MELROSE PARK, Ill. -- Jewel Food Stores here -- a division of American Stores Co., Salt Lake City -- said last week it will enter the Milwaukee market with its Jewel-Osco combination stores when it completes the purchase of five stores there Feb. 14.
Four of the stores are owned by Cub Foods, a division of Supervalu, Minneapolis; the fifth is an independently owned unit of Pick 'n Save, a banner store from Roundy's, Pewaukee, Wis.
In addition to acquiring the four Cubs from Supervalu, Jewel officials said the wholesaler will become the secondary dry grocery supplier for Jewel's 183 supermarkets in Illinois, Indiana, Iowa and Wisconsin, replacing the La Crosse, Wis., division (formerly Gateway Foods) of Fleming Cos., Oklahoma City.
"Supervalu already knows what items Milwaukee shoppers like and they already stock them," Karen Ramos, Jewel's director of public relations, told SN, "so with Supervalu as our partner, we won't miss a beat."
Jewel operates 13 stand-alone Osco drug stores in Milwaukee and has previously disclosed plans to build five Jewel-Osco combos there over the next two years. The five-store acquisition will give the chain an immediate supermarket presence there, the company pointed out -- its first since the late 1970s, when it left the Milwaukee marketplace.
Debra Levin, a securities analyst with Morgan Stanley Dean Witter, New York, said the acquisition of stores in Milwaukee will help Jewel-Osco achieve critical mass immediately rather than over a longer period.
"It enables Jewel to enter the market with a strong food-store presence, rather than adding one unit at a time over several years," Levin said. "Entering with five stores will help with advertising synergies and build customer awareness much more quickly."
Supervalu officials declined to indicate how much volume they expect to pick up as Jewel's secondary grocery supplier. "We were not a supplier to Jewel before this deal, and we are very pleased with the additional volume," a spokeswoman told SN last week.
The four Cubs are the only stores Supervalu operates in the Milwaukee area. Asked why the company opted to leave the market, the spokeswoman replied, "Our presence there was fairly small, and when this opportunity [to sell the stores and become Jewel's secondary supplier] came along, it fit our strategy of serving chain business while allowing us to take the resources from the sale of those stores and put them into other markets where we have a larger store base."
Observers said the four Cubs average 75,000 square feet and the Pick 'n Save is about 65,000 square feet. The five stores are fairly widespread over the Greater Milwaukee area, local observers told SN.
Jewel officials said four of the five stores will be closed Feb. 15 to 18 for computer conversions; once they reopen Feb. 19, they will remain open for business during the six-month remodeling process. The other store, a Cub in Bay View, Wis., has been closed since August 1995 and will reopen following remodeling, the officials added.
According to the company, the remodeled Jewel-Oscos will feature a full pharmacy; a Chef's Kitchen deli; a fresh bake shop; a floral shop, including cards and gifts; a one-hour photo shop and camera department; service meat and seafood; and an in-store bank.
