NEW YORK — The wholesale segment of the food industry is “ripe for consolidation,” Jeff Noddle, chairman and chief executive officer of Supervalu, Minneapolis, said at a financial conference here last week.
Though it's unlikely Supervalu will be involved in any near-term consolidation among wholesalers, it is going to happen, Noddle told the 15th annual Goldman Sachs Global Retailing Conference.
Member-owned cooperatives will be among the consolidation targets, he said.
He said Supervalu has gone after some co-op members, “though we've very selective in the retailers we want,” he added.
Asked whether Supervalu has explored opportunities to monetize some of its non-core assets, Noddle said he considers all of the company's businesses as core assets.
“But our board of directors is very diligent, and it considers all options, and if it believed the growth of our business was compromising our ability to achieve shareholder value, it would take whatever actions it felt necessary.”
Asked about opportunities for growth of its hard-discount Save-A-Lot operation, Noddle said the company had considered opening more corporate-owned units, “but the appetite for growth among our licensees was so strong that we've changed our minds, and in the current economy, we anticipate the appetite for licensees to put more capital at risk will go up.
“However, there's a reluctance by licensees to go into new markets — they prefer buying out other licensees in established locations — so we're opening corporate stores in new markets.”
Noddle said Supervalu expects distribution sales to drop in the next couple of quarters as Target begins supplying more of its own perishables through the two distribution centers it has opened in Texas and Florida.
“But we're still supplying both of them as that business migrates to their facilities, and in both cases, they've hired us to run those facilities for them, so there will be income from that relationship. And their next facility is not scheduled to open for more than a year.”
In other remarks:
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Noddle said Supervalu anticipates launching two new programs later this month now that its new marketing department is in place: a national branding campaign, tailored to each of its banners but with a single theme, and the company's first direct customer-centric marketing effort, with fliers sent to households tailored to their specific shopping patterns.
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Own-brand penetration is increasing “a little faster than we thought it would,” he said, with the current level of 15% likely to rise to 16% or 17% by mid-2009 and to 20% by fiscal 2012. Supervalu introduced a new private brand last week called Culinary Circle. (See Page 43.)
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Noddle said he does not anticipate any substantial changes in the macro-economic environment over the next six to 12 months, “though the rate of inflation should subside from 5% to 6% now to a more normal 2% to 3% by late 2009,” he noted.
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Operating margins are likely to remain under pressure, due in part to rising energy costs — “not so much the price of gas, but the costs of refrigeration at store level,” he said.
