Spartan Looks Outside Michigan for Growth
Spartan Stores’ numbers look good and the company has set
its sites on bigger and better things ahead, according to The Grand Rapids
Press.
The grocery wholesaler and retailer, which achieved the second highest
level of profitability in its 92-year history over the past fiscal year, sees
opportunities to grow its business both inside and out of its Michigan home.
"We will be opportunistically seeking growth in the market or outside
the state through acquisition," CEO Dennis Eidson recently told analysts
during a recent conference call.
Spartan also believes it can achieve growth
on a smaller scale through remodels of its existing store base. The company
operates units under the D&W Fresh
Markets, Family Fare, Felpausch Foods, Glen’s Markets and VG’s Food and Pharmacy
banners.
Discussion Questions: Do you see Spartan Stores making a major acquisition(s)
outside of Michigan? What targets do you think are most likely to be acquired?
Do you think Spartan will eventually move away from its wholesaling business
to concentrate primarily on its own retail operations?
I don’t see Spartan moving away from wholesaling. They have a nice customer base in Michigan. Memories are short in this business. Spartan bought the Food Town stores in Ohio and it nearly bankrupted them. At the time, they were making the same bold statements about expanding outside of Michigan. Maybe they have finally learned that when you acquire stores, you need to put the ego away and accept the fact sales will go down. Marsh and Roundy’s have had their papers on the street for some time now. Even though they are available does not mean they will make good acquisitions. Marsh would probably end up being another Food Town type fiasco. Roundy’s might be too big to swallow.
There are still plenty of small store groups in Michigan and northern Indiana that could be acquired. We all know who they are but they are sensitive to being mentioned in this forum.
I guess I’d prefer to think more in terms of Spartan making strategic–as opposed to dramatic acquisitions. If that’s the case, I’d say the answer is “yes.”
As to “moving away” from being a wholesaler, I have to say I find the traditional understanding of retailer and wholesaler to be outdated and increasingly less and less useful. Wholesaling–and retailing–are evolving to address the needs of constantly changing markets and, in the process, many traditional roles and functions are getting blurred.
In this context, do I think Spartan is evolving? What option do they have?
Evolution happens! “While Darwinian Man, though well-behaved, at best is only a monkey shaved.”
Spartan will expand cautiously and evolve into those rivers of opportunity that open up but Spartan will stay close to its roots in Michigan and serving capable and well-shaved regional operators.
Why not? Others have tried and been successful. I have the sense Spartan knows what they are doing and have a strategic plan in place. If they can work the plan, they will be successful. If they find the plan is not workable; they will revisit and make the decision to proceed in another direction or back out and continue to be successful in the existing markets.
There will be small opportunities to pick up some good locations with poor operations but Spartan is in the unenviable position of being in a depressed state with poor growth. They are forced to look for opportunities outside of Michigan just as Wal-Mart is forced to look outside the US. Unfortunately the contiguous areas are not much better. Spartan should perhaps consider growing blueberries.
If they can make it in Michigan these days, with the economy there, I’d say you might as well take a shot at growing outside of the state. (On the other hand, with that name, they might avoid Ann Arbor, Columbus, and South Bend!)