Dive Brief:

• Coborn's has acquired Hornbacher's, the Fargo, North Dakota-based grocery chain, from United Natural Foods, Inc. and its Supervalu subsidiary for an undisclosed sum. The deal, which is expected to close by Christmas, includes seven stores in North Dakota as well as an eighth under development in West Fargo, North Dakota. One location in Grand Forks, North Dakota will close, with store liquidation beginning today.
• Under the deal, Coborn's will expand its distribution contract with UNFI and use it as the primary distributor for Hornbacher’s stores. Coborn's, which operates 53 Upper Midwest stores across four banners, has been a longtime Supervalu customer.
• Coborn's said it plans to keep the Hornbacher's name and ensure the guest experience stays consistent. The St. Cloud, Minnesota-based chain is employee-owned and plans to extend company stock options to Hornbacher's 1,200 workers after they meet eligibility requirements.  

Dive Insight:

The eight-store deal is the latest selloff for UNFI following its $2.9 billion acquisition of Supervalu in July. In September, UNFI/Supervalu sold 19 Shop n' Save locations to Schnucks, then closed the chain's remaining 16 locations last month. Back in March, Supervalu sold off most of its Farm Fresh stores to Kroger and Ahold Delhaize.

That leaves two marquee chains in Supervalu's stable — Cub Foods and Shoppers Food & Pharmacy — and it's anyone's guess as to who could lay claim to those locations. UNFI has said it wants to find a single buyer for Cub Foods' 81 stores, and in local news reports Kroger and Hy-Vee have emerged as top names. But Cub has lost significant market share in recent years, meaning an acquirer will be taking on an ailing brand. Although the chain has updated numerous stores and still leads market share in Minneapolis/St. Paul, significant remodeling will have to be factored into any acquisition cost.

Hy-Vee has never made an acquisition on the scale of a Cub Foods, while Kroger is more invested in digital growth and refreshing its existing store base and doesn't have much strategically to gain from Cub. It seems more feasible to split the chain among multiple suitors, but will UNFI accept that outcome?

A piecemeal deal also seems to make the most sense for Shoppers, given the wide range of store sizes it operates and various antitrust concerns among primary names like Albertsons and Ahold Delhaize. The latter has already bought up several Shoppers locations that have closed and invested millions to update them.

Regardless, the pace of regional consolidation has picked up recently, with Lidl acquiring 27 Best Market stores in New York and New Jersey and SpartanNash buying South Bend, Indiana-based Martin's Super Markets and its 21 stores. During its recent Capital Markets Day in New York, Ahold Delhaize executives said they're keen to make another acquisition.

Regional grocers like Coborn's stand to grow their footprint during a period of significant change in the industry. Coborn's annual revenue currently totals $1.4 billion, and it hopes to eventually surpass the $2 billion mark. The nearly 100-year-old grocer operates 53 stores under Coborn's, Cash Wise Foods, Marketplace Foods and Save-A-Lot banners, has been employee-owned for more than a decade and is known for its innovative products, services and fresh food.