Grocery store openings increased 30 percent in 2018

New grocery store openings were up 30% in 2018 as compared to the prior year, according to a report by JLL. More than one-quarter of the new stores were in Florida, California and Texas as a result of expansion by Publix, Sprouts Farmers Market, Aldi, Kroger and H-E-B.

"Grocery is one of the strongest retail sectors, with nearly twice as many new stores opening than closing last year," according to JLL Director of Research James Cook.

Cook also pointed out that shopper habits have shifted to more frequent, shorter trips, and as a result, food retailers are focusing on developing smaller format stores.

"In 2019 we expect to see even more grocery stores rolling out their smaller-format stores as they battle razor-thin margins in prime locations, while still serving evolving consumer needs," said Cook.

Aldi, which accounted for 16% of total new stores by square footage, continues to expand at a rapid pace. And new formats, like Giant's 9,500 square foot Heirloom Market in Philadelphia, were recently introduced.

Sprouts to open 30 new stores in 2019

Sprouts Farmers Market announced earlier this month that it plans to open nine new stores in the second quarter of 2019. Overall, the company expects to open about 30 new stores for the year, the same as in 2018.

The stores opening in the second quarter are in New Jersey (Marlton), Louisiana, Virginia, Florida (2), California (3) and Arizona.

Eight stores opened or are slated to open in the first quarter of the year. They are in California (2), Texas, Florida (3), Washington and Nevada.

Sprouts currently operates 320 stores in 19 states.

Kroger to test unmanned vehicle delivery

Kroger announced in late June that it plans to pilot unmanned road vehicles for grocery delivery through a partnership with Nuro, a California-based robotics and artificial intelligence company.

A test scheduled for the fall will allow customers to place grocery orders through Kroger's ClickList system and Nuro's app, and have their items delivered the same day. The pilot market has not yet been announced.

In addition, Kroger announced a partnership with British online grocery supermarket Ocado to build e-commerce fulfillment centers and build out its e-grocery platform. At the same time Kroger announced a deal to purchase online meal kit service Home Chef, as well as plans to launch Boosted Products in Search, a service that will "enable consumer packaged goods brands to reach digitally savvy shoppers with 'hyper-relevant' products in search results across Kroger digital properties," according to Supermarket News.

Grocery store openings fell sharply in 2017

According to an annual "Grocery Tracker" report from JLL, grocery store openings dropped 28.8% in 2017 compared to the previous year. The report states that the decline reflects chains' efforts to reexamine their current footprints and rethink strategies to deal with new online and brick-and-mortar competition.

JLL said that California led the way in 2017 with 1.6 million square feet of new grocery store space. Virginia and North Carolina combined for 2.7 million square feet of new space, and Texas was described as "still one of the hottest states for grocery expansion."

Sprouts, Grocery Outlet, Aldi and Lidl were mentioned as notable chains that are expanding.

JLL's report said that investment in grocery-anchored centers grew 5.3% in 2017, and the company expects supermarkets to retain high interest as anchor tenants for shopping centers.

"It (grocery-anchored centers) was one of the only retail sectors to see growth in a year of low transaction volume," the study said. "Grocery-anchored centers remain a safe bet for investors, as overall transaction volume for retail has been down, indicating the asset remains a stable sector."

The study mentioned that the increase in smaller footprint stores is a clear trend - for more compact formats like Aldi and Trader Joe's, as well as for traditional supermarket chains and mass merchants like Walmart and Target.

"The grocers that can deliver the right in-store experience, combined with the right online pickup or fulfillment plan... are the ones that will thrive, whether their stores are 15,000 square feet with limited products or take up a footprint four times as large," said James Cook, JLL director of retail research.

PA ranks second in organic food sales

According to a report published by the U.S. Department of Agriculture, Pennsylvania trails only California in the sale of organic products. Statewide consumption of organic foods in Pennsylvania has increased by about ten times over the past decade, and has doubled from 2015 and 2016.

Nationwide, organic food sales reached $43 billion last year, an increase of 8.4% over the previous year.

"The demand has increased so much," said Cheryl Cook, deputy secretary for market development at the Pennsylvania Department of Agriculture. "We could quadruple and quintuple the production and still not fill the demand."

Consumer neuroscience firm Nielsen told Progressive Grocer that despite the increase in organic sales in recent years, price perception remains the greatest barrier to organic purchases, even though prices are in general decline.

Save-A-Lot closing west coast stores

Save-A-Lot, under the ownership and guidance of private equity firm Onex since last fall, announced earlier this month that it would close all 13 of its existing stores in California and Nevada, as well as the distribution center servicing them.

Supervalu, the discount grocer's previous owner, saw the west coast as a great opportunity, but current CEO Eric Claus told Supermarket News that the investment required to build brand equity and store density would be better deployed on initiatives where the chain was better established.

Save-A-Lot currently has about 1,400 stores from Colorado and states to the east.

The 13 stores are expected to close in a matter of weeks.

Analyst says Aldi and Lidl to hurt small grocery operators

A Supermarket News story recently quoted an analyst who predicted that the "invasion" of Lidl into the U.S., combined with Aldi's rapid expansion, will prove to be problematic for smaller operators and those focused on lower-income shoppers. The analyst did not think the two European powerhouses would have as devastating an effect on top U.S. grocers.

However, based on where Lidl is buying property in the Greater Philadelphia region, it certainly appears they believe they will have a big effect on top grocers. From what I have seen, they are eager to open up stores adjacent to - or across the street from - market leaders Giant and ShopRite.

Although they are opening new stores all over the country, Aldi's recent growth has been mostly focused on California. Lidl is planning to open at least 75 stores from New Jersey to Georgia in early 2018.

The Fresh Market to limit expansion to existing markets

The Fresh Market announced earlier this month that they plan to increase penetration in existing markets while slowing the pace of expansion in new markets. The company also announced the upcoming closures of four stores, three in Sacramento, CA and one in Houston, TX.

The Fresh Market, which operates more than 150 stores nationwide, entered the California market in 2012 and the Houston market last year (through an acquisition). As of this evening, the company's website says that it operates two stores in California and four in Houston, one of which has a location in Turtle Creek listed as "TBD."

There are four Fresh Market stores in Pennsylvania and two in New Jersey.

Aldi plan calls for 650 new stores in five years

Aldi, the discount grocer that operates about 1,300 stores from the East Coast to Kansas, said last week it would accelerate store growth with a goal of 650 new stores in the next five years, and nearly 2,000 stores by 2018. Aldi's plans call for approximately 130 new stores per year, compared to its pace of 80 new stores in recent years.

The company's growth plan includes a strong presence in California, including a warehouse and regional headquarters to be located in Moreno Valley, CA. Aldi announced earlier in the year that it would expand to California.

Amazon planning major online grocery expansion

Earlier this month Reuters reported that Amazon is planning a major expansion of its online grocery service. According to the report, the expanded service will start in California and then possibly expand into 20 urban markets. And according to Globe Street, a national supermarket analyst says Amazon could be targeting 40 markets.

Amazon is no stranger to the grocery delivery business as it's been operating AmazonFresh for several years in Seattle, where the company is headquartered. In March, KTR Capital Partners, Amazon's development partner, acquired a 900,000 square foot complex in Woodbridge, NJ that it will renovate for Amazon. The facility was previously owned by C&S Wholesale Grocers.

Currently, Peapod, which is owned by Ahold (Giant, Stop & Shop), calls itself the largest online grocer. It serves more than 8 million households in the Northeast.

Fresh & Easy may exit U.S. market

U.K.-based Tesco, the third largest retailer in the world as measured by revenues, recently launched a strategic review of its struggling U.S. Fresh & Easy Neighborhood Market chain. Many analysts believe the results, scheduled to be announced at the company's annual meeting later this month, will lead to Tesco exiting the U.S. market.

There is speculation that buyers could include Trader Joe's, Aldi, Wal-Mart or real estate companies.

Fresh & Easy stores are located mostly in California, with additional stores in Nevada and Arizona.

Tesco to shut down Fresh & Easy chain

Tesco, the British supermarket giant and the world's fourth largest retailer, announced it will sell or shut down its 200 Fresh & Easy grocery stores. All of the stores are located in California, Arizona and Nevada, and the banner is Tesco's only U.S. asset.

Fresh & Easy began with its first store in Phoenix in 2007, and the grocery chain's stores are typically in the 10,000 to 15,000 square foot range. They offer fresh food and ready-to-eat meals at low prices, and the stores are touted as more convenient alternatives to traditional U.S. supermarkets.

Since 2007, Tesco has invested about $1.6 billion in the chain, but it has never been profitable.

"It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form," said Tesco CEO Philip Clarke.

Analysts say that Aldi could be among those interested in acquiring the chain, and that Walmart could bid for parts of it.

Acme's parent company to lay of workers in CA, NV

Acme's parent company, Supervalu, announced last week that it plans to layoff 2,200 - 2,500 employees at its Albertsons supermarkets in California and Nevada later this month. Supervalu, headquartered in Minnesota, is trying to lower costs, pay down debt from its 2006 Albertsons acquisition, and compete more successfully with rivals like Safeway and Kroger.

Save-A-Lot's plans include growth and flexibility

A Supermarket News article earlier this week detailed Save-A-Lot's widely publicized plans to double their store count to 2,400 by 2015.

According to Save-A-Lot President and CEO Bill Shaner, the hard discount format is underdeveloped in the U.S., especially as compared to Europe and South America. Now is the opportunity to build market share, he says. Their stores, which average 15,000 square feet, currently have sales of about $80,000 per week.

Some interesting tidbits from the story provide good insight into Save-A-Lot's strategy:

• Save-A-Lot, a division of Supervalu (Acme), is experimenting with new opportunities to drive its expansion, including co-branded stores (with Rite Aid stores in South Carolina and a Hispanic-oriented operator in Texas) and new offerings, such as deli departments.
• The company has regionalized its real estate and development team by spreading them across the country rather than housing them entirely in St. Louis, as they had done previously. According to Shaner, this new structure provides Save-A-Lot with in-market expertise.
• According to a map of expansion opportunities on their website, Pennsylvania can expect 50-100 new Save-A-Lot stores in the next couple years, while New Jersey can expect 25-50 new stores. The biggest growth areas are California, Texas and Florida. Larger urban markets will see more corporate store openings, while smaller markets will see more licensed independent operators.

Incentives and Flexibility

• The company is supporting all licensees who open a Save-A-Lot by providing them with at least $200,000 in financing per store. They say it costs an average of $822,500 to open a new store.
• Executives have decided to be more flexible in the store's building requirements by "letting the building be the building," rather than imposing a proscribed design. General construction standards as they pertain to lighting, flooring and walls have been relaxed as well.
• A more localized product offering, including about 15% of the merchandise that can be customized to the market, has been introduced in an attempt to improve sales performance.

Here's the Supermarket News article: Thinking Outside the Small Box