Publix's move into Virginia likely the beginning of rapid expansion, analyst says

Feb 2, 2016, 2:49pm EST Updated Feb 2, 2016, 2:53pm EST

Ashley Gurbal KritzerReporterTampa Bay Business Journal

As other grocery chains falter, expect Publix Super Markets Inc. to rapidly expand to new markets, an analyst said.

The Lakeland-based grocer on Tuesday announced it is planning two stores in south central Virginia: One in Bristol and one in the Richmond area. It's the first time Publix has announced it would enter a new state since 2012, when it confirmed it would open stores in North Carolina.

An analyst expects Publix Super Markets Inc. to grow quickly.

PUBLIX SUPER MARKETS INC.

Phil Lempert, owner of SupermarketGuru.com, said he expects this move is the first of many, and that the pace of Publix's expansion into new markets will accelerate in the years ahead.

"I think you’re going to see a bunch of moves by Publix to get bigger, to expand," Lempert said. "Being employee-owned, they've got a very loyal employee base, and customers love them."

That strong foundation, Lempert said, is bolstered by other grocers' struggles.Walmart Stores Inc. (NYSE: WMT) is grappling with its grocery business, and specialty grocers like Whole Foods Market Inc. (NASDAQ: WFM) and The Fresh Market (NASDAQ: TFM) are "stumbling" in certain markets, Lempert said.

"It's a good time for them to expand," Lempert said. "There have been a lot of changes in the supermarket world. Publix is strong — they know what they’re doing."

David J. Livingston, owner of DJL Consulting in Wisconsin, said Publix's entrance into Virginia is reminiscent of when it expanded into North Carolina. There are several "vulnerable" grocers in the Virginia market, Livingston said, beyond the big national players, including Food Lion.

"If I'm Publix, I'm thinking, 'Wow, this is some low hanging fruit. I better go there,'" Livingston said.

Still, Lempert says it will be a competitive market for Publix. Kroger Co. (NYSE: KR) controls close to 20 percent of that grocery market, between its stores and the Harris Teeter banner, according to The Shelby Report, an industry trade publication. (See more below.) Kroger acquired Harris Teeter in 2014.

Besides being close to its existing supply chain, the stores in Virginia will also reach a key demographic, Lempert said: Millennial foodies. Richmond, while a small city, is consistently recognized as a place with an up-and-coming restaurant scene.

"Publix will want to go where the people are who love food, who love service and they never want to eat the same thing twice in their lifetime," he said. "It’s a perfect market and a perfect fit for what Publix is all about."

 Grocery market share

Grocery market share for North Carolina, South Carolina, Virginia and West Virginia, via the Shelby Report. The ACV = $32.70 billion.

	# STORES	% MARKET	+ or - Change	COMPANY	# STORES	% MARKET	+ or - Change	COMPANY	# STORES
Walmart	270	29.00%	+0.1%	Walmart	270	29.00%	+0.1%	Walmart	270
Food Lion	754	23.70%	-0.2%	Food Lion	754	23.70%	-0.2%	Food Lion	754
Harris Teeter	161	10.90%	+0.3%	Harris Teeter	161	10.90%	+0.3%	Harris Teeter	161
Kroger	90	7.20%	+0.1%	Kroger	90	7.20%	+0.1%	Kroger	90
MDI*	253	5.70%	-0.1%	MDI*	253	5.70%	-0.1%	MDI*	253
Lowes	89	3.00%	N/C	Lowes	89	3.00%	N/C	Lowes	89
C&S*	83	4.20%	-0.5%	C&S*	83	4.20%	-0.5%	C&S*	83
Ingles	97	4.20%	N/C	Ingles	97	4.20%	N/C	Ingles	97
SpartanNash*	100	3.10%	-0.1%	SpartanNash*	100	3.10%	-0.1%	SpartanNash*	100
SUPERVALU*	94	2.70%	-0.3%	SUPERVALU*	94	2.70%	-0.3%	SUPERVALU*	94
United Natural*	20	1.10%	N/C	United Natural*	20