Save A Lot shifts to wholesale model

Save A Lot is transitioning to a wholesale business model in which the discount grocer plans to sell more than 300 corporate-operated locations to current and new retail partners.

St. Louis-based Save A Lot said Monday that it has sold 51 company-operated stores in the Tampa, Fla., market to independent grocer Fresh Encounter Inc., which will continue to run those locations under the Save A Lot banner. 

“We are excited to expand our partnership with Michael Needler and the Fresh Encounter team, who have been fantastic partners, strong operators and excellent ambassadors of the Save A Lot brand,” Kenneth McGrath, CEO of Save A Lot, said in a statement. “Through the relicensing transactions we are executing across our footprint, we believe that we will be even better-positioned to continue to serve the communities in which we operate. We currently have a dedicated group of retail partners that we support, and we look forward to helping other entrepreneurs own, operate and succeed in their own business.”

Findlay, Ohio-based Fresh Encounter, a current Save A lot licensee, operates supermarkets in Ohio, Kentucky and eastern Indiana under such banners as Great Scot, Community Markets, Germantown Fresh Market, Needler’s Fresh Market, Remke Markets, Sack n’ Save, King Saver and Chief Supermarkets. 

Related:Save A Lot stores in Nashville acquired by local investor

“The Fresh Encounter family of companies has a culture that prioritizes being positive, appreciative and resilient and we are eager to onboard the new Florida associates. Over the past several months, I have toured stores in the greater Tampa market, and I’m impressed with the Save A Lot team,” stated Michael Needler Jr., president and CEO of Fresh Encounter. “I am truly humbled to be joining them in delighting our customers, nourishing the communities and inspiring pride in the team. Kenneth and [Chief Operating Officer] Kevin Proctor and the rest of the Save A Lot corporate team are transformative, and we are equally eager to join their efforts in re-establishing the Save A Lot brand for tomorrow’s competitive environment.”

To date under the relicensing program, Save A Lot has executed seven sale transactions encompassing 82 stores, including the Tampa locations being sold to Fresh Encounter. Save A Lot said that as multiple transactions near completion, the company expects to wrap up the transition of most corporate stores to independent ownership in 2021. 

In October, four Save A Lot supermarkets in Nashville, Tenn., were acquired by J. Word Enterprises LLC, an affiliate of real estate investment firm J. Word Properties. With the deal, J. Word Enterprises became Save A Lot’s retail partner in Nashville.

Related:Save A Lot lands $350 million in new capital

Plans call for Save A Lot to retain 21 corporate-operated stores in St. Louis, which will serve as a testing ground for innovations to help the company’s retail partners nationwide. Overall, Save A Lot operates 14 distribution centers and has a retail network of more than 1,000 stores in 33 states, with the vast majority of the locations licensed by over 200 independent grocers. 

New York-based PJ Solomon is serving as Save A Lot’s financial adviser for the store relicensing program. Earlier this year, PJ Solomon advised Save A Lot on a balance sheet recapitalization that involved over $1 billion of debt and reduced the retailer’s total leverage by more than $500 million. Save A Lot then announced in April that, as part of its refinancing, the company secured $350 million in new capital to help its business transformation plan. Save A Lot's recapitalization led to the departure of Canadian private-equity firm Onex Corp. as the chain's owner.

“Through the relicensing program, Save A Lot is transitioning to a pure-play wholesale model (with the exception of 21 stores in its home St. Louis market), which will allow the company to be completely focused on its core mission of providing over 200 Save A Lot retail partners and their customers high-quality groceries at low prices every day,” Scott Moses, managing director and head of food retail and restaurant investment banking at PJ Solomon, said in an email on Monday. “Kenneth McGrath and the Save A Lot team have been doing extraordinary work this year, across over 1,000 store communities, demonstrating the importance of making affordable groceries available to customers, particularly during this very challenging economic time.”

Onex had acquired Save A Lot in December 2016 for about $1.4 billion from Supervalu Inc. Now part of United Natural Foods Inc., Supervalu had previously explored a spinoff of Save A Lot. 

On the 2020 Supermarket News Top 75 list of the largest grocery retailers and wholesalers, Save A Lot finished 43rd in sales at $3.66 billion for the 2019-20 fiscal period, down 9.9% from 2018-19. The retailer was No. 19 by store count, though its number of locations fell by 127 (-10.1%) versus a year earlier.

In a late February interview with SN at the National Grocers Association convention, Save A Lot's Proctor said the retailer differs from other discount grocery models — namely, Aldi and Lidl — through its stores’ localized assortments and local ownership. This enables independent grocers under the Save A Lot banner to cater their customers and communities while maintaining the benefits of a value grocery model: a heavy focus on private label, limited assortment, a low-cost operational model, and an easy-to-shop store layout.