Spartan to Buy D&W Food Centers
By George Anderson
Spartan Stores has entered into an agreement to purchase “certain operating assets” of D&W Food Centers.
Craig Sturken, chairman, chief executive officer and president of Spartan Stores, said in a released statement, “We are very pleased to bring together these two outstanding retail grocery operators. This transaction is a component of our previously stated business strategy, which is to grow our business through opportunistic acquisitions of other grocery operators that are adjacent to or in markets where we operate today.”
The deal, pending due diligence, will give Spartan control of D&W’s 20 grocery stores operating in Western Michigan.
“This transaction will significantly strengthen our competitive retail market position by expanding our services to certain communities and trade areas not currently served by our existing store base. D&W Food Centers is a very well respected name in western Michigan grocery retailing known for its fresh and unique product offerings. This combination presents an outstanding opportunity to pool the talents and resources of both organizations to benefit consumers in the West Michigan market. Our distribution customers, associates and the communities where we operate will all benefit from the economies of scale created from this transaction,” said Mr. Sturken.
When the deal is closed, Spartan estimates it will add $200 million to the company’s sales line.
“This business combination provides significant opportunities to improve retail sales growth and operating efficiencies. These opportunities include reintroducing our award winning ‘Spartan’ private label products to D&W Food Center customers, giving them the choice to purchase these sought after products in their local D&W Food Center stores. This transaction will also give us the opportunity to implement elements of our successful category management practices, to improve distribution efficiencies through higher sales volumes and to strengthen our buying power, which will benefit all of our customers,” said Mr. Sturken.
Moderator’s Comment: What will Spartan Stores need to do to make the deal for D&W Food Centers work? Do you see other opportunities for Spartan that
match the company’s stated strategy of growth “through opportunistic acquisitions of other grocery operators that are adjacent to or in markets” where it operates?
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George Anderson – Moderator
Good call omnisuperstore. I checked the store list and the old beaters have been closed or sold. The Grand Rapids stores do look good and I think a few existing Spartan stores will close to consolidate into nearby D&Ws – i.e. in Cascade where Prevo’s does poorly and D&W does great. Kalamazoo will be a nice carrot on a stick for getting other retailers to come on board. Muskegon looks scary with Wal-Mart opening across the street. D&W has built a couple of palaces, like the store in Holland and on the south side of Kalamazoo, but I don’t think those stores ever did the volume they wanted. Keep in mind, D&W sold these stores for a reason. Cool and innovative designs often do not lead to improved sales. (Fresh Brands in Wisconsin learned this the hard way.) And Spartan has the most to gain by buying them.
D&W has always been an innovator around the perimeter. The acquisition will be one more step in making Spartan a player in this world of consolidation!
I believe Spartan has been watching D&W ever since they let Supervalu step in and do the wholesale business. They knew they let a good operation go and now, with Spartan in control, their business will thrive. I worked on two grocery store designs for Spartan’s Harding’s Market. Spartan pretty much does the corporate store planning and then lets the individual operators do their own store decor, merchandising, etc. Spartan does NOT have a Federated Department Store attitude of taking away customers’ favorite nameplates and replacing them with one brand. Spartan believes in regionalization, so that’s why I believe they are a good operation, especially at the tough conservative West Michigan consumer level.
I lived in Grand Rapids for 3 years after college as a designer for an architectural office that supported Meijer. As much as I liked to shop at Meijer, it was nice to run to a D&W for last minute items and specialty beers and gourmet items. D&W is highly, highly, innovative when it comes to store design and layout. Their newly remodeled store in Gaslight Village in uppity East Grand Rapids uses parabolic 2X2 lighting, recessed downlights, wood fixtures, wood flooring, interesting vinyl tile designs and, overall, the store has an upscale department store feel. It’s always buzzing with customers. And with all that said, their prices are not all that terribly high, even with Meijer in their backyard.
In fact, I believe that Safeway should take a hard, lean look at D&W in their lifestyle store design. D&W is doing way more design and innovations than any of the other national chains. This so called “small-town” chain has Starbucks in its grocery locations…..much of what you would find in a suburban Chicago grocery store, but better! I would compare them to Marsh, but with better IT and logistics. Living in Chicago, I really miss my local D&W experience.
David:
I don’t know which D&W’s you have been in, but none of the D&W’s I have been in around Grand Rapids in the last year look tired or old in the least. Are you sure you weren’t at another store? The D&W’s stores are extremely innovative with graphics and product selection. Sir, if you want to see tired, please take a look at the Dominick’s stores in Chicago…..D&W is anything but tired!
I’m not real certain this deal will really help Spartan retail but it should improve wholesale. D&W has been on the decline for the past few years ever since Wal-Mart and Meijer started going toe-to-toe in southwest Michigan. Historically, D&W has run some nice stores and built a strong pharmacy business. Lately, the D&W stores have looked tired and the volumes appear to be weak in markets that have both Meijer and Wal-Mart Supercenters.
Spartan has recently re-evaluated the Grand Rapids market so I think we will see some consolidation and store closings where D&W is close to a Spartan corporate store. Perhaps even see Spartan sell some of the D&W stores to other multi-store operators (supplied by competitors) in order to take more business from Nash Finch and other wholesalers.
These kinds of opportunities will become commonplace for Spartan as their multi-store operators continue to weaken under the thumbs of Wal-Mart and Meijer.
Now that Nash Finch has announced that the Roundy’s warehouse purchase has not worked out as planned, there might by an opportunity for Spartan to take over the old Roundy’s warehouses that Nash Finch bought and have fail to get on track.
Whatever happens, there is no shortage of opportunities for Spartan. Also don’t be surprised if the ghost of Farmer Jack reappears after Christmas.
Spartan has earned the reputation with some of its independent affiliates that corporate stores are served first, and the independents get the leavings, regardless of the length of time the affiliation has existed. When a D&W store is in the same market area as a Spartan affiliate, which one do you think will receive priority service? One of the affiliates was so frustrated with regular product outages during holiday weeks that they completely changed produce companies. This situation continues to occur in the grocery and meat department shipments. Is the purchase of D&W a signal to the independent affiliates to begin researching new warehouses?