Dive Brief:
- Schnuck Markets will buy 19 St. Louis area Shop ‘n Save stores from Supervalu — 14 locations in Missouri and five in Illinois, according to a news release. The grocer also agreed to buy four of Shop 'n Save's seven fuel centers and to use Supervalu as its primary supplier at nine of its existing stores. Terms of the deal were not disclosed.
- Fifteen of the acquired stores have pharmacies, and those will remain open under the Schnucks brand. The grocer also purchased a standalone pharmacy in Union, Missouri, along with prescription records for 10 additional Shop ‘n Save stores that will transfer to nearby stores.
- Stores will close on a staggered schedule beginning October 7 and ending later that month. Each location will be closed for two and a half days as signage, fixtures and point-of-sale systems are switched out and shelves restocked. Schnucks will offer jobs to Shop 'n Save’s 1,500 union employees and says it will interview store directors, pharmacy managers and pharmacists for positions over the next week.
Dive Insight:
More chips have fallen in Supervalu's quest to divest the entirety of its retail operations under new owner United Natural Foods.
With this deal, Schnucks acquires nearly half of Shop ‘n Save’s 36 stores in the St. Louis area. Supervalu said in a release it is seeking buyers for the remaining 17 locations, but will close down those stores by the end of this year if no deals are struck.
Who might buy the remaining locations? Possibilities include Kroger and Albertsons, or another local chain like Dierbergs — though the players in the market are firmly entrenched, with Aldi, Walmart and Fresh Thyme challenging traditional grocers. Schnucks CEO Todd Schnuck told the St. Louis Post-Dispatch that the company considered the other locations, but ultimately decided to pass, saying the stores it acquired filled coverage "voids" in its hometown market.
For Supervalu, this deal follows the sale of 21 Farm Fresh stores for $43 million earlier this year. The wholesaler has tried to sell off its retail stores under intense pressure from investors, and UNFI stated in July after its $2.9 billion deal that it planned to use retail store sales to help fund the acquisition. Schnuck told the Post-Dispatch his company’s talks with Supervalu predated the UNFI deal, but sped up after it was announced.
Supervalu's remaining banners include Hornbacher's, Shoppers Food and Pharmacy and Cub Foods, with the latter being closely watched by industry observers. Cub is the market share leader in the hotly contested Minneapolis/St. Paul market, and could get divided up among competitors, including Hy-Vee and Lunds & Byerlys. The stores could also be an entry point for the likes of Kroger or Albertsons, though they will require significant investment in order to reverse the share declines the chain has seen in recent years.
Meanwhile, Schnucks further solidifies its market share lead in St. Louis and grows its footprint by roughly 20% with this acquisition. The grocer has grown in leaps and bounds, including the acquisition of 60 National supermarkets back in 1995 — a deal that doubled the grocer’s store count. Schnuck said this latest deal is similarly "generational."
“We expect this transaction to help Schnucks improve these stores for their communities," Scott Moses told Food Dive. Moses is the managing director and head of food retail and restaurants investment banking with PJ Solomon, which advised Supervalu on its Shop 'n Save sale to Schnucks and Fred's on its recent sale of pharmacy files and inventory to Walgreens. "Most important to me, it should help thousands of people keep good supermarket jobs.”
Schnucks faces tough challenges ahead, but it's taken the chance to grow when the opportunity arose. It also maintains a focus on innovation. Earlier this year, Schnucks announced it would open a small-format store in Warrenton, Missouri, centered on fresh foods and a unique store experience. In 2009, Schnucks opened Culinaria, a 20,000-square-foot store that planted the mostly suburban grocer in the heart of downtown St. Louis.
