At its first Investor Day, SpartanNash unveiled plans to consolidate retail banners in its corporate-owned supermarkets from about a dozen to four as part of a ramped-up growth strategy.
With the move, the company will create a three-tier retail structure: a conventional supermarket segment under the Family Fare banner, an upmarket segment under the Martin’s Super Markets and D&W Fresh Market banners, and an ethnic segment under the Supermercado Nuestra Familia banner.
Masiar Tayebi, chief strategy and information officer at Grand Rapids, Mich.-based SpartanNash, announced the banner change yesterday during the distributor’s Investor Day presentation at the Nasdaq MarketSite conference site in Manhattan’s Times Square.
“We did banner equity studies, and we’ve determined that it is in our best interest, and shareholders’ best interest, to consolidate to four primary banners: Family Fare for our conventional/mass [stores], Supermercado for ethnic, and then our upmarket [stores] will be Martin’s and D&W Fresh Market,” Tayebi said. “This allows us to have much more purpose as we talk to shoppers and consumers. These archetypes we’ve identified are also mirrored in our customers in the food distribution space, so we can provide the service and advisory they need to grow. And so we’re extremely excited about this banner consolidation over the long-range plan.”
D&W Fresh Market, along with Martin's Super Markets, will become SpartanNash's upmarket retail banners.
Overall, SpartanNash now operates 147 grocery stores in Michigan, Indiana, Iowa, Minnesota, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin, including three recently acquired Shop-N-Save Food Centers in northwestern Michigan that were converted to the Family Fare banner.
Stores for the new banner structure currently include 86 Family Fare locations (Michigan, Iowa, Minnesota, Nebraska, South Dakota and Wisconsin), 20 Martin’s locations (northern Indiana and southwestern Michigan), 10 D&W Fresh Market locations (Michigan) and three Supermercado locations (Nebraska). Two stand-alone Forest Hills Foods/Ada Fresh Market locations also will remain.
SpartanNash already had been transitioning some stores to Family Fare. Besides Family Fare, Martin’s, D&W, Supermercado and the two stand-alone banners, the company’s roster of supermarket banners has included VG’s Grocery, Dan’s Supermarket, Family Fresh Market, Fresh Madison Market, No Frills, SunMart, Dillonvale IGA and Econofoods.
“As we’ve cobbled together [our stores] over the great many years, we’ve made acquisitions of small [grocers] with great relevance in their community and kept the banners in many cases. Now we see that we have something we can pull together in terms of a real, advertisable benefit for our core banners,” SpartanNash CEO Tony Sarsam said in a Q&A at Investor Day. “So we think it’s time to actually start moving some of those [stores] into the core banners because we have articulated distinct advantages for Family Fare, for D&W and for Martin’s. We’ll be moving those banners over as we move forward, and we’ve moved some already this year.”
Chief Financial Officer Jason Monaco noted that shoppers also can expect an enhanced shopping experience with the banner changes.
“One thing to think about with banner consolidation is more broadly about the retail strategy and the work that we're doing around upgrading the buildings themselves, the space and the user experience,” Monaco said. “You should expect that we’re going to touch about a quarter of the stores over this time period and continue to upgrade the experience. That’s going to range from big projects to small that will link with the banner consolidation, so we get a terrific customer experience, grow and deliver the right return on invested capital.”
SpartanNash executives said the company will also mull acquisitions and partnerships to propel its growth plan. On the retail side, that included the recent purchase of Shop-N-Save Food Centers in Michigan.
At Investor Day, SpartanNash — whose businesses include food distribution, military distribution and supermarket retail — released an accelerated growth plan that projects the company, by 2025, to top $10 billion in total sales (or 12% growth from a 3% compound annual growth rate in 2021) and exceed $300 million in adjusted EBITDA (or 40% growth from a 9% CAGR in 2021).
The new growth plan came as SpartanNash also announced preliminary results for the fiscal 2022 third quarter. Projections include net sales of $2.28 billion to $2.31 billion (versus $2.07 billion year earlier), net income of $8.9 million to $9.9 million (vs. $15.2 million a year earlier) and adjusted EBITDA of $56.3 million to $58.3 million (vs. $51.5 million a year earlier. On the retail side, same-store sales growth is estimated at 8% year over year. The company also unveiled a new reporting structure of wholesale and retail business units, combining its food and military distribution arms into one wholesale segment.
Currently, SpartanNash’s retail business unit accounts for about 29% of total sales. The upcoming banner changes and store upgrades are expected to raise that figure, according to SpartanNash, which noted that its retail arm differentiates the company from competitors because of the valuable operating and shopper insights it brings to the distributor’s 2,100 independent grocery customers.
“Most of those banners will be converted by the end of 2024, so it will align with our three-year, long-range plan to be harmonized by the end of 2025,” SpartanNash Chief Marketing Officer Amy McClellan told Supermarket News at Investor Day.
“In addition to some light renovations, at some of the stores — D&W, for example — we’ve had major renovations to get them up to par to deliver the experience that aligns with the banner offering,” McLellan said. “We also, in 2023, will relaunch our loyalty program, primarily in Family Fare stores. We’ll leverage that loyalty program relaunch as we harmonize banners. So Dan’s, for example, will become Family Fare and, more than just swapping the sign on the building, we will launch a brand-new loyalty program in those communities. They’ve not had the benefits of our loyalty program in the past. So that aligns with the Family Fare brand and then just investing in service and people to deliver the right experience.”
The retail banner and enhancement strategy is aimed at cultivating the feeling of a hometown store, according to Tom Swanson, executive vice president and general manager of corporate retail at SpartanNash.
“Building on our insights, our retail teams develop a detailed plan to ensure consistency of execution in a local hometown experience every time shoppers visit our stores,” Swanson said in a video presentation. “Our strategy includes added investments in our people, differentiated above-and-beyond customer service, a better in-stock position and new shopper loyalty benefits.”
