As if any further demonstration were required, Ahold showed with last week's proposal to acquire Giant Food of Maryland that a real merger frenzy is sweeping the industry. You'll see a lot about that proposed acquisition on Page 1 of this week's SN.
But even in the excitement surrounding big deals such as this one, it's well to recall that the relentless engine of retail consolidation doesn't always propel the industry in a single direction. As is the case with all endeavors, some acquisitions are more successful than others, and all are freighted with the necessity of making countless changes in areas such as store banners, distribution, management, formats, promotions, merchandising and so on.
It's impossible to guess at this point which of these activities would attend Ahold's buyout of Giant Food, or how successful it would be. But the degree to which acquisition drives change and introduces complexity is suggested by the second story on Page 1. The feature is about Jitney-Jungle, the venerable supermarket operator in Mississippi. Jitney is busy integrating Delchamps into its own style. Jitney's management had to grapple with many changes -- such as those earlier cited -- in a bid to fold the two companies together. The ways Jitney's management dealt with problems is instructive in considering how any acquisition is likely to proceed and the unpredictable train of action and reaction that's set in motion.
To cite an example, one of the first decisions made by Jitney's management after last September's acquisition of Delchamps was to shutter Delchamps' distribution center in Louisiana in favor of supplying products from Jitney's own depot. That action was accompanied by a resetting and remerchandising of Delchamps stores.
The in-store efforts apparently paid off since it was soon discovered that Jitney's depot was insufficient to supply products to all stores, so wholesaler Supervalu was brought into the picture.
An acquisition often broadens the portfolio of store formats -- and geography -- a company has under operation. That provides the opportunity for management to take a close look at what makes sense, and what doesn't, not to mention the simple issue of how the surviving company wishes to operate. Such was the case at Jitney. Indeed, Jitney finds itself with a plethora of formats including conventional stores, one-stop Premier stores, warehouse stores under two banners, gasoline stations and liquor stores.
The extent of tinkering with those formats includes rolling out more Premier stores but increasing the emphasis on food merchandising in those stores. Meanwhile, it was decided not to expand the number of warehouse stores.
Jitney is also seeking ways to expand its store base in several areas. Jitney's management wants to expand in New Orleans, but is unsure how that can be accomplished. It's acknowledged, however, that Jitney could be open to making another acquisition, maybe immediately but more likely next year. Memphis is also viewed as a area that holds growth potential and Jitney plans to build stores there since the best acquisition target in that market, Seessel's, went to Albertson's.
Take a look at the news feature about Jitney to get a glimpse into the complexities of combining two companies, and to see the many issues the retail industry will confront increasingly as consolidation continues to dominate the landscape. And, as Fleming's Robert Stauth suggests in a news article on Page 4, acquisition at any price isn't the answer.