Carnival stores this year and plans to begin construction on a new Carnival Super Market in Fort Worth this fall and to break ground on a third new unit, also in Fort Worth, in 2008, Byars said.
“As the demographics and competitive landscape change around us, it's clear that we, too, must continue to change with the times,” Byars said in his prepared remarks. “We're dedicated to giving our customers the best possible shopping experience, which sometimes means closing or consolidating outlets to ensure that we're consistently providing our customers with top values and top quality.
“There will be Carnival, Minyard and Sack 'n Save stores that are closed or sold because they are underperforming, the leases have expired or they do not fit the neighborhood demographics.”
Byars said that Minyard's plans to close a Carnival store in Dallas because of its proximity to the flagship store, and it has already sold a Minyard's-banner store in the Lakewood suburb of Dallas to Whole Foods Market.
“As we sell or close stores, some of you will be asked to move locations,” Byars said in his prepared remarks. “For example, when we close [the Carnival near the flagship store], the increased traffic to [the flagship] will require experienced associates,” he pointed out.
According to Byars, Minyard's prefers stores of between 50,000 and 55,000 square feet for its Carnival locations, though two of the four stores it remodeled last year were in the 40,000-square-foot range.
Though Minyard's priority is remodeling the stores it has, Byars said the company is looking at potential acquisitions in the 50,000- to 55,000-square-foot range. The Albertsons stores up for sale in the Dallas marketplace would accommodate the needs of the Carnival banner, he said, noting that Minyard's has looked at some of those stores.
Besides using the Carnival format to focus on the needs of Hispanic shoppers, Byars said, Minyard's can also utilize the format to merchandise to the needs of Anglo, African American and other customer segments.