MILWAUKEE -- Midwestern grocery Roundy's Inc. has acquired 11 Dominick's stores from Safeway Inc. in a $36 million cash and lease assumption transaction and will convert them to the Mariano's banner, the company's high-profile growth banner, in the Chicago metropolitan area.
The Mariano's chain--featured in a recent issue of CSP magazine--is known for its "theatrical" deli, meat, cheese, bakery and produce departments; its foodservice offering, which includes sampling and cooking demonstrations; and its overall retail "storytelling" ability. And it is definitely in growth mode.
"This acquisition is transformational in terms of Mariano's expansion plans in the Chicago metropolitan area, allowing us to open 11 additional stores in 2014 in prime locations with great market demographics," said Robert Mariano, chairman, president and CEO of Roundy's and former CEO of Dominick's. "These key locations will seamlessly integrate into and complement our existing base of 13 Mariano's locations as well as our five additional 2014 Mariano's locations now under construction."
The company expects to close the transaction in the second half of Dec. 2013, with a transition period of one to two months during which Roundy's will take possession of the stores and convert them to the Mariano's banner.
The stores are located in Park Ridge, Western Springs, Chicago (3), Northfield, Westchester, Buffalo Grove, Gurnee, Aurora and Shorewood, Ill.
With the near doubling of the Mariano's store base following this acquisition and what the chain sees as strong continued growth prospects for the Mariano's banner, Roundy's has determined that allocating additional capital to these opportunities is the best use of cash from a long-term shareholder return perspective. As a result, Roundy's will suspend its quarterly dividend so that it can use that cash to grow the Mariano's business, it said.
Could Mariano's be a threat to the convenience channel any more so than other grocery chains?
"I would also imagine that Mariano's may eventually look into smaller versions of their current store footprint to fit into appealing, space-constrained sites. They could leverage the power of the Mariano's brand and apply it to a somewhat smaller store," Jon Hauptman, partner with Willard Bishop LLC, Barrington, Ill., told CSP.
And while much of what Mariano's excels at can only be admired from a distance by c-store operators, limited by space, resources and the demands of convenience-oriented consumers, industry observers believe c-stores can adopt some of the grocer's successful strategies.
For example, c-stores can emulate Mariano's focus on attentive service and fresh, family-friendly products and solutions, Hauptman said.
"Regardless of the department, Mariano's offers an expert who can help the shopper make an educated decision," he said. "And Mariano's provides value-added options that make meal preparation easier for families with children. These are all areas which would be somewhat fertile ground for c-store operators."
Michelle Barry, CEO of Seattle-based research firm Centric Brand Anthropology, said she believes c-stores can distinguish themselves in foodservice, as Mariano's has done, by offering at least one high-quality edible item and building on its reputation.
"If a c-store could do one thing really well, what would it want to be famous for? They could do a really great brat, or the best gelato bar in town or the best slice of pizza. To know that you can walk in that door and get a really great sandwich no matter what and get back out quickly while you're filling up on gas—that's a game changer," she told CSP. Convenience retailers "need to get out of the commodity-driven, low-quality, low-price mindset. Yes, people want fast and convenient, but they also want more choice and higher quality," she said.
Barry also points to a clear sense of "pride and ownership" exuded by Mariano's employees, "which is something that's seriously lacking in the c-store channel. Most [convenience retail workers] don't have a level of expertise about what they are selling and lack a sense of pride working in that environment."
Tim Powell, principal and c-store practice lead with Chicago-based Technomic Inc., said that c-stores do not have the labor or the experience to become a Mariano's overnight. "But they should [look to Mariano's] as a best-in-class example of food safety, presentation, staff friendliness and flexibility," he told CSP.
Roundy's has nearly $4 billion in sales and more than 20,000 employees. Founded in Milwaukee in 1872, Roundy's operates 163 retail grocery stores and 101 pharmacies under the Pick 'n Save, Rainbow, Copps, Metro Market and Mariano's retail banners in Wisconsin, Minnesota and Illinois.