Consolidation appears to have moved onto the front burner this year, but the recent acquisitions of several midsized, regional chains don't necessarily signify a trend, observers said.
David Schoeder, principal, The Food Partners, Washington, said that the recent acquisitions of Minyard's and Fiesta Mart in Texas, Victory Supermarkets in New England and Bristol Farms in Southern California were aberrations, noting that most of the acquisitions he expects to see going forward will be of smaller groups of stores rather than whole chains.
"There's been some recent consolidation, but I don't think it's reflective of a trend," he said. "There's going to be continuing consolidation as we realign markets, but it's not going be a radical change in most markets. It can either be divestitures of single stores or multiple stores by one seller.
"We're seeing more and more of those types of 'portfolio sales,' or the unbundling and divestiture of specific stores in a region, rather than 'corporate sales,' or the sale of the overall business."
Steve Smith, president and chief executive officer, K-VA-T Food Stores, Abingdon, Va., said he thinks the best midsized operators are competing quite well and are even growing.
"Speaking for our company, and I think I can speak for other good regional chains, I think it's probably as good a time to be a privately held independent regional chain as there ever has been," he told SN last week. "This doesn't mean that there's not a lot of pressures on us, because any time you have supercenters continuing to expand, it does put pressure on."
At least one analyst think the times are changing, however.
Andrew Wolf, analyst, BB&T Capital Markets, Richmond, Va., said he thinks owners of midsized chains have decided that they can no longer hold out for a high price on their businesses and have begun deciding to exit the industry.
"Executives [of the consolidators] have said that those types of companies have been increasingly for sale," he said. "In the mind of the sellers, there has been a price adjustment."
Neil Stern, senior partner, McMillan-Doolittle, Chicago, said he thinks there have been different forces driving each of the acquisitions that have taken place recently.
"I think everybody's circumstances are unique," he said. "Some of the sales have been driven by financial situations, where if the company did not make a transaction, then it wouldn't have the capital to operate.
Some of it is driven by family transitions, when it's simply the time they chose to get out, and some of it is driven by the strategic moves of companies. In almost any transaction that has happened in the last couple of years, one of those factors is in play, but there are different reasons."
Some observers see opportunities for strong regional independents to be the acquirers themselves. In recent weeks, Buehler Foods, Jasper, Ind., and E.W. James & Sons, Union City, Tenn., have acquired groups of 16 and 10 Winn-Dixie stores, respectively, to expand their operations.
"If anything, I think the recent industry trends suggest that this is really an opportune time for regional, midsized independent groups to grow their companies," said Tom Zaucha, president, National Grocers Association, Arlington, Va. He said he does not see a trend toward more acquisitions of midsized independents.
"I don't think this is the time to sell out," he said. "I think the prevailing attitude is that independent retailers are very much in an aggressive growth mode."
Stern agreed.
"I think it's a great time to be opportunistic in terms of getting great locations or filling out your market area," he said. "Turmoil creates problems, but it also creates opportunities for companies that are in a position to capitalize on them. I think we're going to see that.
"Certainly there are some wonderful and powerful regional and growing chains out there. It's certainly not impossible to continue to exist as an independent. You just need to be in the right financial position to do so."
