Nash Finch Gets Business Turned Around
Nash Finch found plenty of detractors in years past. But
more recently, the grocery wholesaler has changed its approach and that
has enabled it to prosper during an economic downturn even as larger
rivals struggle. In fact, the turnaround at Nash Finch is so complete
that the company’s CEO is looking to build on its organic growth through
strategic acquisitions.
David Livingston, principal at DJL Research and RetailWire BrainTrust
member, was one of those who criticized Nash Finch in the past, particularly
its former chief executive Ron Marshall.
Mr. Livingston told the Minneapolis
Star Tribune that current CEO Alec Covington
has the company on course. “He has realistic goals and realistic
ideas.”
“We continue to make good progress in debt reduction, working
capital improvement and cost containment,” Mr. Covington said in a press
release to announce the company’s second quarter results. “As we previously
announced, we delayed some of our non-essential 2009 capital expenditures
to ensure we attain our goals for free cash flow to net asset returns.
In the second half of 2009, we will continue to focus on attracting new
food distribution customers, improving the productivity in our warehouse
operations and converting the final GSC military warehouse onto our standard
suite of military systems.”
Discussion Questions: What
is different about Nash Finch today compared to a few years back? Is now a good or bad time for Nash Finch to be looking to grow through acquisitions?
Nash Finch no longer has an executive team raiding the company treasury under the guise of salary and bonus. The firing of the former executives has gone a long way in restoring the confidence in the employees and retailers. I’m sure we all remember the execs with multi-million dollar salaries and golden parachutes that were opening Mexican stores in Puerto Rican neighborhoods.
With Supervalu on a fast track to bankruptcy, Nash Finch might be able to pick up a few distribution centers where the two companies do not overlap, perhaps in Washington and Alabama. As retailers continue to lose confidence in Supervalu, Nash Finch is in a good position to capture more wholesale accounts.
First, an appeal to David’s comment above: Let’s hope the Proud Old Lady of Eden Prairie, Supervalu, is not heading for bankruptcy under its new CEO. True SVU is burdened by debt and sluggish sales but its heritage is a great asset.
Now it’s up to Craig Herkert to prove he is up to the task.
Now to Nash Finch. Nearly 30% of its annual revenue today comes from food distribution on military bases, a business that supplies some of the 284 U.S. military commissaries around the world as well as supermarkets where military personnel buy groceries at cost plus 5%. That’s slightly higher than wholesale and retail. That’s a big NF asset.
More than 50% of Nash Finch’s revenues comes from its wholesale business, supporting independent supermarket operators, who are a declining breed. And while further acquisitions will add to NF’s near-future sales base the uncertainty of whether a new army of vital independent food operators will arise tomorrow to replace today’s existing army. That poses a cloud over the long-term viability of such growth by even the strategic acquisition of small wholesalers.
Perhaps that’s why NF is focused so clearly on building military sales and why Supervalu dove so deeply into a retail conversion mode.
Just as with Supervalu, success in the future of Nash Finch is dependent of the vision of its leadership, perhaps more than by opportunistic acquisitions. So stay tuned.
What is different at Nash Finch today than in recent years past? They hired Alec Covington as CEO, hired Christopher Brown back, and Bob Dimond as their CFO. They have a very seasoned management team that has been there and done that, and are focusing on their core wholesale business. Oh, and they got rid of Ron Marshal, of course….
Former co-worker of Alec Covington’s at Richfood