C.A. Fortune Newsletter- January/February 2018

Newsletter January/February 2018 Volume 6 - Issue 1

C.A. Fortune Announcements Vol. 6 - Issue 1 Inside This Issue CAF Announcements 2 Distributor News 3-4 Industry News 4-7 Consumer Trends 8-11 Retailer News 11-18 Shows & Events 19

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C.A. Fortune joins forces with consumer products brand incubator BUILD In 2017, C.A. Fortune managed to create the best of both worlds by finalizing a coast-to-coast solution for client brands and retail customers while maintaining the intimate, boutique service model that built its brand. Now able to scale and serve the entire United States, C.A. Fortune is looking ahead. The privately held agency, is launching 2018 by joining forces with BUILD, a national consumer products brand incubator, based in Minneapolis.

With an eye toward growth, Tyler Lowell, Managing Partner of C.A. Fortune, said, “the timing of identifying emergent brands in the natural sector is ideal as industry experts expect record growth in 2018”. Primed to outperform the competition in almost every category - including dairy, bakery, snacks and ready meals, these brands are gaining ground because they offer authenticity, a connection to local growers, the promise of healthy ingredients or a quirky story, according to PwC’s most recent Consumer Packaged Goods Trends.

“Our latest transaction with BUILD represents the continuation of our vision in building out the nation’s leading consumer products service firm, with direct focus on lifestyle/better-for-you offerings,” said Lowell. “Following the completion and full integration of our national sales agency last year, adding BUILD’s capabilities to the C.A. Fortune family of companies enables us to have a dedicated team solely focused on identifying emerging brands in the industry - and ultimately providing a turn-key solution for our clients, from brand incubation, client development, sales management, marketing and insights, retail services and more.”

The transaction closed on February 1, 2018; BUILD will continue to operate independently, wholly owned by C.A. Fortune. Ali Shouman launched BUILD in 2012, along with his brother and business partner Hassan Shouman, and will run the new business unit, with a vision of offering emerging brands a unique suite of services they struggled receiving from other competitors. The agency is now one of the top brand incubation organizations in the country, with a range of services and many of the fastest growing brands in the industry.

“At BUILD, we help solve some of the pitfalls in building a business. We play a value-added leadership role in assisting clients to scale to the next level toward a variety of long-term goals - whether it’s to attract investors, expand product offerings or simply to move product off shelf by aligning our clients with the top sales agency in the country,” said Shouman. “Joining the C.A. Fortune team now enables us to provide a turn-key deliverable for our current and future clients. The privately held culture C.A. Fortune embodies - and ultimately what is portrayed in the service they provide their client partners, was the most compelling aspect of why we made the move.”

Distributor News KeHE’s 2018 Summer Selling Show Delivers New Products & Hot Seasonal Items KeHE welcomed nearly 4,000 industry professionals to the 2018 Summer Selling Show in Atlanta on February 6-7th. The Georgia World Congress Center was buzzing with activity as retailers, vendors and brokers surveyed the best natural & organic, specialty and fresh summer products from approximately 700 exhibiting companies.

“We are thrilled by the growth of the Summer Selling Show,” said Brandon Barnholt, President and CEO, KeHE. “KeHE’s Summer Selling Show is a trusted resource for our customers, who can count on finding the hottest deals from new and established brands as well as exciting marketplaces of innovative new products.”

New for 2018 was the Health & Wellness Marketplace, where attendees explored the latest products encouraging healthy living, and the International Bazaar, featuring the hottest offerings from around the world.

The Fresh Pavilion was another hot spot for show attendees interested in the latest offerings for bulk/foodservice and retail deli, bakery, cheese and perimeter departments. They also explored items from more than 150 companies featured in the New Product Showcase. Retailers cast their votes for the top items in the showcase in seven categories. The 2018 winners are: • Best of Show – Mad Dog & Merrill Brand • Best Packaging – Maya Kaimal • Best Mission Based Product – Kize Concepts Inc. • Best Organic Food/Beverage Product – Nooma • Best Center Store Product – Simple Mills • Best Fresh/Frozen Product – Cali’flour Foods • Best Healthy Living Product – Stoneworks by GrabGreen KeHE also debuted the newest partners in its CAREtrade™ initiative, which supports businesses that advance a higher purpose. The five new partners for this year are Dignity Coconuts, Mavuno Harvest, Native American Natural Foods, The Real Co. and Tony’s Chocolonely.

Thanks in part to the traffic to the KeHE Cares™ booth, donations to several charitable organizations increased by 40 percent this year. Show attendees received a wooden token to drop into a jar for one of five organizations represented. For each token placed in its jar, the organization received a $5 donation from KeHE Cares™. This year, $12,075 will be donated to the selected charities.

KeHE and its supplier partners also donated more than 41,000 pounds of food products to Atlanta Community Food Bank following the show.

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Distributor News Lipari Foods Continues Expansion of Specialty Offerings with Proposed Acquisition of Ohio-Based Leo A. Dick & Sons Co.

Lipari Foods, a leading Midwest food distributor based in Warren, Michigan, has reached an agreement in principle to acquire the specialty and gourmet business of Leo A. Dick & Sons Co. of Canton, Ohio. The acquisition will strengthen Lipari’s existing specialty grocery product portfolio which includes a broad range of natural, organic and gluten-free foods. Mr. Leo A. Dick, the president of Leo A. Dick & Sons, and Mr. Lawrence J. Dick, the Vice President of Leo A. Dick & Sons, will join Lipari’s specialty food division.

The addition of Leo A. Dick & Sons follows Lipari’s 2015 acquisition of Wisconsin-based Soderholm Wholesale Foods, which also boasted an extensive specialty grocery product line. The acquisition will strengthen Lipari’s strategic position of being one of the leading “perimeter of the store and specialty” wholesale food distributors in the US. “Our customers continue to bring more natural, organic and specialty products into their stores in order to meet the needs of today’s consumer,” says Lipari Foods President/CEO, Thom Lipari. “With the acquisition of Leo A. Dick & Sons, we will continue to deliver high quality product solutions to our customer base.”

“I’m thrilled to have the opportunity to partner with one of our industry’s leaders. I look forward to bringing our extensive capabilities and a lifetime of experience in specialty food distribution to support Lipari Foods. This will benefit our current customers by increasing our product offering more than tenfold and enable Lipari Foods to represent a broader and more innovative product selection,” says Leo Dick, whose grandfather founded the business nearly a century ago.

The acquisition is subject to completion of definitive documentation and satisfaction of customary closing conditions, and is expected to occur in the next several weeks.

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Industry News Are Cashiers’ Days Numbered?

A grocery shopping experience almost completely devoid of human interaction is just over the horizon, and it could be just what supermarkets need to prosper. Rising labor costs and increasingly intense competition are driving grocery purveyors, including Wal-Mart, Amazon.com, and more recently Kroger, to venture into a world without cashiers.

Get up and go Amazon really gave the idea a jump-start when it opened its first Amazon Go store for employees in 2016. On the shelves at Amazon Go are food items including ready-to-eat meals, grocery staples, and meal kits. Using a mobile app that’s activated upon entering the store, the customer picks up items and adds them to their cart just as they normally would. continues next page...

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Industry News Are Cashiers’ Days Numbered? cont...

However, rather than having to go to a register to tally the total, an Amazon app keeps a running count, and when the customer leaves the store, the app totals the purchase, charges the customer’s Amazon account, and sends the shopper a receipt. Amazon calls it Just Walk Out technology. So far, the company continues to test the concept.

Now Wal-Mart is reportedly working on a similar concept. Recode reports Wal-Mart’s prototype is dubbed Project Kepler and uses the same type of “computer vision” and machine learning technology that will eliminate the need for cashiers. Without the high cost of labor, profits can fall straight to the bottom line.

Same goal, different path Kroger’s, the largest supermarket chain in the U.S., plans to expand its Scan, Bag, Go technology to 400 stores this year, making its effort more widespread than Amazon Go and similar technology currently available at a handful of Wal-Mart and Sam’s Club stores.

Using either an app downloaded to a smartphone or a scanner provided by the store, a Kroger’s customer scans items he’s placing in his cart as he walks around the store. At checkout, he logs the scanner or his phone into the register and pays for his groceries before exiting.

As previously noted, a number of supermarkets already have this technology in place, including Wal-Mart, but it’s not nearly as widespread or ambitious as Kroger’s efforts. Though Wal-Mart recently said it planned to implement the technology at an additional 100 stores.

Coupled with online grocery shopping, whether the customer picks it up or has it delivered to the house, the need for cashiers is rapidly evaporating.

Rise of the machines We’re seeing it in other industries, too, such as restaurants that are installing self-serve kiosks in greater numbers.

From fast-food chains like McDonald’s and Wendy’s to fast-casual outlets like Shake Shack, as workers have demanded dramatically higher wages for performing menial tasks, they have simultaneously priced themselves out of the market, and we’re seeing more computers and robots replacing them.

Labor is one of Wal-Mart’s biggest expenses, and with some 1.4 million U.S. employees, it needs to contend with rising minimum wage rates. Some 18 states and 20 cities hiked the legal minimum wage on January 1st, so in a bid to stay above those levels, retailers like Wal-Mart are forced to raise their base wages even higher. It’s an unsustainable cycle that will push more employers to seek out alternatives for unskilled workers.

Even as Wal-Mart recently announced a raise in its minimum starting wage, it also said it was closing 69 Sam’s Club stores (though it will try to find positions for everyone).

While labor costs were not the only reason for the Sam’s Club move, and maybe not even the primary one, it still entered into the equation, and as technology improves it will enable retailers like Wal-Mart, Amazon.com, and Kroger to more easily eliminate positions that their higher costs can’t justify. Cashiers may soon be more rare than paper grocery bags.

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Industry News Beloved Organic Brands Make Unprecedented Protest: Stop Attacking Organic

On January16th, the nation’s organic food movement, representing dozens of brands, thousands of organic farmers and millions of organic consumers, as well as retailers, certifiers, and organizations, published an open letter in the Washington Post. The cosigners are demanding that the USDA stop interfering with the public process that has created clear standards for animal welfare in organic food production.

In a full-page paid advertisement the group asks USDA Sec. Sonny Perdue to reinstate the Organic Livestock and Poultry Practices rule that was issued in January 2017, a rule that has the overwhelming support of the organic industry and the American people. The OLPP clarifies and codifies animal welfare practices that give consumers what they expect when it comes to organic food choices. The OLPP is the result of a lawful 20-year process with bipartisan support. That is now being subverted by political interference and the influence of industrial agriculture.

“We have seen industrial agriculture fight against animal welfare again and again, whether it is cage-free or ending gestation crates,” said George Siemon, CEO of Organic Valley, who convened the cosigners. “Now, when organic wants consistent animal welfare standards supported by a strong public process, industrial agriculture’s fears are trumping. They don’t want any expectations for animal welfare in agriculture, period. This is a clear case where USDA replaces established process with the dictate of industrial livestock to stop any animal welfare rules living at USDA—purely political and against organic.”

Siemon continued, “Organic belongs to the people, and the law says so. The organic seal belongs to the farmers, handlers, processors, and consumers who choose organic for their families. It is a system that is supported by a stakeholder process, that provides a lifeline to family farms, and that allows consumers to buy food that meets a higher standard for animal welfare.”

Cosigners include: Organic Valley, Stonyfield Farms, Horizon Organic, Whole Foods Market, National Co+Op Grocers, Applegate, Vital Farms, Pete and Gerry’s Organic Eggs, Maple Hill Creamery, National Farmers Union, Dr. Bronner’s, The Humane Society of the United States, Organic Trade Association, Rodale Institute, Environmental Working Group, Oregon Tilth, Farm Aid, Union of Concerned Scientists, Center for Science in the Public Interest, National Family Farm Coalition, Consumer Federation of America, National Sustainable Agriculture Coalition, National Organic Coalition, Organic Farming Research Foundation, Natural Resources Defense Council, Accredited Certifiers Association, and others.

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Industry News The Best Grocery Store in Every State for 2018 Most of us rely on grocery stores for our daily needs. They are the places where you can find everything you might need to live from fruits and vegetables to dried goods, meats, fish, laundry detergents, paper towels, candles, shampoo and so much more. They are hubs that house both essential and non-essential products that help make daily life that much easier and allow customers to buy everything at once rather than forcing people to make multiple trips — assuming you have your shopping list handy!

But how in the world can you determine which grocery store is the best in every state? The truth is that you cannot, at least not definitively. For this story we scoured the internet for as much information as we could find, cross-referencing other best-of lists that have previously been written as well as reviews on Google, Yelp, Foursquare, and Facebook we analyzed local polls, social media posts, and check-ins. We also conducted informal polls weighing concerns and praise about price, quality of products, and customer service, as well as store cleanliness. *You’ll find that independently owned and locally founded stores often won out over the big chains like Kroger or Whole Foods.

• Alabama - Renfroe’s Market • Alaska - Safeway • Arizona - Sprouts Market • Arkansas - Edwards Food Giant • California - Trader Joes • Colorado - King Soopers • Connecticut - Stew Leonard’s • Delaware - Janssen’s Market • Florida - Publix • Georgia - Whole Foods • Hawaii - Don Quixote Honolulu • Idaho - Natural Grocers • Illinois - Mariano’s • Indiana - Fresh Market • Iowa - Hy-Vee • Kansas - Roeland Park Price Chopper • Kentucky - Lucky’s Market • Louisiana - Rouses • Maine - Hannaford Brothers Company • Maryland - MOM’s Organic Market • Massachusetts - Market Basket • Michigan - Meijer • Minnesota - Cub Foods • Mississippi - Rainbow Co-op • Missouri - Dierberg’s • Montana - Albertson’s

• Nebraska - Open Harvest Grocery Co-op • Nevada - WinCo Foods • New Hampshire - Market Basket • New Jersey - King’s Super Markets • New Mexico - La Montanita Food Co-op Market Nob Hill • New York - Wegmans • North Carolina - Harris Teeter • North Dakota - Hormbacher’s Express • Ohio - Jungle Jim’s International Market • Oklahoma - Crest Foods • Oregon - New Seasons Market Seven Corners • Pennsylvania - Giant Food Stores • Rhode Island - Eastside Marketplace • South Carolina - Bi-Lo • South Dakota - Lynn’s Dakotamart • Tennessee - The Turnip Trucks • Texas - H-E-B • Utah - Harmon’s • Vermont - Shaw’s • Virginia - Ellwood Thompson • Washington - PCC Market • West Virginia - Capital Market • Wisconsin - Woodman’s Market • Wyoming - King Soopers

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Consumer Trends Food Trends Report: Predictions for 2018 The industry is buzzing with predictions about the future of food in 2018. While no one has a crystal ball to know what the new year might bring, we do have data and reports from industry experts making their best educated guesses.

From personalized nutrition to a boom in botanicals, here are the seven trends for the natural food industry in 2018, predicted by industry analysts and some of CPG’s biggest players.

1. Personalized Nutrition Food is becoming as varied as the consumers buying it. Brands are focusing on health-focused, niche offerings that meet individual needs rather than selling mass-market products, according to data from meal kit provider Sun Basket. The shift is a response to consumers who are less focused on fad diets and more focused on searching for foods that make them feel energized, improve their digestion and reduce their inflammation.

“The movement toward clean eating reflects a change in how consumers view food,” Jenna Bell, SVP of Pollock Communications, noted in the agency’s trend report. “Consumers are searching for nutrition information and equating diet with overall well-being.”

Meal kits are also playing to personalization. Meal kit delivery services reached $5 billion in sales, according to Packaged Facts. The growth is a result of consumers seeking greater convenience in the fresh, home-cooked foods that are adjustable to their own tastes.

2. Strategizing for Online Online grocery sales are expected to reach $41.7 billion by 2022, according to Packaged Facts. To ensure that they don’t get left behind, industry players are working to secure competitive advantages in this online market. This year alone, Amazon leveraged its Prime Membership to entice customers to buy groceries online with its acquisition of Whole Foods Market, Walmart announced the expansion of its curbside grocery pickup service to nearly half of its stores by the end of 2018, and Target acquired online same-day delivery platform Shipt in December to give itself the infrastructure and operational capacity to grow its market share in the online grocery channel.

As retailers make strategic shifts toward e-commerce, brands are also evaluating their approach to packaging and how its design translates to an online marketplace. Mintel noted this could give brands the opportunity to develop packaging that transports better and addresses sustainability issues related to shipping.

3. Alternative Eating From plant-based meats to insect-ground flours, alternative options seem less like a trend and more like the future of food, according to the Campbell Soup Company’s 2018 trend predictions. As consumer interest in plant-based eating continues to grow, the demand for proteins and dairy products not made from animals is also increasing. KIND named dairy-free milks as one of its top foods for 2018, and Sun Basket predicted that nuts will continue to gain popularity as a source for these products. continues next page...

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Consumer Trends Food Trends Report: Predictions for 2018 cont...

4. Global Flavors Spice leader McCormick released its flavor forecast for 2018, which highlighted the adventurous and interactive nature of how people are eating. The brand predicted that consumers will continue to gravitate toward Asian-inspired flavors but also “hand-held fusions” that are reminiscent of global street food. Bold broths and hot pots are also expected to boom in the new year.

“For 2018, look to new eating experiences that invite sharing, are globally inspired and pack a flavorful punch,” McCormick Executive Chef Kevan Vetter said in a statement. “A steamy pot of spiced broth is the centerpiece of an Asian hot pot cooking party.

5. Organic Beyond Natural Clean label is currently king in the food industry, and one way a brand can illustrate that commitment to consumers — especially those beyond the natural channel — is through the USDA Organic seal.

Packaged Facts noted that from 2012 to 2016, U.S. retail sales for natural and organic foods rose at a compact annual gross rate of seven percent, and predicted that by 2021, the growth will hit double digits. With so much potential capital and growth, organic offerings are expected to continue to grow within supermarkets and mass retailers from Costco to Walmart.

Even ahead of non-GMO, Natural Grocers agreed that organic will continue to be the most important certification for brands in 2018 because consumers understand it to be better for the environment, human health and the economy in comparison to other third-party certifications.

6. The Power of Probiotics Consumers are going with their gut in the new year. A 2017 national consumer survey found approximately a quarter of U.S. adults seek out foods and beverages with high amounts of probiotics.

Pollock Communications’ annual end-of-year survey predicted that foods with these naturally occurring live cultures — i.e. fermented foods such as yogurt, kefir, kombucha and sauerkraut — bumped seeds as the No. 1 superfood for 2018.

Brands making everything from cookies to cereal are also adding probiotics into their offerings. Leading probiotic supplier Ganaden, which was acquired by Irish food and ingredient conglomerate the Kerry Group, alone launched more than 350 new products fortified with GanedenBC30 in 2017.

7. Blooming Botanicals In 2018, interest in botanicals is expected to bloom, according to Natural Grocers. From mood boosting to brain building powers, botanicals such as green tea, ashwagandha, lions mane, reishi and holy basil are predicted to be making appearances on ingredient labels more frequently. KIND also predicted that shopper’s interest in turmeric won’t be waning anytime soon, either.

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Consumer Trends Trend Watch: Filipino Flavors on the Horizon Food innovation is running at an all-time high, and the Specialty Food Association’s Trendspotter Panel has named what they believe will be hot trends in 2018. The panel draws perspectives from retail, food service, strategic marketing and culinary education. While many of the trends speak to health and better-for-you choices, consumer demand for deeper flavor exploration is still strong, as evidenced by their growing interest in Filipino foods, one of the top trends forecast for 2018.

Often overshadowed by other Asian cuisines, the foods of the Philippines have not yet captured a broad U.S. audience. That is shifting, as American palates have become more sophisticated and attuned to the complex flavors and bitter or sour notes of Filipino dishes. Chefs and tastemakers are taking to this cuisine that infuses Asian and Latin flavors and pairs well with meat and poultry.

Filipino flavors can be quite complex. They tend to be a layering of bold flavors with fresh ingredients, which in the end, meld together to form a unique profile. Filipino food is influenced by Chinese, Malaysian, Spanish and American culinary traditions, thus a wide range of spices is often prominent. Flavors in Filipino dishes are layered and rely heavily on vegetables and fruits to build their complexity. Pineapple, coconut, jackfruit, palm nuts, tomatoes and bananas have become some of the most widely used flavoring ingredients with cassava, potatoes, yams and rice the preferred starches. Chilies are sometimes used, but not as heavily as in other parts of Asia. For the most part, Filipino food is considered a no- to mild-heat cuisine.

Animal proteins are the primary component of many Filipino dishes. The fusion of fruits, vegetables, herbs and spices is balanced against hearty roasted, grilled and slow-cooked meats. Some resemble foods common to international American cuisine, while some local and regional specialties might be considered “extreme ethnic.”

One of the most popular dishes is adobo. It is a cooking process as well as a flavor profile, as it involves marinating protein in a sauce based on vinegar and seasonings such as soy sauce, black pepper, garlic and bay leaves. The protein is then browned in oil and transferred back to the marinade for a lengthy simmering. The sauce gets reduced while the protein tenderizes. The stew-like mixture is typically served over a bed of rice or with another traditional starch.

Here are some other Filipino dishes to spark innovation: • Bistek is flattened sirloin coated in seasoned breadcrumbs and fried. It is often topped with grilled onions and soy sauce.

• Kaldereta is a traditional goat meat stew, but has evolved over time to be made with beef, chicken or pork. The meat gets stewed with vegetables, such as bell peppers, olives and tomatoes, and liver paste. The latter contributes a metallic iron taste intended to counter the grassy flavor of goat. The stew is often finished with annatto seed, which gives it a vivid reddish-orange color without adding much flavor.

• Kare-kare is another meaty stew. This specialty includes oxtail braised in a thick and savory peanut sauce.

Organ meats as well as hocks and feet can also be added. Vegetables are quite varied and often include greens, cabbage and eggplant. Additional flavor comes from ground roasted peanuts, onions and garlic. continues next page...

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Consumer Trends Trend Watch: Filipino Flavors on the Horizon cont...

• Lumpia is a spring roll made with a thin crepe called the lumpia wrapper. It contains a mixture of chopped vegetables – typically cabbage, carrots, green beans and leeks – along with minced meat. Pork is the most common protein used in lumpia, but beef and poultry are also used. The rolls are fried and served crispy with dipping sauces. The sauces provide an opportunity to add additional layers of flavor.

• Lechón is suckling pig or chicken that is spit roasted after being rubbed or marinated with a variety of spices.

This is considered a Filipino delicacy and starting to show up in high-end US restaurants.

• Sisig is a spicy dish made from parts of a pig’s head and liver. The meat first marinades in vinegar to tenderize, then it is seasoned with varied chili peppers and simmered for many hours. This is one of the hotter dishes in Filipino cuisine.

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Retailer News Albertsons Debuts New C-Store Concept Albertsons has opened an upgraded fuel center and convenience store concept down the street from its headquarters in Boise, Idaho, that includes prepared deli foods, cut produce and the chain’s first drive-thru window.

The move comes six years after former Albertsons parent Supervalu decided to divest most of Albertsons’ fuel center and c-store operations, selling 107 of its 134 fuel centers to various operators, including all of its fuel centers in the Boise market.

The new Albertsons Express store “is currently the only one of its kind,” said Kathy Holland, a spokeswoman for Albertsons. Both Albertsons and sister banner Safeway operate fuel centers with c-stores at other locations, but the offerings at the new Boise Albertsons Express are unique.

In addition to fresh-cut fruits and vegetables, the store also features fresh-made deli sandwiches and salads from the service deli of the adjacent full-size Albertsons location, a selection of private label grocery items, a large wine selection and a walk-in beer cave. Holland described the décor as “modern and classy.”

According to a report in the Idaho Statesman, the 3,100-square-foot store also includes a digital soda machine, an espresso coffee station and two varieties of cold-brew coffee.

The fuel center is also unique. It offers five different grades of fuel, and it is the first in the company to offer ethanol-free unleaded fuel, according to Holland. It is also the only fuel center in Idaho to feature credit card chip-based technology at the pump. continues next page...

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Retailer News Albertsons Debuts New C-Store Concept cont...

The store is located at the site of a former Pizza Hut, and is adjacent to an Albertsons flagship location at the Southshore Shopping Center.

“As our company grows and expands, we will review opportunities to open new fuel center/convenience stores similar to this one,” said Holland.

Albertsons now operates three fuel centers in Idaho, according to the Statesman, following its acquisition of the Paul’s Market chain in early 2016.

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Albertsons, Rite Aid Deal Creates U.S. Supermarket and Health Care Giant Supermarket giant Albertsons is buying part of Rite Aid, the nation’s third-largest pharmacy chain, as the companies try to navigate sweeping shifts in the food and health care industries.

Rite Aid and Albertsons, the private-equity backed company that operates Safeway and several other grocery chains, said the deal would create a company with expected 2018 revenue of $83 billion and potential annual earnings of $3.7 billion before interest, taxes, depreciation and amortization.

The deal is aimed at sparking Rite Aid’s expansion as the company competes with retailing giant Amazon, which is eyeing a potential entry into health care, as well as Walmart.

For Albertsons, the deal enables the company to go public after being controlled since 2005 by private equity giant Cerberus Capital Management.

Albertsons previously weighed an initial public offering but shelved the plan last year after Amazon acquired Whole Foods, several media organizations reported. However, the company updated its amended public offering filing with the Securities and Exchange Commission in November.

In all, the new company is expected to serve more than 40 million U.S. customers a week at around 4,900 locations, 4,350 pharmacy counters and 320 health clinics across the U.S. Most Albertsons pharmacies will be given the Rite Aid name, and the combined company will continue to run Rite Aid stand-alone pharmacies, the companies said.

Moody’s Vice President Mickey Chadha said the deal would give the new entity the large scale and diversified revenue base needed in the highly competitive U.S. food and drug retail environment.

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Retailer News Albertsons, Rite Aid Deal Creates U.S. Supermarket and Health Care Giant cont...

“However, drug retailing has had its own challenges with reimbursement pressure and weak front-end sales as evidenced in Rite Aid’s weak profits over the last couple of years,” he said. “Competing with much larger and more diversified drug retailers like CVS and Walgreens will be a formidable challenge.”

Current Rite Aid Chairman and CEO John Standley will become chief executive of the combined company, and Bob Miller, chairman and CEO of Albertsons, will serve as chairman of the combined board.

“The combined platform positions Rite Aid to capitalize on our pharmacy expertise and expand and enhance our pharmacy footprint,” Standley said in a statement issued with the announcement.

Miller said the new company would “enable us to even better serve the valuable pharmacy customer by providing a fully integrated one-stop shop for our customers’ food, health and wellness needs.”

Albertsons shareholders would own 70.4% to 72% of the combined company when the deal closes, while Rite Aid shareholders would own 28% to 29.6%.

Directors of both companies have approved the deal, which is expected to close early in the second half of this year, subject to approval by Rite Aid shareholders and regulatory approvals.

Rite Aid is in the process of selling 1,932 of its approximately 4,600 stores to rival Walgreen Boots Alliance. In all, 1,114 stores had been transferred as of February 8th, Rite Aid said in a recent investor announcement.

Walgreens and Rite Aid had planned a complete merger, but the federal government blocked that plan on antitrust grounds.

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Fresh Thyme Fine-Tunes Operations in 2018 Fresh Thyme is shifting its priorities heading into 2018 as the retailer slows its rate of new-store growth to ensure long-term success, CEO Chris Sherrell said.

In an interview with SN, Sherrell said the 68-store chain, based in Downers Grove, Illinois, has entered a new phase of growth that will still see it expand rapidly but also take the time to fine-tune its operations. As previously reported, Fresh Thyme is planning to open 10 new stores in 2018, versus 20 new stores that opened in 2017.

The company, which began opening its affordably priced natural and organic stores in 2014 and has quickly ramped up to 68 locations, has evolved past its “start-up” phase, Sherrell said.

“We decided to look at a different set of priorities,” said Sherrel. continues next page...

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Retailer News Fresh Thyme Fine-Tunes Operations in 2018 cont...

“Opening 10 stores [in 2018] isn’t shabby, but we decided to go back and shore up the infrastructure, get the systems in place, get the technology up to speed — we’re going to become a billion-dollar company very quickly, and we’ve got to make sure our systems are at par with that volume.”

As previously reported, Fresh Thyme bolstered its executive team with several food retailing veterans in the past year to help ensure that the right systems are in place for ongoing success, Sherrell explained. The new team will bring fresh insights and expertise to the management of the chain, he said.

“I’ve been probably doing too much for too long,” said Sherrell. “It’s kind of at a pressure point where it was time to strengthen the team, and bring in some experienced executives to help us get to that next level.”

Among the priorities that Fresh Thyme plans to focus on in 2018 are delivery and ecommerce, technology, employee training and ensuring that its 320,000-square-foot distribution center in Bolingbrook, Illinois, is “100% operational,” he said.

“We want to continue to use [the DC] as a strategic advantage,” he said, noting that the company’s new stores planned for Pennsylvania in 2018 will still be within reach of the warehouse.

“We are creating a logistical company here that will have 125 grocery stores within about 500-600 miles of our DC,” said Sherrell. “There’s not a natural or organic grocery chain in the country that has that advantage.”

If the company continues expanding further eastward, it would consider opening another warehouse, he said, but the current facility should be able to support 125-150 stores in the next three to five years.

Fresh Thyme, which is backed by supercenter operator Meijer Inc., is also exploring opportunities to expand its ecommerce capabilities, Sherrell said. Three of the chain’s stores have been offering delivery through Amazon Prime Now, which has been “a great partnership,” he said.

“We’ve learned a lot from them, and I’m sure they’ve learned a lot from us, and most likely we’ll continue with that partnership into the future,” said Sherrell, although he noted that there were still a lot of “unknowns” related to Amazon’s acquisition of Whole Foods.

Sherrell said Fresh Thyme could increase its new-store opening pace in 2019 with 15 or more new locations, and he said the company still remains on track to hit the 100-store mark in 2020.

In addition to the first two Pennsylvania stores previously announced for 2018, Fresh Thyme is also exploring other locations in the Pittsburgh area for additional sites, he said.

The company also shuttered two locations in 2017 — one in Lexington, Kentucky, and one in the Cincinnati area.

“We weren’t going to open 100-plus stores without closing a couple,” said Sherrell. “You have to prune the bushes every once in a while, and we just came to terms that we were going to focus our energy on new stores and growth, rather than continue to lose money in those stores.” continues next page...

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Retailer News Fresh Thyme Fine-Tunes Operations in 2018 cont...

The company has learned a lot about site selection, demographics, product mix and prototype design from its rapid rollout that will help refine its expansion in the future, he said.

Looking ahead, Sherrell said he has a bullish outlook for 2018 and beyond.

“Organic grocery is here to stay, and we continue to feel that we are well-positioned at a perfect time,” he said.

“There’s not much competition when it comes to this type of format in the Midwest, like there is in the South and the Southwest, so we remain encouraged, and we’re looking forward to one of the most successful years we’ve had in 2018.”

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Sprouts boosts expansion in Carolinas

Sprouts Farmers Market said it will expand to the fast-growing Charlotte market in April, followed by its first South Carolina location in June.

The moves continue the Phoenix-based chain’s aggressive push eastward, while it also continues to expand in the West, where most of its 280 stores are located. Later in 2018 the chain also plans to open its first stores in Pennsylvania and Maryland, although it has not yet disclosed specific locations.

The move into the booming Charlotte market follows the rapid expansion there during the last three years of Lakeland, Fla.-based Publix Super Markets and the entry last year of German discounter Lidl. Sprouts is planning to open in the Ballantyne area of Charlotte, an affluent area known for its boutique shopping destinations and gold course.

In recent years Publix and Austin, Texas-based Whole Foods Market have been the most active food retailers in the Charlotte market, according to a report from the local office of real estate firm CB Richard Ellis. Both Publix and Whole Foods have been anchoring some new residential and mixed-use developments as the market’s population surges, particularly in the outlying areas of the city.

“Retail growth in the Charlotte market is occurring at a rapid pace,” CBRE said in the report. “Vibrant economic expansion, population growth, solid retail leasing dynamics and strong investment returns have combined to make Charlotte one of the most sought after retail markets in the Southeast.”

The Charlotte metro has a population of more than 2.5 million and has been among the fastest-growing regions in the country. It is the country’s second largest banking center after New York City, and a hub for international travel, with the world’s sixth busiest airport.

According to the Charlotte Observer, Kroger-owned Harris Teeter, based in Matthews, N.C., grabbed the No. 1 grocery market share position in the Charlotte Market in 2016, surpassing Walmart and Food Lion, the Salisbury, N.C.-based division of Ahold Delhaize. continues next page...

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Retailer News Sprouts boosts expansion in Carolinas cont...

Publix, however, has been closing in fast. The chain has quickly grown to operate about 17 stores in the greater area, with three more listed as “coming soon” on its website. Publix grabbed 7.2% of the grocery market share in 2016 for the No. 4 position, according to the Charlotte Observer.

Lidl entered the market late last year with four locations, according to local reports.

Sprouts has been among the best performing food retailers in the past year, but one local real estate professional, who asked not to be identified, said the chain will face increasing competition as its pushes further up the East Coast, where it lacks name recognition and will face well-entrenched competitors.

“I see Whole Foods Market doing everything that Sprouts does, and more, and doing it better,” the observer said.

“They have larger stores, better selection and now better pricing.”

Sprouts opened its first North Carolina store in Raleigh last year and has a second planned for a January 10, 2019, opening in Fayetteville. The first Charlotte store is scheduled to open April 4th .

The Simpsonville, S.C., Sprouts lies between Sprouts’ more well-developed Atlanta market and its burgeoning presence in North Carolina.

In addition to the second-quarter openings planned for Charlotte and Simpsonville, Sprouts also plans to open stores in Augusta, Georgia; Sparks, Nevada; Lincoln, California; and San Diego.

Sprouts said it plans to open 30 stores in all, in 2018.

South Carolina will represent the retailer’s 16th state of operation. In addition to its East Coast expansion into Maryland and Pennsylvania, Sprouts will also open its first store in Washington state, in 2018, marking its expansion into the Pacific Northwest and bringing its state count to 19 by the end of the year.

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Whole Foods Places New Limits on Suppliers, Upsetting Small Vendors Whole Foods Markets is placing new limits on how products are sold in its stores and asking suppliers to help pay for the changes, riling some mom-and-pop vendors that have long depended on the grocer for visibility and shelf space.

The changes, outlined in an email recently sent to the company’s suppliers, are intended to save on costs and centralize operations.

They come as Whole Foods’s new owner, Amazon.com, pushes to reduce prices at the chain’s 473 stores.

Some small-business owners said they are already feeling the effect.

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Retailer News Whole Foods Places New Limits on Suppliers, Upsetting Small Vendors cont...

Valerie Gray, for instance, began selling her pasta sauce, Italian Heart’s Gourmet Foods, to the Whole Foods store in Reno, Nevada, four years ago. For years, she said, the grocer allowed her to display 108 bottles of pasta sauce at a time. A professional photograph of Gray and her husband hung from the ceiling, alongside a sign that said “Made Locally.”

But in the past month, that photo has come down, Gray said, and the shelves now accommodate just 36 bottles of sauce as the store makes room for national brands. Sales of Gray’s pasta sauce have dropped by 75 percent in the past month, she said.

“It feels like that local, personal touch is going away,” she said, adding that Whole Foods accounts for half of the company’s sales.

“It’s hard to set ourselves apart anymore in the sea of well-known national brands.”

Previously, Whole Foods allowed suppliers such as Gray to oversee their own merchandise or hire local firms to do so. But under the new rules, Whole Foods is requiring suppliers to work exclusively with Daymon, a Stamford, Conn.-based retail strategy firm, and its subsidiary, SAS Retail Services, to schedule in-store tastings, check inventory on shelves and create displays on their behalf. (Jeffrey P. Bezos, the founder and chief executive of Amazon, also owns The Washington Post.)

“For the last two years, we have been working to streamline our processes to ensure all our suppliers are supported and set up for success,” Don Clark, general vice president of purchasing for nonperishables, said in a statement.

“The changes to our in-store execution and demo programs are creating a consistent, high-quality experience that benefits both our suppliers and our customers.”

In an email obtained by The Washington Post, Clark advised suppliers that they would be required to help fund the effort.

Suppliers that sell more than $300,000 of goods annually to Whole Foods will be required to discount their products by 3 percent (for groceries) or 5 percent (for health and beauty products) to fund the new program. Local suppliers will also have to pay $110 for each four-hour product demonstration by Daymon, while national suppliers will have to pay $165. (Vendors can also continue to host demonstrations themselves, as long as they pay a scheduling fee of between $10 and $30.) Daymon did not respond to requests for comment.

“To successfully run this program, we need your financial support,” Clark wrote.

Some suppliers said the new policies put them at a disadvantage because they rely on regular, previously free three-hour demonstrations and tastings to introduce products that might be unfamiliar to shoppers.

“Right now, you can set up your table and sample away,” said Jenna Huntsberger, owner of Whisked, a District-based company that sells cookies, quiches and pies to area Whole Foods stores. “So many small brands have gotten their start like that, and shoppers love that they can walk by and meet the person who made their food.” continues next page...

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Retailer News Whole Foods Places New Limits on Suppliers, Upsetting Small Vendors cont...

The changes are also likely to affect a cottage industry of companies that act as liaisons between local suppliers and sellers such as Whole Foods.

Sweet Leenie, a Baltimore-based firm founded by former Whole Foods employee Kathleen Overman, specializes in hosting product demonstrations for companies such as gelato maker Dolcezza and Shenandoah Spice Company. Regular tastings at Whole Foods, Overman said, make up more than 80 percent of her business.

“Whole Foods has done a great job of creating a community of local food producers and brands,” she said. “Our job has always been to advocate for those small businesses, but with these new rules, companies like mine will no longer be useful.”

Since taking over the grocery chain in August, Amazon has looked for ways to combine the power of two well-known brands. Whole Foods stores now sell Amazon Echo devices, and Amazon has added more than 1,000 Whole Foods private-label products on its website.

It is also working to combine sales systems to eventually provide discounts to Amazon Prime members. There are already signs the efforts are paying off: Amazon sold $10 million in Whole Foods-branded products in the first four months following the merger, according to analytics firm One Click Retail.

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Tops to File For Chapter 11 Bankruptcy Tops Markets has announced plans to financially restructure its business under Chapter 11 Bankruptcy.

In a statement released to 2 On Your Side, Tops Markets says there will be no impact on day-to-day operations at its stores in Western New York, Northern Pennsylvania and Vermont.

“We believe the financing that we received from our noteholders is a vote of confidence in our business. Our operations are strong and we have an outstanding network of stores and a talented team to support them. We are now undertaking a financial restructuring, through which we expect to substantially reduce our debt and achieve long-term financial flexibility,” said Frank Curci, Chief Executive Officer of Tops. “This will enable us to invest further in our stores, create an even more exceptional shopping experience for our customers and compete more effectively in today’s highly competitive and evolving market.”

Tops has also set up a website for additional questions about the company’s financial restructuring.

Tops Markets has filed several court motions to continue to support its business operations during its restructuring process, including continuing to pay employee wages and benefits without interruption.

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