INVESTMENT

David Merrefield

The retail food industry in this country isn't well known for investing in, or expanding into, other countries. There are exceptions to this. They include Wal-Mart Stores, H.E. Butt Grocery Co., Costco Cos. and others. But for the most part, American retailers in general, and supermarkets in particular, are a stay-at-home bunch.

It's easy to forget, though, that the reverse isn't true: Investment from outside the United States, particularly from Europe, has been flowing into this country at an increasing rate for a generation. Indeed, considering only major European investment, more than $45 billion of food-retailing business now is done by companies controlled or owned outright by European firms. That amounts to roughly 9.5% of the total grocery sales in the nation.

Let's refresh our memories by identifying the major European players in the United States, and by sketching a quick history of their involvement in this country:

Ahold: This Dutch company has been increasingly active in this country since its initial acquisition of Bi-Lo, South Carolina, in 1977. In subsequent years, it acquired a number of other chains, the latest being Stop & Shop, Massachusetts. Ahold now operates about 830 supermarkets in the United States. Ahold is perhaps the preeminent worldwide food operator now, and it's a good bet that it will continue to buy supermarket chains in the United States.

Tengelmann: This German retailer made an initial investment in A&P, New Jersey, in 1979. It was a bold step at the time to become involved in A&P since there was a lot of fix-up work to be done. But the German group contributed capital that put A&P itself on the acquisition trail.

Delhaize: This Belgian company made its initial buy in the United States in 1974 by investing in an 18-store company in North Carolina called Food Town. That company is now known as Food Lion and, for many years subsequent to the initial investment, was among the fastest growing food retailers in this country. Indeed, starting from that slim base, Food Lion now has more than 1,100 supermarkets in operation.

Aldi: This German company is so quiet that many industry observers are unfamiliar with its magnitude in the United States. The company put down roots in this nation in 1976 and has spread its limited-assortment format through much of the Midwest and into Mid-Atlantic areas. It now operates about 500 stores and generates a sales volume of about $2 billion.

J. Sainsbury: This firm is the second-largest food retailer in the United Kingdom. Its initial investment was in Shaw's Supermarkets, Massachusetts, in 1983. Four years later, Sainsbury acquired the balance of the chain's equity. In 1994, Sainsbury also bought a minority position in Giant Food, Maryland.

Marks & Spencer: This well-known British food and nonfood retailer entered the food business in the United States by purchasing Kings Super Markets, a small regional chain in New Jersey. Since then, the chain has grown slowly, and has developed store locations in Connecticut and New York in the process.

The reason these European companies, and others, have staked out ground in the United States is simple: They achieved market saturation in their home countries years ago. As U.S. retailers face saturation in this nation, look for investment money to start to move from the United States to food retailers elsewhere.