Roundy’s Turns Wholesale Accounts Over to Supervalu
By George Anderson
Roundy’s chairman and chief executive, Robert Mariano, clearly sees the future of his company is in retailing. His counterpart at Supervalu, Jeff Noddle, is apparently happy to help accommodate him as his company agreed to take over distribution for 50 independent grocers in Wisconsin who have been supplied by Roundy’s.
Roundy’s will continue to supply independents operating its Pick ‘n Save format stores.
“This transition is consistent with our strategy to concentrate our resources on growing our own retail stores and independently owned and operated Pick ‘n Save retailers,” said Mr. Mariano in a joint release with Supervalu.
Mr. Noddle added, “We are eager to introduce to them the wide range of supply chain services and leading-edge technology solutions in which Supervalu continues to invest.”
Moderator’s Comment: What does this deal do for Roundy’s and Supervalu? What are your thoughts on the future direction of these two grocery companies?
– George Anderson – Moderator
From a Supervalu point of view, they have always been better (relatively) at wholesale than at retail. I endorse any move that increases their presence and focus in that area. Supervalu’s retail operations do not score in the top half of anyone’s performance overview.
Roundy’s is doing as many noted; focusing on core competencies and avoiding diminution of resources and effort.
Supervalu is adding scale, what should be a relatively profitable chunk of wholesale volume….but continues to be a bit muddled as to an overall corporate vision. As a quick note, if Supervalu spent the resources on supply chain excellence that they do on retail operations, the rewards would be significant. Even today, their general merchandise sourcing and supply chain is woeful.
Interesting comments about Roundy’s….I was just in Minneapolis for the weekend and went to a Rainbow Foods. I was very surprised to see how much their stores looked like the older Dominick’s pre fresh stores….they are nice stores though….bright lighting, clean graphics and no kitschy frills.
The one stupid thing I saw was from an IT/Telecom end…..they had a PBX phone system, but a separate paging intercom….next to each phone. Doesn’t someone know that you can combine both features into the PBX phone system…especially intercom/ paging! So they need to get their act together there. We at Walgreens, as well as stores like Jewel Osco and Dominick’s, have been using a combined intercom/telephone system for at least 15 years!
I am praying and hoping that Mariano comes and takes Dominick’s over! Safeway just doesn’t get it…..
Do you guys see a light at the end of the tunnel for Mariano rescuing Dominick’s? I once wrote him a letter telling him how much I missed his store decor, fresh concepts, etc….but he didn’t write me back. Darn….guess I wasn’t important enough.
One change – such the Roundy’s-Supervalu deal – leaves the way open for the introduction of others. Will other deals follow?
This deal gives Supervalu 50 more stores to supply and service; a plus for their wholesale sales. There wasn’t mention if there was a “consideration” required to obtain that business. If there was none, this is a “freebie” for Supervalu.
One might assume that Roundy’s decision was because serving those independents was unprofitable but they wanted to keep a relationship with the Pick ‘n Save stores because of their larger volumes and possibly their closer proximity to Roundy’s DC. Perhaps Roundy’s is entertaining owning all Pick ‘n Save stores some day as part of the retail strategy that Bob Mariano announced. Or possibly this is deal is step one in a future merger of Supervalu and Roundy’s? SVU’s new president, Mike Jackson, is quite familiar with the Wisconsin market from his past experience there. Stay tuned.
Roundy’s did not have much wholesale left, anyway, and they are just following their game plan. For quite a while now, wholesale has been an afterthought for Roundy’s. For the most part, these accounts were small and will be better served by Supervalu. These are not big accounts to Supervalu but it’s a nice addition to their existing warehouses in Green Bay and Kenosha.
Some of the smaller wholesalers, such as Fresh Brands, might also pick up a few accounts that choose not to be supplied by Supervalu.
Roundy’s is just focusing more on what they do best. I believe they now only have 25 independent Pick ‘N Save stores spread out among 10 owners. Over time, I expect this number to drop as Roundy’s keeps buying them out. In the future, I expect Roundy’s to make one more significant acquisition, probably Dominick’s. Then the company will go to the highest bidder.
I assume that Roundy’s decided to focus on doing 1 thing well instead of trying to focus on doing 2 different things. In a business as challenging as grocery, this isn’t a bad idea. In some forms of retailing, it pays to “own your own wholesaler” (and I guess it sometimes pays for the wholesaler to own retail stores, too.)
Generally speaking, if a wholesale company also is a retailer in the same market, selling to non-owned “outside” retailers, how does that make the “outside” retailers feel?