TUCSON, Ariz. -- The number of national or multiregional chains will level off at between five and 10 as consolidation continues, Jonathan Ziegler, San Francisco-based managing director for Deutsche Banc Alex. Brown, New York, said here.
Ziegler said the list of national chains would probably include Ahold USA, Chantilly, Va.; Albertson's, Boise, Idaho; Kroger Co., Cincinnati; Safeway, Pleasanton, Calif.; Supervalu, Minneapolis; Target Stores, Minneapolis; Wal-Mart, Bentonville, Ark.; "and possibly (Paris-based) Carrefour, which is snooping around the United States looking for an acquisition."
In remarks to the annual meeting and leadership conference of the Private Label Manufacturers Association late last month, Ziegler said regional supermarkets are likely to disappear -- primarily the victims of the growth of "the more powerful Neighborhood Markets" that Wal-Mart is opening, he noted.
Investor interest in e-commerce companies has shifted the focus away from food stocks in the last couple of years, Ziegler said. "We're seeing insane valuations in e-stocks right now, as the new economy attempts to make the supply chain more efficient. But I hope investors come back to more traditional food stocks."
He said consolidation activity in the United States is in a lull right now "because there's a lot of digestion (from previous consolidations) going on. in addition, with food stocks down, the currency of acquirers is less attractive.
"But there are a lot of negotiations going on, and we should see a start-up of some new activity later this year."
In other comments, Ziegler said:
Some drug store chains are likely to seek mergers with related formats, including supermarkets.
The convenience store industry could form business combinations with e-commerce companies, as exemplified by 7-Eleven Japan, whose stores serve as pickup points for merchandise purchased over the Internet.
Wholesale clubs are "still an amazing growth sector," with little need for new companies beyond the three industry leaders (Costco, Issaquah, Wash.; Sam's, Bentonville, Ark., and BJ's, Natick, Mass.).
Priceline's Internet model "makes sense for pricing airplane trips, but it's very convoluted and complex for food, and I don't think it will be a workable model for the long term."
The pending acquisition by Ahold of U.S. Foodservice "is visionary, because it gets Ahold into a whole new arena of the food business, and new geography as well. I'm surprised it hasn't happened sooner."
Opportunties for private-label manufacturers are plentiful, particularly as more European-based companies expand in the United States. "As the Asian economy gets better, there are opportunities there for private label as well."
