Schnucks Buys Chain From Kroger

JON SPRINGER

ST. LOUIS — Schnuck Markets, which earlier this month sold a handful of Memphis-area stores to rival Kroger Co., last week returned the favor, acquiring seven Hilander stores in Rockford, Ill., from Kroger.

Financial terms were not disclosed.

Schnucks said it would operate the stores under the Hilander banner, at least initially. The stores were scheduled to close temporarily and reopen this week.

“We don't intend to make any major changes right away,” Scott Schnuck, chief executive officer of Schnuck Markets, said in a statement. “Although we have been successfully operating in the market for 13 years, our focus now is on combining the experience of both workforces and enhancing our understanding of what today's Rockford customers really want and need from their neighborhood market.”

The Hilander stores range in size from 30,000 to 81,000 square feet and employ around 715 workers. Schnuck said it would retain the “vast majority” of employees.

The deal brings together longtime Rockford brands that began as family rivals. Cincinnati-based Kroger has operated Hilander stores since acquiring the banner from its family owners in 1998, only months after Schnucks gained entry to the region though the acquisition of area Logli stores.

Johanna Koslofski, a broker at Re/Max Valley realtors in nearby Roscoe, Ill., said if history repeats itself the deal should be good for Hilander.

“I think Schnucks will breathe new life into Hilander,” she told SN. “That's what happened when they bought out Logli — they brought in better displays, especially in produce, and run cleaner stores.”

According to Koslofski, Logli traditionally had working-class appeal while Hilander was better known for specialty offerings, but those attributes had begun to reverse themselves in the years since their respective takeover. Both brands in the meantime have been under pressure from alternative formats including Wal-Mart supercenters; Woodman's, the Janesville, Wis.-based warehouse store that expanded to Rockford in 2001; and discounters Save-A-Lot and Aldi.

The Hilander acquisition would give Schnucks control of 11 stores in the Rockford market and vault it from third in market share to first. Wal-Mart Stores was Rockford's leading food retailer, with a 33.5% control of the market in 2010, according to Metro Market Studies, Tucson, Ariz. Kroger's Hilander was No. 2 at 23.6%, and Schnucks controlled 14.9%. Rockford, about 90 miles west of Chicago, has a population of around 367,000.

Although Kroger earlier this month announced the acquisition of most of Schnucks' holdings in Memphis — nine supermarkets and eight convenience stores — a spokesman for Kroger said the Hilander sale was a separate transaction and not a swap, noting the retailer's Indianapolis-based Central Division operated Hilander and the Delta division of Memphis handled the Schnucks purchase. Kroger has already reopened many of the Memphis properties under the Kroger banner.

The sale leaves Kroger with 54 stores in Illinois, most operating under the Kroger banner in the southern part of the state and others under the Food 4 Less format around Chicago. Observers initially considered Kroger's acquisition of Hilander as a prelude to a larger expansion to Chicago, but such a move never materialized.