While many of the industry's major players made multiregional acquisitions over the past 12 months, smaller regional companies and wholesalers were also involved in consolidation, albeit on a smaller scale.
But the pressures are the same.
"You've got to get bigger, or you'll be bought out," Gary Giblen, New York-based managing director of Banc of America Montgomery Securities, San Francisco, told SN. "It's no longer viable to stand still.
"Like a shark, any company that isn't swimming fast is going to die."
According to Giblen, it's difficult for companies to grow without acquisitions. "With a lack of population growth, acquisition is a positive way to expand, and regional operators have to look for opportunities that arise when someone else closes a store. And that's a defensive strategy as well, because if you don't buy it, a competitor will."
Chuck Cerankosky, a securities analyst with McDonald & Co., Cleveland, also said many growth moves by smaller operators come out of necessity.
"These regional operators are looking over their shoulders at the bigger guys, and when they have an opportunity to expand significantly, those deals look very attractive," he explained.
"Just as the major players are achieving greater economies of scale to generate synergies, the smaller operators must also find ways to achieve economies of their own while serving their unique niches."
According to Cerankosky, local acquisition opportunities enable regional players to broaden their geographic reach, improve their distribution economies and strengthen their private-label programs.
Several regional chains in California were major beneficiaries of the fallout from the Albertson's-American Stores Co. merger -- which required Albertson's to divest 145 stores -- including the following:
Stater Bros. Markets, Colton, Calif., which added 43 southern California stores to its base of 112 units, enabling it to double its presence in Los Angeles and Orange counties, increase its presence in Riverside County and move into San Diego County for the first time.
Ralphs Grocery Co., Compton, Calif., a division of Kroger Co., Cincinnati, which picked up 40 divested units, including 31 in northern California that provided an opportunity for Ralphs to expand northward, with 17 stores in the Sacramento area.
Raley's Supermarkets, West Sacramento, Calif., which expanded its operations into Las Vegas and New Mexico with the acquisition of 27 units in those two areas.
Top Valu Markets, Carson, Calif., which picked up 11 of the 31 divested stores sold to Los Angeles-based Certified Grocers of California -- a move that enabled Top Valu to increase its store base to 29 units and stake its claim to becoming one of the largest independent operators in southern California.
Among other retailers, consolidation activities over the past 12 months included the following:
A&P, Montvale, N.J., which acquired six stores in New Orleans when locally based Schwegmann Giant Super Markets filed for Chapter 11 protection.
K-VA-T Food Stores, Abingdon, Va., which acquired 18 stores -- 11 Piggly Wigglys in Virginia and seven Winn-Dixies in eastern Tennessee.
Marsh Supermarkets, Indianapolis, which acquired a majority of the assets of Cox Supermarkets, Richmond, Ind., in July, closing one unit and converting the other two to its price-driven LoBill Foods format. Marsh is reportedly in the market for additional acquisitions, although it is often considered a consolidation target itself.
Publix Super Markets, Lakeland, Fla., which solidified its position in Atlanta when it acquired nine stores there from A&P after A&P opted to exit the market.
Shaw's Supermarkets, East Bridgewater, Mass., a subsidiary of J. Sainsbury, London, which boosted its market share in the Boston area with the acquisition of 45 stores from Cambridge, Mass.-based Star Markets -- a deal that also gave it entry into the Cape Cod, Mass., marketplace.
Deals involving wholesalers included the following:
Associated Wholesale Grocers, Kansas City, Kan., which acquired 38 stores in Kansas and Missouri from Falley's -- a chain that has been one of its top five customers, with annual sales of approximately $300 million. While AWG usually buys stores to resell to members, the wholesaler said it felt Falley's had "a certain strategic value as a single unit" and opted to operate it as its only wholly owned subsidiary.
Fleming Cos., Oklahoma City, which spun off three underperforming corporate chains -- Hyde Park Markets, Fort Lauderdale, Fla.; Consumers Markets, Springfield, Mo.; and Boogaarts, Kansas City, Kan. -- to independent operators; it also picked up the business of 14 H.G. Hill Stores in Nashville, which are being operated by a variety of independent owners.
The spinoffs came as part of a strategic overhaul by new Fleming top management aimed at eliminating financial setbacks by concentrating on top-performing chains.
Spartan Stores, the Grand Rapids, Mich.-based wholesaler, which sought to reinvent itself by jumping into the corporate store business in a big way with the acquisitions of three Michigan chains totalling 44 stores -- Ashcraft's Markets, Harrison; Family Fare, Hudsonville; and Glen's Markets, Gaylord. The company said its goal is to compete on a more even playing field with other wholesalers that own corporate stores.
According to James B. Meyer, president and chief executive officer, "Our objective [is] to assure sales volume for the warehouse and to secure the greater efficiencies that arise from this structure. Continuing strictly as a wholesaler would preclude us from accessing the growth so critical to our future. So Spartan Stores is reinventing itself to stay competitive and to effectively service the independent retailer of the future."