COPPELL, Texas — After a proposed merger with Fiesta Mart fell through, Minyard Food Stores here has opted to sell 37 of its Hispanic- and warehouse-format stores to Grocers Supply Co., Houston, and focus its full attention on its conventional Minyard-banner stores, the company announced last week.
Michael Byars, president and chief executive officer, Minyard, declined comment on whether the investment group that owns Minyard might seek to sell the 20 stores it will continue to operate.
“The investment group and the management team will do what's in the best interests of the company and our customers,” he told SN. “Our strategy for today is to leverage our strengths by focusing on running and growing the stores as much as possible. I can't say what tomorrow will bring.”
Byars said the company will retain 21 of its 58 stores, though it will close one of them when the lease expires later this year.
He declined to specify the price Grocers Supply will pay for the stores or how Minyard will use those funds. “We've made no decision at this point on whether to dedicate any of those resources to remodels,” he told SN.
Sales at the 58 stores Minyard operates are running around $900 million, according to industry sources. The sale of the 37 stores will remove about two-thirds of that volume, leaving the company with a sales base of approximately $300 million, they pointed out.
The stores Minyard will sell to Grocers Supply encompass 23 Hispanic-oriented Carnival stores (and the Carnival name); nine Sack 'n Save warehouse stores; and five Minyard stores, plus five of 15 fuel stations and 15 of 34 in-store pharmacies.
All purchases are expected to be finalized by the end of the year.
Grocers Supply, with sales of approximately $2.3 billion, already supplies a number of independent operators in the Dallas-Fort Worth metroplex out of its Houston facilities. With volume from the 37 stores estimated at $600 million, the wholesaler will be operating at close to $3 billion once the deal is completed, according to industry estimates.
Dave Hoffman, chief operating officer of Grocers Supply, told SN the wholesaler has no immediate plans for other acquisitions.
He said 11 of the Carnival stores will be merged with the 15 Fiesta Mart locations the company operates in the Dallas-Fort Worth metroplex. Grocers Supply acquired Fiesta in 2004 and operates 50 Fiesta units across Texas, including 33 in Houston, two in Austin and the 15 in the metroplex.
Of the other 26 stores Grocers Supply has agreed to acquire, virtually all will be sold to existing customers, Hoffman told SN, “though one or two may close because of lease issues.”
Fiesta plans to convert most of the acquired stores to its own banner, Hoffman said, though it may continue to operate a couple under the Carnival name.
According to Byars, Grocers Supply approached Minyard several months ago and indicated some of its customers were interested in acquiring some of the Minyard and Sack 'n Save locations.
“We raised the possibility of a merger between Fiesta and Carnival — some sort of co-investment in the Carnival brand — but they told us they were interested in buying some stores, but not in a merger. But they said they would consider acquiring not just the stores their customers were interested in, but also the Carnival brand itself, and as we considered that, it made sense as the best way to achieve superior returns for both companies and an opportunity for us to streamline our operations under the Minyard banner.”
Minyard switched from self-distribution to buying from Associated Wholesale Grocers, Kansas City, Kan., early in 2007. Asked whether AWG was given a chance to buy some of the stores that Grocers Supply will acquire, Byars told SN, “Different parties were given a chance to explore various opportunities,” though he declined to elaborate.
In a prepared statement, Gary Phillips, president and CEO of AWG, said, “Market consolidations are a normal part of the retail food business, and this one had been anticipated.” He said AWG will continue to supply the Minyard stores that the company will retain.
According to Byars, the changes in ownership will benefit many constituencies. “By acquiring a major competitor, Grocers Supply will grow its Fiesta chain almost 100% in the Dallas-Fort Worth metroplex and nearly 30% overall; our associates that are hired by Grocers Supply will be part of a much larger, growing Texas banner and will have greater career opportunities; and our mutually shared vendors will benefit from simplification and consolidation of channels,” he explained.
Minyard was acquired from the Minyard family by a Texas-based investment group that includes Byars in late 2004; two years later the company said its primary growth vehicle would be the Carnival-banner stores, which the company was already operating at the time the original owners sold the chain.
“However, the competitive grocery environment, the weakening economy and the complexity of running three banners (conventional, Hispanic and warehouse) in the same market weighed on competitiveness,” Byars said last week. “Returns were acceptable, but not what we had originally targeted.”