It Ain't Easy
By Jim Dudlicek
With 2012 at an end and the occupant of the White House for the next four years confirmed, retail grocers are looking ahead to the economic and regulatory landscape of the next 12 months.
Issues already simmering over the past year are expected to come to a boil in 2013, the most significant to the eventual appearance of the grocery retailing landscape being the destiny of Supervalu Inc.
The Supervalu story seems to change by the day; corporate will only say its "review of strategic alternatives is proceeding" and suitors are keeping similarly mum, prompting rumor and unattributed scuttlebutt that has fueled rampant speculation about the company's pending fate.
Obamacare, energy costs, rising food prices ... grocery retailers will have their hands full in 2013.
As this issue went to press, it appeared that Cerberus Capital Management was poised to acquire at least two Supervalu banners – perhaps Albertsons and Save-A-Lot – after it was unable to come to terms on a full takeover of the beleaguered grocer. A deal, which was expected to be completed by year's end, could also include Cerberus taking an equity stake in the remainder of the company. KKR also reportedly has eyes for Save-A-Lot, which has been one of the few jewels in Supervalu's tarnished crown.
Meanwhile, the Wayne Sales-led management team continues to struggle with how to stem three years of declining sales, a long downslide that got Craig Herkert knocked from his perch as CEO. Among the strategies have been store-wide price drops, a move that hasn't necessarily kept shoppers from continuing to flock to big-boxers like Walmart, which is aggressively taking on established traditional grocers in local markets with its receipt comparison campaign, and Target, which has been expanding its grocery offerings. Further, dropping its quarterly dividend, among other cost-cutting measures, has made the Minneapolis-based giant less attractive to investors.
As if we didn't already know the grocery market is challenging, the dreams of Tesco to duplicate its U.K. success on American shores appear to be fading.
Now the British grocer is invoking the words "strategic review" for its struggling Fresh & Easy chain, whose CEO, Tim Mason, is out of a job as the banner's 200 stores in California and Nevada continue to deliver anemic returns five years after its grand entrance into the U.S. market. The jobs of 5,000 people are on the line as Fresh & Easy considers sale or closure of its U.S. locations.
Internally, grocery companies are bearing down for the expected costs of Obamacare, which the recent presidential election confirmed will be here to stay. The Retail Industry Leaders Association (RILA) recently sent a letter to President Obama on behalf of its members, arguing that the administration's failure to timely provide employers with formal guidance on basic implementation rules for the Affordable Care Act "jeopardizes employer-sponsored health care coverage."
That, along with the volatile cost of fuel and last summer's drought that's expected to bring higher food prices in 2013, should give grocers plenty to deal with when they're not interfacing with shoppers.
Be sure to keep up with the latest developments on these and other industry issues every day at www.progressivegrocer.com
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We hope you find our supplier directory to be an indispensible resource as you plan your purchasing decisions, capital projects and conference travels during 2013.
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