Dive Brief:

• SpartanNash grew its consolidated net sales by 3.7% in the second quarter to $1.89 billion, according to a company release. The company’s distribution channel drove growth, with sales up $121 million to $941.6 million compared to the same period a year earlier, thanks primarily to its acquisition of specialty wholesaler Caito Foods.
• Retail store sales decreased 3.9% due to store closures and a competitive environment, while military sales dropped 6.8% on lower commissary sales. 
• SpartanNash also noted that its Fresh Kitchen prepared foods facility, gained through its Caito Foods acquisition, is producing lower-than-expected sales so far. The company expects the facility to produce revenue growth starting next year. “As we integrate the operations of our recent acquisition, refine and expand production in our new Fresh Kitchen facility, and onboard new military business, the positive momentum in our distribution operations will continue to drive growth,” David Staples, SpartanNash’s president and CEO, said in a statement.

Dive Insight:

With its retail and military channels struggling, SpartanNash is looking to its distribution arm to lift sales and drive growth for the company. The $217.5 acquisition of Caito Foods last November boosts the retailer/wholesaler’s presence in high-growth specialty foods and produce. In its earnings statement, the company noted its Caito buy drove organic growth in the second quarter.

However, a key part of that acquisition has so far performed below expectations. The $32 million Fresh Kitchen facility, which assembles and packages prepared foods, has struggled for SpartanNash. The company hoped the 120,000-square-foot Indianapolis facility would provide a quick sales boost, but CEO David Staples noted it’s likely Fresh Kitchen won’t start contributing to growth at SpartanNash until next year.

“While the integration of our latest acquisition and the start-up of our new Fresh Kitchen facility have been slower than anticipated, we are excited about the potential they provide for both the fresh-cut fruits/vegetables and freshly prepared meal solution offerings, which are right in line with the ever-increasing consumer demand for convenience,” Staples said in a company release.

SpartanNash saw retail sales drop 3.9%, mainly due to store closures as the company tries to streamline its operations. Comp store sales, meanwhile, dropped 1.8% — an improvement from this year’s first quarter. The company’s conventional supermarkets, including Family Fare Supermarkets and D&W Fresh Markets, are having a hard time differentiating themselves in a crowded market, and are under pricing pressure from Walmart, discounters and dollar stores.

SpartanNash — widely viewed as a company that delivers solid results despite operating in a slow-growth Midwest market — has taken promising steps of late, including store remodels, a sustainability initiative and a chain-wide e-commerce platform that offers personalized promotions to shoppers. It also announced the hiring of Mark Shambers, a new EVP and CFO, who formerly served as CFO of specialty and organic wholesaler United Natural Foods Inc. He succeeds Tom Van Hall, and will begin working for the company on Sept. 11.