For Minneapolis-based Supervalu, 2006 marked a new beginning.
No longer would the company be the nation's largest wholesaler, which happened to operate a network of far-flung regional supermarket banners. Instead, with the acquisition of Albertsons, Supervalu transformed itself into one of the nation's largest operators of traditional supermarket outlets — a $44 billion company where wholesaling accounts for only about 20% of its revenues.
The move not only redefined Supervalu, but it also had repercussions throughout the industry, as the 661 Albertsons stores it chose not to acquire went to a private equity consortium that immediately began closing and selling them off. That, combined with the closure of hundreds of Winn-Dixie sites in the Southeast and the gradual dismemberment of Tops in the Northeast, has helped reduce what many analysts described as an overcapacity of food retailing square footage in many markets.
It also created opportunities for regional independents to grow their businesses, as companies like Modesto, Calif.-based Save Mart agreed to acquire Albertsons' Northern California operations, and Pittsburgh-based Giant Eagle said it would buy 13 Ohio Tops stores.
The closures haven't hurt Kroger and Safeway either, as the two mega-operators benefited from the Albertsons breakup and also from the fruits of their own distinct marketing strategies.
This year also marked a new beginning for Winn-Dixie, which had its bankruptcy reorganization plan approved amid skepticism that the company can mount a comeback against the likes of Publix Super Markets and Wal-Mart Stores.
Meanwhile, just as it seemed some rationalization might be entering the industry, along came Tesco, considered to be among the premier food retailers in the world, which unveiled plans to roll out a new, small-format food store to hundreds of locations in the Southwest, starting next year. The company has enjoyed success in expanding its customer-centric business model to countries throughout the Eastern Hemisphere, but some observers say “Fresh and Easy” will be anything but in the rough-and-tumble world of U.S. food retailing.