Analyst: Supervalu got ‘bargain basement’ deal on AG of Florida

October 23, 2017

Jeff Wells | Food Dive

Dive Brief:

  • Supervalu acquired Associated Grocers of Florida last week for as much as 35% below the cooperative wholesaler’s full value, longtime grocery analyst Burt Flickinger told Progressive Grocer. Supervalu announced last week during its second quarter earnings call that it had acquired Associated Grocers for $180 million. According to Flickinger, AG of Florida is worth anywhere between $215 million and $250 million.
  • Along with its Unified Grocers acquisition, completed earlier this year, Supervalu is well-positioned to supply retailers serving growing Hispanic and Asian markets.
  • Flickinger also noted that Supervalu’s recent acquisitions give it “unprecedented purchasing power,” and said he believes the company will soon acquire another wholesaler.

Dive Insight:

Supervalu CEO Mark Gross sees Hispanic shoppers as a driving force behind the wholesale company’s future growth. During the company’s second quarter earnings call, he noted that Associated Grocers — along with Unified Grocers, which Supervalu purchased earlier this year for $375 million — serves retailers that are seeing growing number of Hispanic consumers as well as non-Hispanic consumers seeking authentic dishes and ingredients.

“We’re obviously investing significantly in what I will call the Hispanic market and the diverse changing of people’s desires to have different types of food and authentic food,” he said during the call.

It’s an opportunity that retailers and wholesalers across the country are eager to profit from. According to Census data, there are 54 million Hispanics in the U.S., and that number is expected to double over the next forty years. Research also shows that Hispanic consumers spend more than non-Hispanic shoppers, especially on high-margin fresh items.

In markets like Miami, which is 68% Latino and Hispanic according to a recent report in the Miami Herald, Supervalu has the opportunity to supply many independent grocers that are the lifeblood of this booming market. But the wholesaler will have plenty of competition to contend with. As the Herald and Supermarket News reported, Amazon recently partnered with food distributor El Latino to offer Prime deliveries of Hispanic fresh foods and grocery products. Rival wholesaler C&S Grocers also has a significant presence in Florida, with five warehouses spread across the state.

Supervalu’s greatest advantage, as Flickinger points out, may be its pricing, which comes thanks to its considerable scale. Supervalu also has retail expertise that allows it to offer guidance and support services to the grocers it supplies.

Supervalu has made a string of acquisitions recently as it continues to gain momentum in the lucrative wholesaling business. The company doesn’t look to be slowing down anytime soon, either. Flickinger told Progressive Grocer that Supervalu will likely buy another regional competitor, and eventually regain its position as North America’s top wholesaler.