By Joel Albrizio, President, Adlife Marketing & Communications
"Albertsons & Price Chopper Agree To End Acquisition Discussions"
Albertsons and Price Chopper have decided to end formal discussions pointed toward an eventual acquisition of Price Chopper. Albertsons like many of the possible retail food suiters soon realized Price Chopper has headed in a direction requiring a larger investment than the accompanying retail food giants market share deserved.
Much like many of todays retailers it is Price Chopper's belief that it is time for a new format .....the all new "Market 32" concept. Transition to this new "Market 32" concept would require an additional investment of 300 million dollars or more.
"New Concept Supermarkets Mean Greater Retail Sales Right?
For so long supermarket retailers have both complained and relied on the low loyalty factor with todays consumer. With our understanding that the consumer would love to try anything new, supermarket retailers internationally are always looking for the new secret weapon the "New Format" to bring about retail food success.
"Here Is The Problem With The Secret Formula & Albertsons Sees This Clearly"
Should Albertsons have invested in both the purchase of the existing Price Chopper and continued with the investment in the new "Market 32" concept retail sales would likely shoot up delivering what appeared to be certain retail food supremacy.
However long before both investments realized a realistic, acceptable return on investment, sales would subside to some degree. With some other retailers new concept as competition, Albertsons would be left like many retailers looking for a new management team or some logical reason the certain success of this plan ultimately failed.
"Selling Dimes For A Nickel Doesn't Work Regardless Of The Store Format"
What likely occurred was when Albertsons factored in the total sum of the acquisition costs and then added in the transition costs to "Market 32" coupled with the likely duration of the increased retail sales the numbers just did't work.
We have worked with retailers and wholesalers alike for almost 40 years. Today whether it be Price Chopper, Market Basket or even Ahold all of these companies owe more money today than they did ten or twenty years ago. Either through traditional financing or through private equity retailers today owe more money for the same or even less retail sales!
Why Do Retailers Owe So Much Money...Whats Going On?
At the end of the day todays supermarkets need to better understand you can not sell dimes for a nickel thinking a greater market share will bring financial success. Todays independent supermarket retailer can not borrow money traditionally or through private equity and so in part this is the reason the independent retailer has failed.
"Supermarket Chains Have Failed They Just Don't Know It"
So where the supermarket chain with private equity availability has now found additional ways borrow they have survived but certainly not prospered financially. At some point reality must set in financially and todays supermarket retailer must address profitability as job one.
Capital investments must be spread over a shorter, more relevant time period with a greater focus on the value proposition and not this insane race to gross zero because as retailers we must all have the lowest price every week.
Setting aside the golden parachutes many supermarket gurus have enjoyed few retailers are making money and even less seem interested in doing much about it.
"More Money Owed Coupled With Lower Top & Bottom Line Defines Failure"
So lets enjoy the show while Bi-Lo tries the Harvey's concept, Whole Foods the 365 concept, Walmart the local market concept, Price Chopper the Market 32 and so on and so on. Its crazy watching all of the brightest retail minds internationally run in the same circle. Why not agree as retailers you must sell your products for more than your cost of goods coupled with a realistic overhead spurring profitability.
Make retailing exciting and grow organically with solid sales and service programs the consumer comes to trust and enjoy. Create a definable emotion the consumer feels and misses when not shopping at your store.
Price the products fairly and stand behind them with retail service programs. Learn to sell what the consumer wants and needs. this is the all important "Value Proposition"
Price Chopper does not need Albertsons or Market 32. Price Chopper has impressive existing facilities and will likely find greater success selling products for more than what the product costs including the overhead to deliver it to the customer, period. Price Chopper must believe in and employ the "Value Proposition"
Until then who would invest in a supermarket?
A friend of mine once asked me about buying a particular supermarket and my opinion of that decision. I advised him to purchase something safer like a motorcycle. That supermarket location in now closed.
In closing, many have asked why I choose to write about what I see in the supermarket industry today and my ideas. At PreparedFoodPhotos.com & Adlife we believe great ideas and its resulting branding will give new life and direction to any company. So for that reason we chose to open the discussion.
Joel M. Albrizio, President PreparedFoodPhotos.com & Adlife Marketing & Communications
Follow Me On Twitter @joelalbrizio or right here on LinkedIn!
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