Martin's reportedly selling its 19 stores in the Richmond area as part of merger
Martin’s entered the Richmond grocery market in 2010 when it bought Ukrop’s Super Markets for $140 million. The chain has 22 stores in the area, but previously announced it would close three of them this summer.
Posted: Monday, March 21, 2016 12:45 pm
The 19 Martin’s Food Markets stores in the Richmond region likely will be sold or closed this year as part of a planned merger, according to an industry trade publication.
The Kroger and/or Publix supermarket chains could be the likely buyer of those stores.
The sale of the Martin’s stores would be needed to satisfy federal regulators so Dutch retail conglomerate Royal Ahold NV — which operates U.S. supermarket chains Martin’s, Giant and Stop & Shop — can combine this year with its Belgian counterpart Delhaize Group, which owns Food Lion and Hannaford stores. Shareholders of both companies approved the deal last week.
The combined companies are offering a total of 83 stores for sale where it potentially has overlapping store locations, including the 19 Martin’s stores in the Richmond area and one Martin’s store in Staunton, according to Maryland-based industry publication Food World, which reported the list on its website Monday. The list also shows 43 Food Lion stores, including 10 in Virginia (in Culpeper, Front Royal, Purcellville, Stephens City and Winchester).
“My prediction is that this is the end of Martin’s in Richmond and what they can’t sell, they will likely close,” Jeffrey W. Metzger, publisher of Food World, said about the local Martin’s stores.
Martin’s has 22 area stores, but the chain late last year said that it plans to close three stores this summer unrelated to the planned merger.
Christopher Brand, a spokesman for Ahold USA, which runs the Martin’s and other supermarket chains in the U.S., would not confirm if the Martin’s stores here are up for sale. “As part of any merger approval process where there may be store divestitures, store visits may be conducted by potential buyers but it’s too early to speculate on the outcome of the (Federal Trade Commission) review process.”
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Possible buyers of the Martin’s stores, Metzger predicts, are: Kroger Co., the Ohio-based chain that continues to gain market share since entering the Richmond market in 2000 by opening or remodeling stores; and/or Publix Super Markets Inc., the Florida-based chain that announced in early February that it had signed a lease for a 49,000-square-foot store in western Henrico County that would open sometime in 2018.
“This makes a lot of sense for Publix or Kroger to be the two most likely buyers,” Metzger said. “For Kroger, it allows them to fill in areas that they currently don’t occupy in the Richmond market. For Publix, it allows them to beef up their entry in the market.”
Publix, the nation’s largest employee-owned grocery chain, typically grows organically by opening one or two stores in a market at a time over years, he said.
“This has not been the usual path for Publix, but this is a very unusual opportunity for Publix,” Metzger said about the possibility of the chain buying the local Martin’s stores.
Last month, a Publix spokeswoman said the chain was “looking aggressively to grow” in the Richmond area and elsewhere in Virginia. The chain, known for its top-notch customer service, also has signed a lease for a store in Bristol that is slated to open in the fourth quarter of 2017.
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What’s unusual about Ahold-Delhaize’s plans is the combined companies apparently have decided to put all of its Martin’s stores in the Richmond area up for sale rather than any of Delhaize’s Food Lion stores.
“If you look at the entire list, the overwhelming banner that they are attempting to remove where there is overlap is Food Lion except in two areas — Richmond and Fredericksburg,” he said.
The list shows six Giant stores in the Fredericksburg area to be sold or closed. That would mean the combined companies would opt to keep the 10 Food Lions stores in that area open.
“My thinking is the bleeding is more intensive at Martin’s and, related but separately, they believe they have a better chance of selling a Martin’s store rather than a Food Lion store in the Richmond area.”
Martin’s, which entered the Richmond market in 2010 by buying the Ukrop’s Super Market stores for $140 million, holds the No. 1 spot in market share in the Richmond region, based on sales, according to the annual grocery market survey released last June by Food World. The company had 15.42 percent of the total market for the 12 months that ended March 31, 2015, generating estimated sales of $549.24 million at its 22 area stores.
Food Lion, which entered the Richmond market in the mid-1980s, has 45 area stores. It ranked third in the market with sales of $518.9 million, or 14.57 percent, falling from the No. 2 spot in the previous year’s rankings.
A new market share report will be released in June.
But Martin’s and Food Lion have been losing market share in recent years, Metzger said.
Besides, he said, the Richmond area is a highly competitive market and will continue to be so as new chains enter the market.
High-end grocer Wegmans will open two stores in the area this year. Super frugal Aldi has opened six locations in the past year and has three more on the way. German-based Lidl continues its preparations for entry into the market, as it has bought five area sites. In addition, Walmart has expanded by opening four of its Neighborhood Market grocery-only stores in the past year.
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Ukrop’s Homestyle Foods could be hurt if the area Martin’s stores are sold or closed.
The Henrico County-based company makes bakery items and prepared foods for Martin’s and other grocery stores. Martin’s is Ukrop’s Homestyle Foods’ single largest customer, said Robert S. Ukrop, the company’s president and chief executive officer who is the former longtime president and CEO of the Ukrop’s Super Markets chain before his family sold it.
“It is business as usual for us and we will continue to keep serving Martin’s as we have been,” Ukrop said. “Our hope is that whoever purchases them, should they be sold, that we will continue to be a supplier to the new owners or operators should that happen.”
Ukrop’s Homestyle Foods has diversified since being created in 2010 after the family grocery stores were sold. The company supplied its food products to about 30 grocery stores — nearly all Martin’s — but now ships bakery and prepared foods to more than 1,500 stores in 31 states.
Most of those products are its famed White House Rolls, which are sold at Kroger stores here and in other parts of the country as well as at other retailers. The White House Rolls and other bakery items are sold under the Good Meadow Homemades brand.
“Martin’s sees the relationship with us as a positive thing for them and the Richmond community that our food is in their stores,” Ukrop said. “Hopefully, the new owners, should it come to pass, will see us the same way.”
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Brett McNamee, a senior vice president of the Richmond office for Divaris Real Estate Inc., said she was surprised that the local Martin’s stores reportedly are up for sale.
“But this will open up an opportunity for some of the existing grocers and open up for those who are not currently in the market,” McNamee said. “I hate to see Martin’s go, but somebody will be extremely fortunate to take over the real estate that they have.”
That opportunity could be similar to how Kroger entered the Richmond market in 2000.
Kroger bought stores in the Richmond and Hampton Roads market that had been operated by Hannaford Bros. Co., then a Maine-based supermarket retailer that entered the Richmond area in late 1995.
Hannaford wanted to merge with Food Lion in 2000. In order for the merger to be approved by federal regulators, Hannaford had to sell its 38 stores in Virginia and North Carolina to resolve antitrust concerns where Hannaford and Food Lion competed in the same market.
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The Federal Trade Commission is reviewing the Ahold-Delhaize merger, but it has not ruled yet.
“It probably has been in discussions with Ahold and Delhaize about the overlaps. They (the chains) are being proactive with this list of stores,” Food World’s Metzger said.
The combined company has put out a list to possible buyers to gauge interest, he said. The next round would be to submit specific bids.
The merger remains on track for completion in mid-2016, Ahold USA’s Brand said.
Ahold and Delhaize are reportedly offering a combined 83 stores for sale in the Richmond, Baltimore-Washington, Eastern Shore, Southern Pennsylvania, West Virginia, Lower Hudson Valley and Greater Boston markets, the Food World report said.
In addition to the 19 Martin’s stores here and one in Staunton, the list shows nine stores operating under the Giant banner, 43 under Food Lion, eight as Hannaford and three as Stop & Shop.
Martin’s late last year announced that it would close three stores this summer — in the Stony Point Shopping Center off Huguenot Road in South Richmond, at 7324 Bell Creek Road in Hanover County and at 3330 South Crater Road in Petersburg. The company said the store closings were unrelated to the merger.
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