Key Development: Acquisition of two Roundy's DCs.
What's Next: Conversion of Cincinnati DC to IGA Center of Excellence.
Acquisitions are like marriage in that it's not prudent to speculate when one might occur, said Ron Marshall, chief executive officer, Nash Finch, Minneapolis.
Nash Finch took the plunge in March with the acquisition of Milwaukee-based Roundy's distribution centers in Lima, Ohio, and Westville, Ind. -- along with the business of the 500 stores that they supply -- for $225 million. The two DCs are expected to represent nearly $1 billion in additional annual food-distribution sales for Nash Finch, which already does $3.9 billion in annual sales.
Moreover, this acquisition has become Nash Finch's acquisition paradigm. "This marvelous opportunity will serve as our template for growth going forward," said Marshall, who projects that the current market of 50 to 60 food wholesalers will be cut to about a dozen through consolidation.
The acquisition also includes new distribution to small Midwestern chains such as Riesbeck Food Markets, St. Clairsville, Ohio, and Martin's Super Markets, South Bend, Ind., increasing the supplier's retail customer base to more than 1,500 stores and institutional customers. Those chains, with $100 million to $150 million in sales, are the type Nash Finch is targeting for distribution.
Marshall, who's earned his first spot on SN's Power 50 list, has been CEO of Nash Finch since 1998. The 50-year-old executive developed Nash Finch's greater focus on independent retailers after an enterprise-wide assessment two years ago. "Ron Marshall transformed an archaic organization into a dynamic, growth-oriented company while reducing expenses with better controls," said Larry Babbit, partner of Nash Finch's risk management broker, USI Insurance and Financial Services.
Despite the struggles some independents have had competing against Wal-Mart Stores and large chains, Marshall still described distribution to independent retailers as "the sweet spot in food retail." Smaller independents "have a strong and long future, and we're uniquely positioned to be the wholesaler of choice to these folks," he said. Currently, distribution to independent retailers comprises 60% of Nash Finch's business. And as the distributor to 300 foreign and domestic military commissaries and bases, it is the largest defense commissary supplier worldwide.
Although Nash Finch's primary focus is on its distribution operation, 15% of its business still comes from the 80 stores it operates under the Econofoods, Family Thrift Center, Sun Mart and Wholesale Food Outlet banners. Last year, it closed 22 retail locations, thereby doubling profits in its retail division to $5.6 million. "These were stores where we didn't think we'd be successful," Marshall said. "We have nice market positions in our remaining stores and work to protect those markets, but our real focus is on our distribution business."
Most recently, Nash Finch began converting its Cincinnati distribution center to a dedicated IGA Center of Excellence that will focus on better service and consolidated buying power for IGA retailers in the Midwest. It plans to service all of its IGA customers, currently 100 IGA members, through Cincinnati by the end of the summer, according to Marshall. "It really helps give them advantages that a self-distributing chain would have," he said.
