Grocery Store Trends Open Air Conference Miami, Florida March 2, - - PowerPoint PPT Presentation
Grocery Store Trends Open Air Conference Miami, Florida March 2, 2017 Ted Frumkin Jeff Chamberlain Joe McKeska Chief Development Officer S VP Real Estate and Facilities President S prouts Farmers Market Publix S upermarkets Elkhorn
Open Air Conference Miami, Florida March 2, 2017
Ted Frumkin Chief Development Officer S prouts Farmers Market Phoenix, Arizona Jeff Chamberlain S VP Real Estate and Facilities Publix S upermarkets Lakeland, Florida Joe McKeska President Elkhorn Real Estate Partners Oak Brook, Illinois
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Trends in Grocery Retailing – Major Themes
and acquisitions trends
for landlords and investors
Grocery Store Trends 2017 ICSC OAC Miami
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Changes in the Grocery Retailing Landscape
Grocery shopping transformation being driven by the collision of changes in demographics, shopping behavior, and technology Changes include ethnic, cultural, socioeconomic, and generational Technology enabling and driving rapidly changing channel and format disintermediation
Grocery Store Trends 2017 ICSC OAC Miami
Aggressive new competitor entry such as meal subscription services, boutique restaurants, and non- traditional retailers selling food Continued increase in the number of channels through which consumers purchase food Includes increase in digital and e- commerce options available to meet changing consumer expectations
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Grocery Store Trends 2017 ICSC OAC Miami
Changes in the Grocery Retailing Landscape
Source: Coca Cola Retail Research Council Report January 2017 Source: Coca Cola Retail Research Council Report January 2017
Source: The race to reinvent grocery shopping by Bricks Meets Clicks – January 2017
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Traditional Grocery Retail Impacts and Priorities
Physical stores will continue to drive vast majority of sales for foreseeable future According to recent Coca Cola Retail Research Council report, grocery shopping in the future will become much more omnichannel and omniformat, lifestyle driven, highly personalized, and digitally integrated E-commerce still only 2% of sales but growing rapidly with recent Nielsen and Food Marketing Institute (FMI) study projecting that e-commerce may capture 20% of the food-at-home market by 2025
Grocery Store Trends 2017 ICSC OAC Miami
Certain categories are more vulnerable and will erode more quickly with the Nielsen/FMI projecting 40% of center store grocery categories moving on-line New formats and channels will not only impact sales, but will also pressure profit margins given venture capital funding/loss leader approach and high brick and mortar fixed and variable operating costs
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Grocery Store Trends 2017 ICSC OAC Miami
Traditional Grocery Retail Impacts and Priorities
Source: Coca Cola Retail Research Council Report January 2017
Source: Walmart Corporate Web Site, Walmart Pickup – Grocery Facility in Bentonville, AK
Source: Experian Lifestyle Segmentation
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Industry Growth and Investment Trends
Heavy focus on improving existing business models to increase competitiveness Numerous initiatives and investments in improving traditional points of differentiation such as quality/price equation, fresh departments, and
Resultant brick and mortar investment priorities include remodeling existing stores and replacing older stores to implement initiatives thereby improving productivity and profitability
Grocery Store Trends 2017 ICSC OAC Miami
New store growth taking place but slowing and mostly limited to in-market
Capital savings being shifted to digital and e-commerce platforms to better compete given accelerating changes in shopping behavior and consumer expectations
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Grocery Store Trends 2017 ICSC OAC Miami
Industry Growth and Investment Trends
Source: Walmart 10/16 Investor Presentation
230 130 55 Walmart Number of New Stores (US) = 2015 2016 2017
Source: Photo by Neil Stern: Aldi Takes a (slight) Detour on Road to 2000 US Stores – Forbes 2/17
Project Type 2013 2014 2015 2016 Totals New Stores 17 33 31 50 131 Relocations 7 12 12 20 51 Closures (28) (48) (37) (17) (130) New Stores (1) (4) (3) 6 53 52 (1) Excludes acquisitions % Increase from 2013 = 1.97% Project Type 2013 2014 2015 2016 Totals Major Remodels 158 156 183 150-170 Minor Remodels 190 221 246
348 377 429 ?
Source: Kroger 11/16 Investor Conference Presentation
Kroger New Store & Remodel Project Counts 2013 - 2016
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Grocery Store Trends 2017 ICSC OAC Miami
According to a recent study completed by the Food Partners, the number of bankruptcies has remained fairly constant since 2010 The number of stores being acquired has increased during this time even accounting for the three largest transactions Grocery retailers and strategic private equity players are becoming more willing to invest/acquire both e-commerce companies and unique formats Notwithstanding Walmart (e.g. - Jet.com), this is still nascent as most retailers are focusing on either developing these capabilities internally or partnering with third parties to deliver the same
Mergers and Acquisitions Trends
All of this points to continuing industry consolidation as competitiveness and pressures on brick and mortar retailers increases at an accelerating pace Near term M&A activity will most likely be in the arena of local and regional chains and smaller independents given that the logical large consolidations have been completed over the last few years including ABS/Supervalu, ABS/Safeway, and Ahold/Delhaize
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Grocery Store Trends 2017 ICSC OAC Miami
Mergers and Acquisitions Trends
4 1 14 5 7 1 6 3 3 1 2 4 6 8 10 12 14 16 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Number of Supermarket Bankruptcies by Year
1,012 671 764 979 877 1,335 3,400 130 749 510 1,889 2,006 4,164 979 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 2010 2011 2012 2013[1] 2014[1] 2015[1] 2016 Stores Sold Stores Sold Through Large Transactions[1]
Stores Sold
Source: The Food Partners NGA Presentation 2/17 Source: The Food Partners NGA Presentation 2/17
Supermarket Bankruptcy Detail
Company Date Filed
Stores State Filed Status Fairway Group Holdings Corp. 5/3/2016 15 NY Emerged Fresh & Easy 10/30/2015 97 DE Liquidated Haggen 9/9/2015 164 DE Sold The Great Atlantic & Pacific Tea Co. 7/19/2015 297 NY Liquidated Dahl's Foods 11/10/2014 10 IA Sold Associated Wholesalers 9/9/2014 n/a DE Sold Farmers Foods (Highland Springs and Webb) 6/2/2014 2 VA Closed C&K Market 11/19/2013 60 OR Emerged Fresh & Easy Neighborhood Market 9/30/2013 167 DE Sold Midwest Gourmet Foods (Fox & Obel) 9/19/2013 1 IL Unknown Mi Pueblo San Jose 7/22/2013 21 CA Emerged Belle Foods 7/1/2013 57 AL Sold Pro's Ranch Markets 5/29/2013 11 CA Sold Liborio Market 4/13/2012 8 CA Liquidated Michael’s Fresh Market 12/30/2011 7 IL Unknown Associated Grocers of Maine 8/26/2011 n/a ME Dismissed Azteca Ranch Market 8/1/2011 n/a CO Liquidated Moo & Oink 8/24/2011 4 IL Liquidated Andronico's Market 8/22/2011 7 CA Sold A.G. Ferrari Foods 3/30/2011 13 CA Sold Rizk-Co-Zann Foods Corporation 3/10/2011 1 PA Dismissed 4 18 12 30 43 71 16 14 13 26 10 20 30 40 50 60 70 80 2010 2011 2012 2013[1] 2014[1] 2015[1] 2016
Average Stores per Transaction
Source: The Food Partners NGA Presentation 2/17
[1] Albertson’s, Safeway and Delhaize acquisitions in 2013, 2014 and 2015, respectively
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Grocery Store Trends 2017 ICSC OAC Miami
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Grocery Store Trends 2017 ICSC OAC Miami
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Grocery Store Trends 2017 ICSC OAC Miami
Jeff Chamberlain
Jeff is Senior Vice President of Real Estate and Facilities at Publix Super Markets. He is currently a board member for Enterprise Florida, Publix Employee’s Federal Credit Union, Lakeland Economic Development Council and Chair of Lakeland’s High Skill/High Wage Recruitment Program.
Ted Frumkin
Ted is the Chief Development Officer for Sprout’s Farmer’s Market. He served as their Senior Vice President of Business Development since joining Sprouts in December 2012 after spending his last 11 years at Staples as the Vice President of Real Estate. Ted is responsible for all aspects of the company’s new store growth managing real estate, construction, property management and facility maintenance. Prior to joining Sprouts, Ted held various real estate management positions with Las Vegas Discount Golf & Tennis, Taco Bell, Wal-Mart, Office Depot, and Rubio’s
Real Estate and currently holds a Master of Corporate Real Estate with Honors designation from the International Association of Corporate Real Estate Executives (NACORE). Ted has a Bachelor’s of Fine Arts degree from Texas Christian University and an MBA from Florida International University. Ted currently resides in Scottsdale, AZ.
Joe McKeska
Joe is the president and co-founder of Elkhorn Real Estate Partners which is an advisory and investment firm based in Oak Brook, Illinois specializing in assisting retailers and retail investors in analyzing and creating value from their real estate portfolios in alignment with their broader business strategy. Prior to co-founding Elkhorn Real Estate Partners, Joe was Senior Vice President of Real Estate for Southeastern Grocers (Winn Dixie, Bi-Lo, and Harvey’s banners). He was the company’s executive team leader for all real estate related functions with oversight of a 40MM square foot portfolio. McKeska also spent 17 years in various real estate positions with Supervalu, Inc. and its predecessor companies including Albertsons, Inc. and American Stores Company where his last position was Group Vice President of Real Estate in which he was responsible for a portfolio of 1,500 stores totaling approximately 90MM square feet. He is a graduate of the University of Illinois with a B.S. in Real Estate Finance and also obtained a M.B.A. in Finance from the Kellogg Graduate School of Business at Northwestern University.
Speaker Biographies