C.A. Fortune Newsletter- March 2018 by C.A. Fortune

Newsletter March 2018 Volume 6 - Issue 2

C.A. Fortune Announcements Vol. 6 - Issue 2 Inside This Issue CAF Announcements 2 Distributor News 3-4 Industry News 4-8 Consumer Trends 8-11 Retailer News 11-21 Shows & Events 22

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Distributor News SuperValu investing $69M in return to Harrisburg, PA. distribution hub SuperValu Inc., one of the largest grocery wholesalers and retailers in the country, is planning to spend about $69 million in a return to Harrisburg, PA., where it will operate a wholesale distribution center to serve its Northeast customers. The plan, announced March 23rd, by Gov. Tom Wolf, brings SuperValu back to 3900 Industrial Road. The company announced plans in 2008 to close the Harrisburg facility by 2010 as it consolidated distribution into a Lancaster County facility. A decade later, SuperValu, which has $16 billion in annual sales, is growing again and needs more space — and people. It plans to hire at least 350 people over the next three years for the Harrisburg facility. The Minnesota-based company distributes groceries to more than 3,300 stores across the country, including more than 3,100 independent and franchise grocers. SuperValu also owns more than 200 retail grocery stores operating under five retail banners: Cub Foods, Hornbacher’s, Shop ‘N Save, Shoppers and Farm Fresh. SuperValu spent nearly $37.1 million last year to buy the 750,000-square-foot distribution facility in Harrisburg, according to Dauphin County deed records. The company sold the property for $30.3 million in 2008 to a private-equity firm. After buying it back in 2017, the company began preparing the facility for shipping operations. That renovation work has been completed and hiring has begun for some of the 350 jobs, said Mike Wilken, a SuperValu spokesman. “Shipping for certain departments has already begun with additional departments coming online throughout the year,” Wilken said. SuperValu has received funding from the state Department of Community and Economic Development that includes a $740,000 Pennsylvania First grant and $166,500 in WEDnetPA funding for employee training. The Governor’s Action Team, a group of economic development professionals who report to the governor and work with businesses that are considering locating or expanding in Pennsylvania, facilitated the deal. “This speaks to the strength of the Harrisburg market as a distribution hub,” said Dave Black, president and CEO of the Harrisburg Regional Chamber and Capital Region Economic Development Corp. This site, which sits off Interstate 81 and adjacent to the Norfolk Southern intermodal railyard, is a logical place for grocery distribution, Black said. The midstate highway system, which includes I-81, makes it easy for companies to quickly reach most major cities along the East Coast. Black also said this decision by SuperValu to come back to Harrisburg speaks to the ongoing economic recovery. Ten years ago, many companies were cutting back operations because of the financial collapse. Now many businesses are spending big on new facilities, including distribution centers.

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Distributor News Lipari Foods Acquires Wisconsin Cheese Supplier Lipari Foods LLC has purchased Waterloo, Wisconsin based Jim’s Cheese LLC, the Warren-based food distributor announced March 5th. Lipari bought the cheese cutting and packaging firm to grow its manufacturing business, according to a news release. The Wisconsin cheese supplier will fall under Lipari’s JLM Manufacturing division. Terms of the deal were not disclosed. A Lipari representative did not immediately respond to further questions. The distributor has grown through acquisitions in recent years. It purchased assets of Taylor-based Dairy Fresh Foods Inc. in August for an undisclosed price. And in early 2015, it bought Bridgeville, PA. based Clover Mountain Foods LLC for $16 million, expanding its service area and enabling it to become a top distributor of specialty foods and high-demand fresh foods found in the bakery, dairy, deli, seafood, meat, beverage, convenience food and other “perimeter of the store” product areas. It also bought Sun Prairie, Wisconsin based Soderholm Wholesale Foods Inc. for $4 million in late 2014. Lipari was working toward a $39.4 million expansion of its Warren site as of the end of 2016. The Lipari representative didn’t immediately respond to a request for an update on the project.

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Industry News Starbucks Opens first Reserve Store with Princi Bakery On February 27, Starbucks announced that it had opened its first Reserve store, located in the company’s headquarters. The new premium retail format will combine elements of Reserve Roasteries, freshly baked artisanal Italian food from Rocco Princi, and Third Place experience. The marketplace-style environment will be the first of many, as Starbucks plans to open up to 1,000 Reserve store locations worldwide to bring premium store experiences to customers. “We have taken everything we have learned from our highly successful Roasteries, the relevancy of the third place, and the overwhelming reception of freshly baked Princi food to an environment that will re-define customer connection and continue to serve as a halo to the rest of the business,” says Starbucks executive chairman Howard Schultz. A full beverage menu will feature everything available at the Reserve Roastery, in addition to new items like Nitro Draft Latte and Spiced Ginger Cold Brew on tap as well as new espresso drinks such as the Bianco Mocha. Princi Bakery products, which first became available to Starbucks customers at the Seattle Reserve Roastery in November, include cornetti, brioche, Pizza Mozzarella di Bufala, and focaccia sandwiches. continues next page...

Industry News Starbucks Opens first Reserve Store with Princi Bakery cont... The open environement of the Reserve store allows customers to interact with employees at the Reserve coffee bar or Princi Bakery counter, view breads and pastries being prepared in the Princi kitchen, or relax and socialize in the store’s community tables or lounge areas set around two fireplaces. “While our Roasteries are designed to be bold, educational environments, our Reserve store takes the best of coffee craft as well as artisan baking and layers in a marketplace-style customer experience creating a space that has both energy and moments of intimacy,” says Liz Muller, senior vice president, Creative, Global Design & Innovation.

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Walter Robb Shifts Focus from Whole Foods to Food Waste In the year since stepping down as co-chief executive officer of Whole Foods Market, Walter Robb has joined the fight against food waste. Mr. Robb recently became an investor and board member of FoodMaven, an online marketplace for otherwise wasted food. Based in Colorado Springs, Colorado ”40% of the food produced in the United States is lost,” Mr. Robb said during a presentation at Natural Products Expo West, held March 8-11 in Anaheim. “We’re not talking about the stuff off of the salad bars at Whole Foods at the end of the day. We’re talking about the way that systems are set up between supply and demand.” Mr. Robb said he partnered with Patrick Bultema, co-founder and CEO of FoodMaven, because he believes there is “no scalable solution at this present time” for rescuing wasted food in the United States. FoodMaven was built on a mission to reclaim the estimated $200 billion per year in revenues from lost food and currently serves hundreds of suppliers and buyers in Colorado with plans to roll out to metro service areas across the United States. In January, FoodMaven announced it had closed an $8.6 million Series A financing led by members of the Walton family to scale its footprint and impact., FoodMaven sells local and oversupplied food from distributors, manufacturers and producers to food service buyers at a discount. “1/3 of what’s going into landfills is food waste,” Mr. Bultema said during the presentation. “And with all this food being thrown away, 42 million Americans are food insecure.” Mr. Bultema pointed to several reasons why food is wasted. He referred to one reason as “an abundance expectation” among grocery shoppers that is pressuring suppliers to produce more than what is needed. continues next page...

Industry News Walter Robb Shifts Focus from Whole Foods to Food Waste cont...

“From the farm to the packing shed, to the distributor, all the way to the big grocery distribution centers and stores, there’s an enormous amount that gets lost that’s really the oversupply in this quest to always have everything all the time,” Mr. Bultema said. And then there are the imperfect or outdated items that are tossed in favor of higher-quality fare. Distributors or retailers may “get fussy” and dump product that doesn’t meet cosmetic standards if there is already too much supply, Mr. Bultema said. Another issue driving food waste is the local food movement, he said, noting that local growers often struggle to gain access to the market. “While there’s a lot of talk about farm to table, the truth of the matter is there isn’t a system for it,” Mr. Bultema said. “They may have a great sourcing relationship with a Whole Foods store, but if they have another 20% or 30% of the crop, oftentimes they have no place to go with that crop.” For producers and distributors, FoodMaven retrieves, stores and sells lost or local product to restaurants and institutional kitchens, helping to increase profits by eliminating waste costs and recuperating otherwise lost revenue. Food that doesn’t sell rapidly may be donated for hunger relief. FoodMaven operates on a “zero-landfill policy,” Mr. Bultema said. “I think we all have to vow to do better at making sure we’re good stewards of food,” he said. “I’m so grateful to have folks like Walter leaning in and such a growing amount of awareness on the issue.”

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What Refrigerated Soup Has To Do With The Future Of Grocery Stores Few would argue against the idea that grocers are in the midst of a pretty substantial existential crisis. As the industry continues to grapple with the implications of the Whole Foods-Amazon merger, rumors abound that Kroger and Target are flirting with a marriage of their own while a majority of big grocers have rushed to ink partnerships with Instacart . E-commerce is unlikely to go away anytime soon, so grocers are wise to invest in that area. But for food retailers looking for deeper insight on how to build better consumer resonance, an answer lies in an unlikely place: an announcement from Panera Bread about how well its grocery-store soups sold in 2017. Panera announced on March 22nd that its line of refrigerated soups surpassed the $100 million sales milestone in 2017, a 27% increase over the prior year that qualifies the fast-casual giant as one of the heavy hitters in the refrigerated soup space. continues next page...

Industry News What Refrigerated Soup Has To Do With The Future Of Grocery Stores cont... On first glance, this piece of news feels a bit like corporate chest-thumping; after all, $100 million is a fraction of the $5.8 billion that IRI, a Chicago-based market research firm, estimates Americans spent on canned soup last year. However, the growth of Panera’s retail soups comes alongside the growth of the refrigerated soup category and the grocery store perimeter as a whole, indicating that fresh soup is an important chapter in a larger story about how Americans are shopping in 2018. In 2013, consumers spent $116 billion on food in the perimeter of the store — that is, the part of the store where produce, deli offerings, seafood, prepared food and bakery items are sold. By 2017, that sales figure jumped $140 billion, accounting for 30.5% of the $425 billion food and beverage business and 54% of the industry’s growth. “If this business was a restaurant, they’d be superstars in the U.S. press,” said Chris DuBois, an IRI analyst and expert on specialty and prepared foods. “That’s why I look at the fresh prepared department as one of the greatest untold growth stories.” Refrigerated soup is a subset of the grocery store perimeter, and in this category, too, the year-over-year sales gains are outpacing those from the center of the grocery store. According to IRI, refrigerated fresh soup sales increased 18% in 2017, compared with an 0.28% increase in dollars spent on canned soup found on shelves in the middle of the store. Through its line of freshly prepared and refrigerated soups, Panera has seen this swing up close. “In 2012, this business was $40 million at retail,” Mike Bufano, senior vice president of the Panera at Home division, told Forbes in a phone interview. “Five years later, it’s over $100 million. That’s how much the opportunity is there with consumers.” DuBois and Bufano believe this shift is being driven by the convergence of two major consumer trends: the push for greater transparency on ingredients and labeling and a heightened focus on holistic health that looks at food as a way of treating the body. “People are looking for fresher, healthier alternatives, both in the ingredient side and on the formulation side. People believe the fresh soup is formulated healthier for them,” DuBois said. (Whether it actually is healthier depends on the soup manufacturer, of course. Bufano notes that Panera’s refrigerated soups have no preservatives and stick to the chain’s “100% clean” guarantee that it offers in its stores, but also allows that sodium “is always an area of opportunity for improvement when it comes to soup.” It also depends on the soup recipe: Broccoli cheddar is Panera’s top-selling refrigerated soup — and is not exactly the company’s healthiest offering.) Ultimately, refrigerated soup isn’t going to save any one grocer from extinction. There are just too many other foods to eat, and too many other issues plaguing grocery stores. However, it should be a piece of a broader strategy that emphasizes fresh foods and those that are sold on the perimeter — because that’s where consumers are migrating. continues next page...

Industry News What Refrigerated Soup Has To Do “I think fresh is one of the biggest tools stores have to inoculate themselves from an e-commerce side. It’s part of the trend towards convenience. The stock-up trip of old is gone,” DuBois says. “Refrigerated soup is part of that.” Bufano adds: “Refrigerated soup, you’re not going to put that in your Amazon pantry box. It’s hard for Amazon, unless they’re doing it out of [Amazon] Local or Whole Foods. For retailers, it’s a differentiator.”

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Consumer Trends The Rise of the Flexitarian Fascinating numbers on how plant-based foods fit into consumers’ daily lives, and how operators can tap into the trend. Close your eyes and picture a customer who demands plant-based options on your menu. Did you see a militant hippie who’s wearing hemp and looking angry? A new study by Datassential on plant-based eating challenges that image, identifying the new, more fluid definitions and the spectrum of how and when consumers are choosing plant-based food. The study questioned 1,500 consumers from all generations and retail and foodservice operators, and revealed that the definitions of how we eat are more fluid than ever. Part-time vegans Moonlighting as vegans, 34% of consumers eat a totally vegan meal at least once a week. Blends are a trend More than half (51%) of consumers in the study are interested in meat blended with grains and veggies. This reduces the negatives about a burger (fat, cholesterol) and increases the good (fiber, vitamins), and also can put a dent in food cost. An example would be a burger blended with mushrooms. Not a trade-off A grain bowl with nuts, legumes and an amazing dressing can be just as satisfying as a meat-and-potatoes plate, according to 48% of those surveyed. Don’t leave out the meat entirely Taking the cue from flexitarians who limit the amount of meat they eat, but still eat it, 38% of operators are adding veggie-centric dishes and side dishes to complement and coexist with meat dishes on the menu. The future is fruit (and veggie) From the operators’ standpoint, 33% expect their sales of fruit and vegetables to increase in the next year, according to the study.

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Consumer Trends Study Cites Barriers to Online Grocery Shopping About 45% of consumers have ever shopped for groceries online, and 60% of those say they have rarely done so, according to a new survey from RichRelevance. The survey found that the biggest barrier to shopping online is that shoppers don’t trust others to pick the best or freshest items, a factor cited by 53.7% of respondents who have not shopped online. Another 44.3% said they don’t want to pay for delivery. The survey was conducted among 1,500 U.S. shoppers in February by San Francisco-based RichRelevance, which provides digitalized personalization for several large brands and retailers, including Tesco, Barneys New York, Marks & Spencer and Office Depot. Greater convenience was the No. 1 reason respondents gave for shopping online, at nearly 68%, followed by time savings, at more than 62%. Consumers also said they like the fact that online shopping allows them to stick to a list and make fewer impulse buys, cited by 39.3% of respondents. Another 24.3% said they can save money and find better deals online, and 22.8% said it was easier for them to find items that meet their dietary needs, such as gluten-free or vegan. Of those who have shopped for groceries online, more than half, about 60%, have shopped on Amazon or Amazon Fresh for their groceries, compared with about 27% who said they have shopped from a traditional supermarket online. About 10% said they have shopped online from Whole Foods, and about 15.5% said they have shopped from a warehouse club such as Costco. Only 9.4% of online grocery shoppers said they do so weekly, while 7.8% said they do so bi-weekly and 22.8% said they do so monthly. Of those who have shopped online, 47.6% cited limited choice as the most frustrating aspect of doing so. Other aspects of online shopping that frustrate U.S. shoppers include not being able to get assistance in real time (24% in the U.S.), and poor navigation around the site (23% in the U.S.). The survey found that 36% of those who have shopped online for groceries said they shop at more than one online grocery outlet, and 56.5% said they do not shop online from the same physical grocer that they usually shop with. Asked which features would make them more likely to shop online or to shop online more frequently, 56% of consumers said they would be interested in being presented with lists of their frequently bought items, and 50% said they would be interested in being presented with alternative products if their preferred items were not available. “As the fight for category leadership in digital grocery heats up, experience personalization will take center stage in 2018,” said Michael Ni, chief marketing officer of RichRelevance. “Grocery buying is increasingly becoming a lifestyle choice beyond produce. This is creating opportunities for new grocers to engage consumers with new and fresh ideas, gather key customer browsing and buying behavior, and personalize their various brands, creating a virtuous cycle of loyalty. Grocers need to learn from the early mistakes of traditional retailers and not simply try to compete with Amazon on convenience, but focus on the new opportunity that online shopping provides.”

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Consumer Trends Millennials Want Ethical Snacks- To Go According to a new report, Ethics on the Go, from Culinary Vision Panel’s Mindful Dining Initiative, millennials’ expectations for snacks and grab-and-go foods are sky high. From sustainable seafood to free-range eggs to fair-trade coffee, this generation “does not want their dining choices to have unintended negative consequences,” says Sharon Olson, executive director of Chicago-based Culinary Visions Panel. “We found that whether it’s rewarding a company’s fair-trade labor practices or their zero-waste policies, millennials are the most serious about ethically sourced grab-and-go foods,” Olson says. While ethical grab-and-go foods may seem like a bit of niche, it’s just a fact when it comes to those great expectations of millennials. The study, which surveyed 1,500 US consumers, found that 82% wish establishments would use more environmentally friendly business practices. “Foodservice operators need to start considering how to introduce and communicate ethically sourced ingredients, menu concepts and business practices,” the report concludes. Here are five data-supported ways to look at this complex issue, identified by the Culinary Visions Panel: 1. Use your ethical practices as a shortcut to connecting with younger customers In the report, the 18 to 34 demographic values ethical eating choices much higher than any other demographic. While 50% of general consumers agreed organic foods tasted better, 60% of consumers under 35 equated organic foods with better flavor. When foodservice operators establish connections with farms and ethical manufacturers, they can also connect with their guests more fully. 2. Communicate your efforts But you can’t connect if you don’t first communicate. Marketing makes a big difference in letting the millennial market know you’re on trend. “From vegan food options to composting onsite, ethical efforts are the new cool ‘it’ factor for millennial consumers who have to navigate more dining options,” according to the report. 76% of consumers studied said ethical efforts made by restaurants are trendy. 3. Focus on grab and go Don’t make millennials choose between their love of quick, easy, on-the-go eats and making a statement and taking a stand for social justice. Millennials see a deficiency in ethical snacks, the study found: Compared to 57% of the general public, 64% of millennial consumers said there’s a shortage of ethical grab-and-go options. 4. It’s worth it to them Consumers under 35 are willing to pay extra to eat more ethically while they’re on the go, according to the study. 67% said they’d be willing to pay more for ethically produced food they can grab on the go, compared to 55% of general consumers. “This fact creates an exciting opportunity for foodservice operators to expand their menu offerings and tap into young consumers’ desire for ethical snacks and grab-and-go foods.”

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Consumer Trends Millennials Want Ethical Snacks- To Go cont... 5. Go plant-based Consumers do still love meat, but many are also looking to get more plants into their diets. This study found that 88% of millennials were making plant-based foods a priority in their lives. This means eating better while feeling better about ethically sourced snacks can go hand in hand.

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Retailer News Walmart Expands Online Grocery Delivery to 100 Cities The path to fast and affordable online grocery service is littered with obstacles: refrigeration challenges, storage woes and high transportation costs, among others. But the country’s largest retailers are convinced that it will lead to a lucrative and largely untapped market. And they are all rushing to dominate it first. Walmart escalated the competition on March 14th, by announcing plans to expand its online grocery delivery service to 100 metropolitan areas by the end of the year. Orders will be fulfilled at more than 800 stores nationwide and shuttled to shoppers by drivers contracted through Uber, Deliv and other ride and delivery platforms. Customers must order at least $30 worth of goods and pay an additional delivery fee of $9.95; they can receive their purchases in as little as four hours if they put in the request by 1p.m. The plan puts the world’s largest retailer on a direct collision course with the world’s most powerful e-commerce player, Amazon, which purchased the Whole Foods grocery chain for $13.4 billion last summer and recently announced plans to use those stores to fill on demand orders. Other retailers like Costco, Target and Kroger are also joining the increasingly expensive battle for customers who want eggs and milk without leaving their couch. “There is a lot of experimenting going on as everyone tries to figure out that last-mile delivery, it’s a tough economic equation to make work,” said Mike Knemeyer, a professor of logistics at Ohio State University. “But if you can, you’ll have a big head start on the others, and you’ll end up making money not just in groceries but on all of the things that you sell.” The nexus of e-commerce and grocery sales is increasingly appealing to retailers. “The thing that’s great about grocery is that it’s a pure traffic driver no matter who you are, you need to get groceries every two weeks, which makes it an exception from all the other categories that keep retailers up at night,” said Matt Sargent, a retail expert at the consulting firm Magid. But while the total grocery market is enormous, nearly $1 trillion annually in the United States, many customers still insist on seeing and touching their food in person before buying. continues next page...

Retailer News Walmart Expands Online Grocery Delivery to 100 Cities cont...

Spending on online groceries is currently just $27 billion a year, or 3% of the total, according to Forrester Research, which specializes in technology.

Controlling costs is another major challenge. Grocery providers have grappled with the expense of packaging delicate produce and meats in ice packs and dispatching fleets of company-owned vehicles from distribution centers staffed around the clock. Even Amazon has struggled. The company launched its AmazonFresh service in the Seattle area in 2007 and tested it for years before expanding it to more than 20 cities. Customers pay $14.99 a month, in addition to their $99-a-year Prime membership, to have groceries sent directly to them. But late last year, the company decided to pull AmazonFresh from some markets. “There’s no question that online grocery has been a challenge for everyone, including Amazon,” said Sucharita Kodali, an analyst at Forrester. “The reason is it’s just really, really hard to get the last mile going.” But Amazon touched off a flurry of activity with its acquisition of Whole Foods in June. In October, Costco introduced a two-day delivery option for dry groceries and a same-day program for fresh goods through Instacart, a delivery service. Target said in December that it would purchase the online same-day delivery service Shipt for $550 million in cash. Amazon, which has several brick-and-mortar grocery options in Seattle, said this month that it had begun to offer same-day delivery of groceries from Whole Foods in six cities and would expand the program to the rest of the country later this year. The program is run through Amazon’s Prime Now service, which relies on contractors to make deliveries in their personal cars within two hours of an order being placed. The service is free to Prime customers, but Amazon automatically adds an optional tip. Kroger soon followed Amazon’s lead with an announcement that it would expand the number of cities eligible for home delivery of groceries through Instacart. Walmart’s Sam’s Club division, which said last month it would offer members free shipping of online orders for an annual $100 fee, also uses Instacart. But Walmart said that it would not tap Instacart for the grocery delivery program at its Walmart stores, which it said would reach more than 40% of American households. “We’re saving customers time by leveraging new technology, and connecting all the parts of our business into a single seamless shopping experience: great stores, easy pickup, fast delivery, and apps and websites that are simple to use,” Greg Foran, the chief executive of Walmart U.S., said in a statement. The company has made substantial investments in its growing suite of online offerings, including a partnership with Google to sell Walmart products on Google Express and the creation of Store No. 8, an internal venture to help develop new online businesses. In the fall, Walmart bought Parcel, a 24-hour delivery service that uses algorithms and leased vehicles to send perishable and nonperishable products to customers in New York City. On March 14th, Walmart also reiterated that it planned to expand its curbside grocery pickup service to 1,000 more locations this year, in addition to the 1,200 locations where it is already offered. continues next page...

Retailer News Walmart Expands Online Grocery Delivery to 100 Cities cont... The service allows customers to order food online and collect it at Walmart stores. But Walmart’s e-commerce success has sometimes been fickle; its online sales increased 23% in its most recent quarter, less than 1/2 the rate of growth in each of the previous three quarters and a performance that sent a ripple of nervousness through the stock market. Walmart’s expanded delivery service requires that customers visit the company’s website or grocery app to place orders. The chain will then have one of its 18,000 personal shoppers collect the selected items in stores. Each of those employees, along with the thousands more that Walmart said it would add this year, undergoes a three-week training program that teaches them how to pick the best meats and produce. As specialists, they are paid more than the company’s entry-level workers. Beefing up its grocery delivery service is an “informed gamble” for Walmart, Mr. Knemeyer said — one that will most likely serve up side benefits such as data collection and inroads with young, affluent city dwellers. The chain, long known as a discount retailer, has lately been trying to broaden its appeal. It spent $3.3 billion acquiring Jet.com, a bulk online retailer that Walmart said would give it access to “urban and millennial customers.” In 2017, it purchased the hip e-commerce brands Bonobos and ModCloth. Last month, it unveiled what it called an “Instagram-worthy” collection of mattresses and bedding, available through a separate website. But the supercenters for which Walmart is best known tend to exist on the outskirts of cities and in rural areas. Breaking into metropolitan grocery ecosystems, which often support an already robust network of delivery services for grocery chains and restaurants alike, could be difficult, experts said. And the feature of groceries that make them so attractive to retailers — they are regularly consumed and so must be regularly replenished — makes most consumers unwilling to splurge on them. Walmart’s $9.95 fee on each order is a much more visible cost to consumers compared to Amazon’s annual $99 fee for its Prime membership, which many shoppers set to auto-pay and then forget. “They probably just look at the relatively high delivery fee and get scared off,” said Matthias Winkenbach, director of M.I.T.’s Megacity Logistics Lab. “Walmart would have to do a very good job communicating the overall economics of shopping their everyday low prices versus Amazon.”

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Retailer News Target and Kroger Deny Merger Rumors Rumors are aswirlin’ after Fast Company reported that Kroger and Target are considering a merger to face Amazon’s industry presence. However, sources are now shooting down the notion, according to Reuters. “We generally don’t comment on rumors or speculation,” said Kroger’s Head of Corporate Communications and Media Kristal Howard, the latter news source reported. After the former news source leaked its speculative news, which explained that the merger would be “the best path forward,” both companies saw a boost in shares. While gains were paired later, Kroger’s shares rose 8%, according to CNBC, which also reported that Target’s hiked fractionally, as well, in the premarket. Target hired Jeff Burt, a former Kroger executive, last year, who took on the changes the retailer sought to make in its food options. “We believe Target has much further to go before the grocery business is fully fixed,” said GlobalData Retail Managing Director Neil Saunder, as reported by CNBC. This news comes in the wake of Albertsons and Rite Aid’s announcement that they would be merging, and is interesting in light of Amazon’s recent growing pains after its Whole Foods acquisition. What do these changes and the speculation on Target and Kroger say about the changing retail landscape? Will we see more mergers to bolster business revenue?

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Farm Fresh to Lays off 1,000+ Employees

After recently divesting 21 of its stores, Farm Fresh is restructuring its workforce, with some sources reporting that the chain is laying off 1,000 of its employees, or about one-third of Farm Fresh’s current employee count. The Virginia Employment Commission recently listed the layoffs. The agency’s website hosted the Worker Adjustment and Retraining Notification Notices.

Parent company SuperValu recently announced that it would be selling 21 of its Farm Fresh banner stores to Harris Teeter, Kroger, Mid-Atlantic Division, and Food Lion; SuperValu implied it had intentioned to seek buyers for the other locations. In the wake of the announcement of the purchased stores, a newer announcement revealed that 11 Farm Fresh stores would feel the effects with 1,000+ layoffs located in the Hampton Roads and Richmond, according to WVEC. Now, the company is reportedly letting another 1,000 employees go, according to Southside Daily. The news outlet reported that the total of let-go employees is estimated at 3,100. continues next page...

Retailer News Farm Fresh to Lays off 1,000+ Employees cont... “We continue to work with the buyers of the 21 stores to ensure a smooth transition and expect them to offer positions to many Farm Fresh employees,” SuperValu’s External Communications and Public Relations Manager Michael Wilken wrote in an email, according to Southside Daily. He added that eligible employees were likely to receive severance and “job transition support.” According to Virginia WARN, the number of employees who will be let go from each location on May 14th, in this most recent round of layoffs, is as follows: • 69 employees: 521 Laskin Road, Virginia Beach • 58 employees: 1385 Fordham Drive, Virginia Beach • 94 employees: 2058 S. Independence Blvd., Virginia Beach • 86 employees: 799 Chimney Hill Shopping Center, Virginia Beach • 71 employees: 4876 Princess Anne Road, Virginia Beach • 134 employees: 2110 Great Neck Square Shopping Center, Virginia Beach • 71 employees: 4001 Virginia Beach Blvd., Virginia Beach • 98 employees: 1069 Independence Blvd., Virginia Beach • 92 employees: 2129 General Booth Blvd., Virginia Beach • 77 employees: 1615 General Booth Blvd., Virginia Beach • 88 employees: 928 Diamond Springs Road, Virginia Beach • 104 employees: 230 E. Little Creek Road, Norfolk • 65 employees: 201 E. Berkley Avenue, Norfolk • 78 employees: 1200 N. Military Hwy. Norfolk • 81 employees: 730 W. 21st St., Norfolk • 94 employees: 309 S. Battlefield Blvd., Chesapeake • 58 employees: 701 N Battlefield Blvd suite A, Chesapeake • 82 employees: 1620 Cedar Rd #100, Chesapeake • 78 employees: 1464 Mt. Pleasant Road, Chesapeake • 85 employees: 1400 Kempsville Road, Suit 109, Chesapeake • 88 employees: 115 Norge Lane, Williamsburg • 88 employees: 4511 John Tyler Hwy., Williamsburg • 69 employees: 460 Wythe Creek Road, Poquoson • 92 employees: 353 Chatham Drive, Newport News • 100 employees: 4000 Victory Blvd., Portsmouth • 80 employees: 3675 Bridge Road, Suffolk • 95 employees: 1401 N. Main Street, Suffolk • 100 employees: 1282 Smithfield Plaza, Smithfield • 77 employees: 6500 George Washington Memorial Hwy., Grafton • 87 employees: 7254 George Washington Memorial Hwy., Hayes • 84 employees: 2320 E Main Street, Richmond • 77 employees: 1459 Armory Drive, Franklin • 82 employees: 30 Towne Centre Way, Hampton • 102 employees: 2190 Coliseum Drive, Hampton • 111 employees: 227 Fox Hill Road, Hampton • 70 employees: 608 E Mercury Blvd., Hampton

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Retailer News Grocery Wars Turn Small Chains Into Battlefield Casualties At the Tops Market on Main Street recently, there was a “Mega Meat Sale” — buy one pork chop and get another free. There were specials on avocados, paper towels and fried fish. Craft beer shared shelf space in the brightly lit store with cases of Genesee, a local favorite. Tops was cutting prices even though it had filed for bankruptcy last month, responding to pressure from behemoths like Amazon and Walmart — which are lowering prices and targeting new markets — and from discount stores like Dollar General. The food war that is raging across the country is weeding out the weakest links, leaving small and medium-size grocery companies struggling to stay afloat. It wasn’t long before another wobbly chain followed Tops into bankruptcy. The parent company of the Southern stores Winn-Dixie and Bi-Lo said it would file for Chapter 11 protection by the end of this month, and close 94 stores. “There is a tremendous shakeout in food retail right now,” said Burt P. Flickinger III, a managing director of the retail consulting firm Strategic Resource Group, whose family founded a grocery business more than a century ago. Amazon’s $13 billion purchase of Whole Foods in June added a sense of urgency to the competition to feed American families, raising the prospect that the e-commerce giant would upend groceries just as it has every other aspect of retail. This month, Walmart responded with its own plan to start offering an online grocery delivery service in 100 cities. At stake is not only the price of toothpaste and bananas, but the fate of thousands of cashiers, cake decorators and meat cutters, many of whom belong to labor unions and are owed pensions when they retire. Tops employs more than 12,000 unionized employees at about 160 stores in New York, Pennsylvania and Vermont. Maribeth Druse made a lifelong career in groceries, but given the industry’s struggles, her experience will increasingly be harder to replicate. Ms. Druse, 61, was still in high school when she started working in the meat department of a grocery chain that Tops eventually acquired. She now collects a $20,000-a year-pension and is still able to work part time at the Tops in Cooperstown, N.Y. “Who works in the same job for 44 years and gets a pension anymore?” Ms. Druse asked. “Nobody.” Like businesses in other industries — including Toys “R” Us, which announced liquidation plans this month — many failing supermarkets are owned by private equity firms that have loaded the companies up with debt. That hampers their ability to compete in an environment where prices in some markets have dropped by as much as 25%, Mr. Flickinger said. Tops was long challenged by the debt its former private equity backer, Morgan Stanley Investment Management, heaped on it. continues next page...

Retailer News Grocery Wars Turn Small Chains Into Battlefield Casualties cont... The private equity firm Lone Star has cashed out $980 million in dividends from Winn-Dixie’s parent company since 2011, according to Moody’s Investors Service. Most of the payments were made by taking out debt on the chain, leaving less money to invest in stores. Marsh Supermarkets, an Indianapolis regional grocer that had been backed by private equity, laid off more than 1,500 workers and required a federal takeover of its pension plan last year. And Fairway, the iconic New York grocer that the Blackstone Group took ownership of after it went bankrupt in 2016, is still trying to distinguish itself in a crowded field, but reports making some progress on its turnaround. This month, Fairway executives met with the company’s roughly 3,500 workers, most of whom are unionized, to unveil a set of new initiatives — like investments in a new marketing campaign. It plans to emphasize the company’s role in bringing new foods to market, as it did with Chobani yogurt and Cape Cod potato chips. “I am here to announce that Fairway has bounced back,” the chief executive, Abel Porter, told a group of cheering workers. Blackstone has been making investments in Fairway, but company executives acknowledge that the grocer faces an uphill battle. “It’s not a level playing field,” Mr. Porter said in an interview. “Competing against Amazon is like competing against the government or a military commissary.” Amid the intense competition, the number of supermarkets around the country increased from 2010 to 2015, but the number of supermarket operators declined slightly. Analysts and industry executives say the pace of consolidation is expected to accelerate. The changes are also taking a toll on unions. Membership in United Food and Commercial Workers, the largest grocery union, has dropped more than 9% since 2002, to about 1.2 million, according to the Labor Department. While some union officials cite factors like automation and state laws unfavorable to organized labor for the decline in membership, others blame the bankruptcies. “The private equity owners try to drain every last ounce of blood from these companies,” said John T. Niccollai, president of Local 464A of the U.F.C.W., which represents grocery workers in New York and New Jersey. “Their feeling is if it goes bankrupt, so be it.” Mr. Niccollai, a former butcher who went on to get a law degree, works out of a cavernous union office, near Paterson, N.J., that is a throwback to a different era. A worn red carpet covers the floor; photos of union officials greeting priests adorn the wood-paneled walls. When Mr. Niccollai started working at the union in the late 1970s, the A & P grocery chain had about 7,000 stores. By the time A & P had filed for its second bankruptcy, in 2015, it was down to about 125. Mr. Niccollai found jobs elsewhere for 3,500 workers who had been displaced by the bankruptcy, but 1,500 of his members were out of work. He recently added membership by organizing some of the warehouse workers at

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Retailer News Grocery Wars Turn Small Chains Into Battlefield Casualties cont... at the Peapod grocery delivery service, but it is challenging when the industry is increasingly dominated by nonunion employers like Walmart and Amazon. “We are fighting hard,” Mr. Niccollai said. Tops’s path into bankruptcy was similar to that of other unionized grocery chains. The first Tops supermarket was opened in Niagara Falls in 1962 by an Italian immigrant. The company grew into a large regional player that bought up smaller grocers and discount food stores through the 1990s. The international food giant Ahold acquired Tops in 2001. The company was sold to Morgan Stanley’s private equity team six years later. Under the firm’s ownership, Tops loaded up on debt and paid out roughly $300 million in dividends to its investors, according to Moody’s. Even though Morgan Stanley no longer owns the company, Tops never overcame the debt burden. And like other unionized supermarket chains, Tops has had to deal with steep pension expenses. Tight on cash, the grocery chain has faced tough competition, even in more remote markets like Chestertown, a community of about 700 people in the Adirondacks. Many residents said they drove 35 miles to shop for food at Walmart on the weekends but shopped at Tops, often paying higher prices, during the week because it was close to home. But Tops’s virtual monopoly in the town ended in August 2016 when Dollar General — a national discounting chain — opened a store in Chestertown. The Dollar General doesn’t sell much fresh produce or meat, but it is siphoning off Tops customers with huge deals on other staples. At $2.80, a gallon of whole milk at Dollar General costs about the same as a half-gallon at Tops. Alex Colpas, 27, who works at a marina on a local lake, said he rarely shopped at Tops any longer because of the deals at Dollar General. “You don’t even need a grocery store, frankly, if you can find a better way to shop,” Mr. Colpas said. “It’s a relic.” When it filed for bankruptcy, Tops said it expected to operate “as normal’’ throughout the bankruptcy, but union officials are bracing for closings. “I have never seen a bankruptcy that doesn’t lead to closing stores,” said Frank DeRiso, president of U.F.C.W. Local 1, which represents Tops workers in New York. Tops, analysts say, would face a difficult time waging a price war with Dollar General. “Survival depends on your ability to weather pricing pressure over an extended period of time,” said Mickey Chadha, a senior credit officer at Moody’s. “The weak guys can’t do that.”

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Retailer News Central Market to Expand, Just not in Houston The high-end grocer, which specializes in local and imported gourmet foods, has five stores in the Dallas area, with one more set to open this summer and another in planning. In the Houston area, however, Central Market has noimmediate plans to expand beyond its sole location near Highland Village, division president Stephen Butt said this week while touting the rollout of curbside pickup service at the Houston store. “At this stage, Central Market’s growth plans are in the Dallas-Fort Worth metroplex,” Butt, a descendant of H-EB’s founding family, said. “We add a Central Market store when we feel we have the right real estate and the right demographic and amount of customers to support the store. We only want to put our stores where we’re confident we’ll be successful.” Don’t take Central Market’s growth in Dallas as a snub of Houston, however. It has more to do with market dynamics and grocery competition than the infamous rivalry between the two cities, said Jason Gaines, a retail broker with Houston-based NAI Partners. In Dallas, H-E-B is squeezed by competitors like Safeway, Kroger and Walmart, which dominate the market. While there are H-E-B stores on the outskirts of Dallas-Fort Worth, there are none within the city limits, Gaines said. Furthermore, there are no plans to expand the H-E-B brand in North Texas, Butt said. To gain market share in Dallas, H-E-B is deploying its Central Market division to compete in the high-end, specialty grocery space against competitors like Whole Foods, Sprouts and Trader Joes, Gaines said. In the Houston area, on the other hand, H-E-B is the grocery market-share leader, followed by Walmart and Kroger, according to the Shelby Report, which tracks the grocery and food industry. The company has 85 H-E-B stores in this area and plans to open six more that will total 550,000 square feet. H-E-B’s dominance in Houston is probably why the company doesn’t see a need to expand its Central Market line, Gaines said. Moreover, many of the newer, high-end H-E-B stores in Houston carry some of the organic and epicurean food items found at Central Market, he said. “H-E-B may be headquartered in San Antonio, but H-E-B is really in Houston,” Gaines said. “Going into a major city like Dallas, you’ve got to have a long-term strategy to compete there.” Central Market may not plan to open more stores in Houston, but it has expanded its local footprint. Last year it completed a $10 million renovation, adding 10,000 square feet to its store at 3815 Westheimer. The grocer expanded the produce section and selection of olive oils, wine and international foods. It also equipped the store to make its own chocolate. And for bragging rights, the revamped 85,000-square-foot Houston store is the largest in the division. “Central Market is a destination trip,” Butt said. “Our responsibility is to create a shopping experience that is worthy of a customer driving 25 miles to shop with us on a weekend.”

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Retailer News Central Market to Expand, Just not in Houston cont... On March 15th, Central Market launched curbside pickup service in Houston to compete with e-commerce retailers like Amazon, owner of Whole Foods Market, which last month began using stores in Dallas and Austin to fill online grocery orders. H-E-B, over the past year, has deployed curbside pickup and home-delivery services at about 100 of its stores across Texas, including about half of its Houston-area locations, Butt said. Central Market customers can now order their groceries online and have a team of 20 trained workers hand-pick their food purchases and deliver them to their vehicle when they arrive at 10 designated parking spots. Central Market plans to add curbside pickup at all of its stores by early 2019. H-E-B, which acquired the Austin-based on-demand delivery service company Favor last month, also plans to offer home-delivery service at Central Market in Houston by early May, Butt said. “Time is increasingly a currency for customers,” Butt said. “We believe curbside will actually help us grow our business with those customers who love and enjoy Central Market but for time reasons and driving distance have not made us a habit.”

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Fiesta Mart Acquired by Bodega Latina Parent Grupo Comercial Chedraui Mexican supermarket giant Grupo Comercial Chedraui— parent of U.S.-based Bodega Latina Corporation—has announced plans to acquire Texas Hispanic grocery chain Fiesta Mart—an acquisition that would create one of the largest Hispanic-focused supermarket companies in the U.S., operating a total of 122 stores across California, Arizona, Nevada, New Mexico, and Texas, and earning revenues of approximately $3 billion USD. “The acquisition of Fiesta allows us to meaningfully expand into Texas via an established, well-known supermarket operator,” noted Carlos Smith, President and CEO of Bodega Latina, in a press release. “Through the combination of the strengths of our two organizations, we will be well positioned to significantly accelerate our vision of efficiently offering high-quality products at the lowest possible prices. We believe this transaction will be beneficial for all of our stakeholders, including customers, suppliers, employees, and vendors. We look forward to welcoming Fiesta’s talented employees and working together to create the premier Hispanic grocery retailer.” The merging companies noted, in a joint press release, that over 50 percent of the growing U.S. Hispani population resides within the five states in which the company operates, and noted that the merger of these high-profile Hispanic supermarket chains would further enhance the customer shopping experience via improved pricing, quality, and customer service. “Combining the strengths of Bodega Latina with those of Fiesta will accelerate the evolution and growth of Fiesta through combining the parties’ scale, geographic reach, talented teams,

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Retailer News Fiesta Mart Acquired by Bodega Latina Parent Grupo Comercial Chedraui cont... and market knowledge,” Sid Keswani, CEO of Fiesta Mart, said. “Our team members are excited about becoming part of the Bodega Latina family and continuing to grow the combined company.” José Antonio Chedraui Eguía, CEO of Chedraui, also noted that the acquisition is a major step for Chedraui as the company looks to further expand its reach throughout the U.S. “We are excited about the combination of Bodega Latina and Fiesta, which further expands our U.S. footprint,” said Chedraui Eguía. “Grupo Comercial Chedraui is committed to growing our U.S. business both organically and through acquisition.” The acquisition is expected to close early in the second quarter of 2018, and Fiesta stores are expected to continue to be operated under their own banner.

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