Supply Scan

Supervalu Now No. 2 With Albertsons Buy

Supervalu may soon be putting Wal-Mart's feet to the fire with its acquisition of more than 1,000 Albertsons stores.
That is, if the Minneapolis-based company can leverage its supply chain expertise to squeeze out distribution costs and enable its stores to compete with Wal-Mart on price.

The deal will also make Supervalu the second largest supermarket retailer in the country behind The Kroger Cos., Cincinnati, and expand its presence on the East Coast—making it a national player.

Supervalu is part of a consortium that includes drugstore retailer CVS Corp. and an investment firm group led by Cerberus Capital Management LP, New York, that are buying the Albertsons chains for $17.4 billion.

Supervalu will get 1,124 stores that operate under the Acme Markets, Bristol Farms, Jewel Osco, Shaw's Supermarkets and Star Markets names, as well as all the Albertsons stores in Idaho, southern Nevada, southern California and the Northwest. The acquisition also includes the related in-store pharmacies under the Osco Drug and Sav-on banners.

CVS, Woonsocket, RI, will acquire 700 stand-alone Osco and Sav-on drugstores in southern California, the southwest and Midwest, as well as a distribution center in La Habra, CA.

Cerberus is heading up a group of real estate investors who are buying an additional 655 stores that operate under the Albertsons and Super Saver banners in the Dallas/Fort Worth area, Florida, northern California, the Rocky Mountain states and the Southwest.

In another move, Supervalu sold 26 Cub Food Stores located primarily in the Chicago area to Cerberus.

"We have put in motion a series of actions that will dramatically transform Supervalu. We will realize a sizable increase in our retail footprint and supply chain network, strengthening our ability to effectively compete in today's challenging industry," said Jeff Noddle, Supervalu's chairman and CEO, in a statement. "The combination of operations will create a premier food retail powerhouse of 2,656, stores from coast to coast, tripling the size of our current retail operations."

In addition, Supervalu will now operate the largest U.S. retailing store fleet as a result of the acquisition.

The combined grocery chains will benefit from Supervalu's own supply chain network, which already supplies 2,200 stores. The company hopes to realize synergy potential through better procurement opportunities, leveraging the size and scale of its supply chain enterprise and its retail expertise to negotiate better prices with suppliers.

"The combination creates a very strong competitor with high market penetrations, tremendous brand equities, significant size and scale and sufficient financial flexibility," said Noddle.

The company expects to see improved margins and cost savings of up to $175 million from the deal.

In recent years, Supervalu has been losing some of its wholesale and distribution business as a result of its customers getting acquired by larger chains.

Distribution now accounts for about 47 percent of annual revenues and with the Abertsons stores, it will generate just 20 percent of revenue, the company said. D

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Ahold Closing, Selling Stop & Shop And Giant Food DCs

n a move designed to make its distribution and transportation systems more efficient in order to remain competitive, The Stop & Shop Supermarket Co. (Stop & Shop) will close its North Haven, CT, distribution facility by the middle of the year.

The company says distribution of goods to retailers in the Northeast currently handled in the North Haven facility will be shifted to its distribution center in Freetown, MA, and to a third-party supplier.

Parent company Ahold USA also announced that it has closed a real estate transaction involving the sale of both the Stop & Shop North Haven distribution facility and a Giant Food office and distribution center in Landover, MD.

"After completing a review of our distribution network, we have made the very difficult decision to close our North Haven distribution center," said Mark Smith, Stop & Shop president and CEO.

"Unfortunately, the location, size and age of this facility limit our ability to service our stores in the most logistically effective way and our markets that are experiencing growth cannot be supported by it."

Smith said that Freetown is well positioned to serve the company's distribution needs in New England.

Closing the North Haven distribution center will affect approximately 850 union and non-union Stop & Shop associates. The company will offer employees a separation package including comprehensive career center assistance. For union associates, this package will be based on discussions with their union leadership.

RFID Producing Huge Benefits For Germany's METRO Group

he METRO Group stands to save about $10 million (or 8.5 million euros) as a result of its use of radio frequency identification (RFID) and electronic data interchange (EDI), according to a new study that the German retailer presented at the National Retail Federation's annual convention and expo in New York last month.

The study, conducted in cooperation with Minneapolis-based Procter & Gamble and IBM, involved warehouses and stores of METRO's Cash & Carry and Real divisions, as well as a Procter & Gamble warehouse.

"The research results confirm our optimism about RFID technology," says Dr. Gerd Wolfram, managing director of METRO Group Information Technology GmbH. "Thanks to RFID, we're able to significantly accelerate time-consuming standard processes in the incoming goods area."

The study also found that in order-picking and at the outgoing goods portal, 16 seconds per pallet can be saved. This is complemented by reduced logistics costs as the faster handling of incoming goods processes shortens waiting times for delivery trucks.

The METRO Group has been introducing RFID in stages along its entire supply chain since November 2004, and has been working with international committees such as EPCglobal and GS1, both headquartered in Brussels, Belgium, to further the development of universal standards for RFID use.

During the course of this year, the METRO Group will be introducing Generation 2 RFID tags throughout it network. Comprehensive tests on the latest chip technology have already produced convincing results, such as improved reading precision.