Tuesday, October 18, 2016

Amazon planning to sell groceries at its own convenience stores

A Wall Street Journal story last week outlined Amazon's plans to expand its grocery business with new, bricks-and-mortar convenience stores. According to the story, Amazon envisions having stores that would sell milk, produce, meats and other perishable items that customers could take home. And using mobile phones, customers could order products like cereal and peanut butter for same-day delivery.

In addition, Amazon will reportedly open drive-in locations where online grocery orders will be brought to customers' vehicles. License-plate reading technology - currently under development - could speed customer wait times.

The stores are initially slated for subscribers to Amazon's Fresh service, which promises same-day food delivery at set times.

Although online grocery purchases only account for two percent of U.S. grocery sales, Morgan Stanley Research estimates that online sales could more than double this year. And Amazon may consider grocery sales as crucial to their growth, since consumers typically restock their refrigerators on a weekly basis, and grocery purchases could lead to other, more profitable purchases.

Amazon expects stiff competition for curbside pickup from Walmart, which plans to have the service at about one fourth of its 4,600 U.S. stores by the end of 2017. Walmart recently purchased e-commerce company Jet.com for $3.3 billion.

Albertsons' IPO plans at a standstill

Albertsons' IPO plans have been halted again, this time due to price deflation that has affected sales and earnings across the supermarket industry. Albertsons (Acme, Albertsons, Safeway, Vons and several others) originally proposed a public offering a year ago, but postponed it when Walmart's announcement about earnings pressure prompted an industry-wide drop in valuations.

Analysts are not optimistic that Albertsons will be able to achieve an IPO at the valuations contemplated last fall, when price deflation wasn't an issue and consumers were not as cautious as they seem to be now.

Lidl's next US target is Texas

German discount grocer Lidl, which is well on its way to opening about 100 stores on the East Coast in 2018, confirmed last Friday to Supermarket News that it also plans to expand into Texas. The move is seen as confirmation that the company is targeting competitive grocery markets, as Houston and Dallas are among the most crowded and price competitive in the country, and already include the three largest U.S. grocers - Walmart, Kroger and Albertsons.

Lidl isn't the first discount grocer to move into Texas, as Aldi has opened nearly 100 stores there since 2010, and says it plans to open hundreds more.  Both Lidl and Aldi prefer to locate close to leading traditional supermarkets where they can enjoy a price advantage.

The two companies are anything but strangers, as they compete worldwide for discount grocery market share.

Private equity firm to buy Save-A-Lot for $1.365 billion

Supervalu announced yesterday that it has entered into an agreement with private equity firm Onex Corp. to sell Save-A-Lot for $1.365 billion. The deal is expected to close by January 31, 2017.

Supervalu and Onex also announced that they have entered into a five-year agreement where Supervalu would continue to provide support for Save-A-Lot, including merchandising technology, payroll, finance and other functions.

Analysts had predicted the sale price would be higher.

Company officials said that Save-A-Lot's results had suffered recently as a result of reduced SNAP benefits and product price deflation. The discount grocery chain currently accounts for about a third of Supervalu's business.

Supervalu said yesterday that proceeds from the deal would be used to reduce debt and improve its capital structure, and to fund operations and growth. The sale is another major step in the company's transformation into a wholesale-focused company.

Monday, October 3, 2016

Canadian private equity firm said to be leading bidder for Save-A-Lot

On Friday published reports indicated that Onex, a Toronto-based private equity firm, is the leading bidder to purchase Save-A-Lot from Supervalu. An auction is underway to find a buyer. Prior to the auction, Supervalu had planned to spin off the discount grocer into a publicly traded company controlled by Supervalu shareholders.

Tuesday, September 27, 2016

Albertsons banners - including Acme - to expand e-commerce

On the heels of a recent analyst report recommending that food retailers slow their e-commerce efforts, MyWebGrocer announced that several Albertsons banners - including Acme - plan to add "click-and-collect" and delivery service on its platform. Albertsons has used MyWebGrocer's software since 2012 for online shopping lists and circulars.

A report released earlier this month by Tabs Analytics reported that just 4.5% of all shoppers are using the Internet to buy groceries six or more times per year, and concluded that "consumers have turned their backs on buying groceries online."

Related story: Study concludes that food retailers should focus on families, not e-commerce or millennials

Study concludes that food retailers should focus on families, not e-commerce or millennials

A study on food and beverage buying released earlier this month by Tabs Analytics concluded that food retailers should slow their investments in e-commerce and on millennials, and focus instead on old-fashioned promotional spending at stores and on marketing to households with children.

The study included 1,000 geographically and demographically dispersed consumers between 18 and 75, and analyzed 15 consumables categories.

According to the study, only 20% of millennials are heavy buyers of food and consumables, and only 4.5% of all shoppers use the Internet to purchase groceries six or more times per year.

"The study underscores that online grocery is failing," said Tabs CEO Kurt Jetta. "For the fourth year in a row, consumers have turned their backs on buying groceries online no matter how much online grocery retailers try to entice them."

In addition, since the study showed that millennials use grocery store circulars significantly less than the overall study average (30% compared to 42%), Jetta said retailers should focus their marketing on households with children, as they are heavy buyers of food and beverages, and much more likely to respond to promotions.