St Paul MN Specialty Logistics

On the other hand, Supervalu, also the 10thlargest supermarket retailer, announced that it would focus on building its retail business and continue its long-term strategy of retail acquisitions. In 2001, as part of its
restructuring, the company announced plans to focus its retail operations and capital spending on retail markets with higher-return growth. The company is also accelerating the growth of its Save-A-Lot stores, which is a limited-assortment, “extreme value” chain of supermarkets that targets households with annual income of $35,000 or less. The goal in 2002 is to grow retail earnings to overcome the loss of its Kmart account in 2001. Thus far, Supervalu has chosen to focus on its supply chain logistics in the United States, rather than expanding internationally through export markets or investments in retail operations.
Consolidation Among General-Line Retail Food Wholesalers
The retail food wholesaling sector continues to experience consolidation through acquisitions. Mergers by leading wholesalers, both horizontal and vertical, are reshuffling the ranks of the top companies (app. table
35). Acquisitions can lead to efficiency gains that reduce costs and enable wholesalers to offer more variety to customers throughout a market region. With rapid consolidation by supermarket chains, many grocery wholesalers continue to acquire retail operations to maintain their customer base. Such vertical expansion enables companies to create synergies, cut operating costs, and cater to the geographic idiosyncrasies of cnsumers and retailer customers. Leading wholesalers Supervalu, Fleming, and Giant Eagle (along with BJ’s Wholesale Club) are now among the top U.S. food retailers, with a combined market share of 5 percent. Richfood Holdings has been especially active in merge activity, acquiring other grocery wholesalers to become more cost-effective while servicing a smaller number of small chains. The addition of Super Rite’s distribution facilities significantly increased
Richfood’s warehouse space. And by acquiring the supermarket chain Farm Fresh in 1997, Richfood multiplied its supermarket establishments six-fold. In 1999, Supervalu purchased Richfood, at that time the sixth leading food wholesaler.
Nash Finch, Spartan Stores, and Roundy’s are also pursuing a strategy of supermarket acquisitions. In 2002, Nash Finch had 111 supermarkets, warehouse stores, and mass merchandise stores to better compete with large self-distributing supermarket chains. In 2001, C&S Wholesale Grocers made its first significant entry into retailing by purchasing Grand Union, a retailer that it formerly supplied.
In an industry in which wholesalers’ main customers are independent retailers and small chains, some wholesalers are courting large and medium-sized chains. For example, C&S Wholesale Grocers is a supplier to Giant
Food Stores, whose parent company, A hold, is the Nation’s fifth largest grocery retailer. These wholesalers provide service to chains that, by virtue of their size, are capable of self-supplying but do not.
Top Food Service Distributors Continue
Rapid Consolidation
In 2001, the ten largest broad line distributors to food service establishments accounted for nearly 31 percent of total food service distributor sales ($170 billion) (table 2-2). Sysco Corporation is the Nation’s largest broad line food service distributor, outpacing its nearest competitor by $4.9 billion in sales, or 28 percent. The company accounted for 13 percent of total food service distribution sales. Sysco also ranked 80th in the S&P 500 (based on growth in sales, profits, return to shareholders, etc.); the nearest food industry company, Kroger, ranked 120th. Through a series of vertical acquisitions, Sysco has also entered specialty meat processing (app. table 35). In recent years, food service distributors have been especially active in acquiring other food service disEconomic Research Service/USDA
U.S. Food Marketing System, 2002 / AER-811

References
The Food Institute Report, “Supercenter and
Wholesale Club Growth Continues,” July 30, 2001.
Friddle, C.G., S. Mangaraj, and J.D. Kinsey. The Food
Service Industry: Trends and Changing Structure in
the New Millennium, Working Paper 01-02. The
Retail Food Industry Center, University of
Minnesota, St. Paul, MN, March 2001.

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