July 16: Supervalu CEO: Rainbow deal a 'wholesale play'

  • Article by: MIKE HUGHLETT , Star Tribune
  • Updated: September 11, 2014 - 1:52 PM

Sam Duncan says he has no desire for the company to return to being a big retailer.

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CEO Sam Duncan said Wednesday that Supervalu’s future is in wholesaling groceries; this distribution center is in Hopkins.

Photo: DAVID JOLES • djoles@startribune.com,

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A complex transaction that Supervalu orchestrated this year involving 18 Rainbow Foods stores was a “wholesale play,” and the company has no intention of again becoming a big operator of traditional supermarkets.

That was the word Wednesday from Supervalu CEO Sam Duncan as he presided over the company’s annual meeting at the Hilton Hotel in Bloomington.

In a deal sparking a major shake-up in the Twin Cities grocery business, a consortium of local supermarket companies led by Supervalu this spring bought 18 of Rainbow’s 27 stores for $65 million. The other nine Rainbows may eventually close as Rainbow’s parent firm, Roundy’s, exits the market.

Ten of the stores will reopen under Supervalu’s Cub Foods banner. But Supervalu wholesale customers — including Jerry’s Foods and Lunds — will have ownership in several of the supermarkets.

“That transaction we did strictly as a wholesale play,” Duncan told shareholders. Not only does the deal offer Supervalu more wholesale business, it helps the firm’s retail customers by allowing them to expand, Duncan said.

Eden Prairie-based Supervalu was one of the nation’s largest grocery retailers until early last year, when it sold its four biggest supermarket operations. The $3.3 billion deal halved Supervalu’s annual revenue to about $17 billion, and made Cub its largest tra­ditional supermarket chain.

It also made Supervalu’s wholesale operations its paramount business, as measured by percentage of sales. “We are going to be a great wholesaler,” Duncan said. “That is our focus. It is more than half of the company, and we are darned good at it. … I have no desire to be a big retailer.”

Still, Supervalu maintains growth plans for Save-A-Lot, its national “hard-discount” supermarket chain. Save-A-Lot will grow its store base in 2014 for the first time in several years, Duncan said. Its growth had stalled due to Supervalu’s woes.

The sale of Supervalu’s biggest supermarket chains was prompted by a long-standing downward spiral in sales and the company’s plummeting stock price. Duncan, a veteran retail executive, was installed as CEO in the winter of 2013 shortly after the deal was announced.

He’s largely credited for stabilizing the company, whose stock gained 7 percent Wednesday, closing at $8.83, up from $2 in the summer of 2012, a 30-year low.

“We have got a heck of a lot accomplished,” Duncan told shareholders. “But we have a lot more to do.”

 

Mike Hughlett • 612-673-7003

 

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