DOWN TO BUSINESS – To Phil Lempert, who watches and reports on food trends as The Supermarket Guru, it was an “industry wake-up call, an earthquake, if you will,” as he wrote on Forbes.com, when grocer Aldi announced a deal last week to buy two established supermarket chains with 400 stores in the Deep South.
Aldi is a limited-assortment discounter offering mostly private-label brands in small stores, well-known for charging customers a refundable quarter to use a shopping cart and requiring they step away from the registers after paying to pack their own purchases.
By contrast, the cash deal for Winn-Dixie and Harveys Supermarket, expected to close early next year, involves traditional, full-service grocers with butcher and seafood counters, in-store bakeries, and large, colorful produce sections in much bigger stores.
Winn-Dixie and Harveys are part of Florida-based Southeastern Grocers, which grew through merger to become the No. 2 supermarket operator in the five states in which it has stores, the company stated in a 2020 planned initial public stock offering that was later withdrawn.
Now, it’s selling off the supermarkets it owns, which also includes the smaller Fresco y Mas chain. The sales are reportedly tied to the pulled IPO, which had been seen as the cash-out vehicle by a group of investment funds that helped Southeastern exit bankruptcy in 2018. When that didn’t materialize, divestiture became the fallback.
Speculation late last year on a likely buyer mentioned the national chains Kroger and Albertsons, but they’re too busy trying to get government approval for their own merger. Ahold Delhaize, parent to the Hannaford chain locally, also was named, since that company already operates in the Carolinas under the Food Lion banner, which added 60 locations in 2020 purchased from Southeastern.
But, instead, Aldi swooped in.
“Aldi surprised the entire industry,” Lempert stated Monday in his weekly Lempert Report on YouTube. “This play is brilliant on Aldi’s [part].”
Founded in Germany, Aldi came to the U.S. in the mid-1970s and today has 2,300 stores in 38 states, with more than 200 each in Illinois, where it’s based, and in Florida. New York has 127 locations, with a dozen in the Capital Region.
The company plans to get to 2,400 stores by year’s end.
In announcing its deal for Winn-Dixie and Harveys, Aldi said it entered the Southeast in the 1990s and has invested $2.5 billion there since then. No financial terms for the acquisition were released. The stores are in Florida, Georgia, Alabama, Mississippi and Louisiana.
Some will be converted to the Aldi format; those that aren’t will continue as Winn-Dixie and Harveys stores.
Invoking the name of Florida’s largest grocery chain, Publix, Lempert opined that if Aldi’s attention to curation and private-label quality — its DNA, as he called it — can be passed along to Winn-Dixie, “I think that Publix is really going to be in for a major competitor.”
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected].