Supervalu: IT services, product supply combo enough to overtake competitors

Supervalu Inc. is targeting smaller distributors that may not be able to keep pace with customer needs, CEO Mark Gross said Thursday during Goldman Sachs’ 24th Annual Global Retailing Conference.

“We are a consolidator,” said Gross. “What’s driving the opportunities in our business is the customer looking for an ever-greater degree of product diversity.”

The bulk of Minneapolis-based Supervalu’s wholesale customer pool includes merchants and smaller operators, and Gross estimates that the majority of the clientele has between five and 50 stores. They are “deeply connected to their local communities,” and are “in no way cookie cutter,” he said.

These clients are looking to offer the same level of selection as larger competitors, while also utilizing the tools that bigger brands wield in-house at an affordable price.

Gross believes Supervalu is the answer for this level of the market and pointed to its recent expansion into tech solutions as an example as to why.

“We needed someone who understood the business, and Supervalu has the people and the bandwidth and the purchasing power to be able to provide that,” Jerry’s Chief Information Officer Jeff Miller told SN last month while discussing the decision to have Supervalu handle the 50-store retailer’s IT needs.

“It’s the same reason we buy Nabisco through them,” he continued. “We could go and buy it direct ourselves, but Supervalu can execute that wholesale portion better than we can.”

“Plenty of our customers can run their own IT departments, can run their own systems,” Gross added Thursday. “Just because you can do it doesn’t mean you should be doing it. I think we bring the scale to be able to afford that right infrastructure.”

Gross also believes that Supervalu’s tech and product supply combo is a recipe that other competitors will be unable to compete with.

“You have a large number of smaller distributors that have come to the realization that they are not best equipped to service their customers and there lies the opportunity to consolidate those distributors into our world,” he said. “The largest example of that being the deal that we just did with Unified Grocers.”

Supervalu gained a foothold with independent West Coast grocers earlier this year after acquiring Unified Grocers Inc. for $390 million.

“The completion of this transaction is a significant step forward for SUPERVALU and the growth of our wholesale business,” Gross said in a statement when the deal was finalized. “Our teams are fully engaged in the important work of integrating these two great organizations with a continued focus on delivering for our customers and stockholders. We’re excited about working with the many talented associates to supply and serve our expanded and highly diverse customer base.”

Also during Thursday’s presentation, Gross said that the wholesaler’s retention rate has eclipsed 99.5% as of the last reporting. He mentioned that the company’s wholesale business is growing at a clip of about 12% and he expects that number to grow after the Unified acquisition.

The pipeline for new opportunities is “very strong,” Gross said.

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Twitter: @DanAMX