Exec Shakeups Roil ‘Overstored’ Southeast; Lidl’s debut likely ‘tremendous factor’ in CEOs’ departuresJune 21, 2017
Indeed, Lidl’s game-changing entry into the area as the staging ground for its U.S. “invasion” was likely a “tremendous factor” in the executives’ respective decisions to move on, in the opinion of Flickinger, who didn’t think either company was currently equipped to do battle with the formidable newcomer.
While praising the abilities of both leaders – Southeastern Grocers’ Ian McLeod and The Fresh Market’s Rick Anicetti – Flickinger, in an interview with Progressive Grocer, pointed out that both of their private equity firm-owned companies are undercapitalized. This puts them at a distinct disadvantage in competing not only against their established rivals in the region, but also against the oncoming juggernaut of Lidl, which, in the 27 other countries in which it operates, has engendered with high-quality products sold at dramatic discounts, and promises to do so here.
The Fresh Market, based in Greensboro, N.C., has the added issues of scattered, underperforming locations without the scale for self-distribution, and dark, depressing store designs that are “not well assorted and not well laid out,” with substandard promotional and merchandising programs, according to Flickinger, all of which have negatively affected customer traffic. Although when he took the helm in September 2015, Anicetti promised to improve the chain’s center store offering, among other changes, Flickinger called it “weak,” noting that the executive didn’t have the resources to make the requisite changes. For Anicetti to have increased volume at The Fresh Market stores, for example, would have required “significant cap ex,” Flickinger pointed out.
A “saving grace” for Jacksonville, Fla.-based Southeastern Grocers, in Flickinger’s view, is the ascension of Anthony Hucker to the president/CEO position, even if on an interim basis. Flickinger believes that not offering Hucker, who, earlier in his career, turned around St. Louis-based Schnucks, could be “a monumental mistake,” as he would be able to keep the company afloat. In any case, the company’s longstanding challenges, which McLeod wasn’t able to overcome in his two years at the helm, don’t bode well for future.
In fact, both Southeastern Grocers and The Fresh Market “face unprecedented and overwhelming competition, and overall uncertainty ahead,” Flickinger observed. Of course, as Lidl expands across the United States, the problem of competing against it will spread to additional regions. Other companies that he predicts will have a tough time competing with Lidl include Ahold Delhaize, Publix, Target, Whole Foods and dollar stores, while well-capitalized operations with competitive pricing and/or differentiated shopping experiences, among them BJ’s Wholesale Club, Costco, Kroger, Walmart, Wegmans and WinCo, should be able to “weather the storm.” “A lot of high-share retailers are going to pay a painful price,” said Flickinger, adding that Lidl would prove more devastating to their sales and market share than Walmart’s massive expansion back in the 1990s.
The question that Flickinger posed with regard to food retailers in the Southeast and beyond that are owned by private equity firms was whether they would receive the necessary investments to grow sales and defend against Lidl. Like everyone else in or connected to the grocery industry, he’s waiting to see what happens.