The 2019 Power 25: Under the Microscope

July 19, 2019

Industry expert Burt P. Flickinger assesses the strengths and weaknesses of the grocery players at the top of the food retailers’ leaderboard.

By Meg Major | Winsight Grocery Business

If the past 12 months in the grocery world have taught us anything, it’s that omnichannel superiority is the criterion by which the leaders and laggards are now being measured.

Evidence of the same underlines the central theme of our annual Power 25 rankings of the nation’s most influential grocery players in our July 2019 issue, courtesy of Kantar Consulting. Despite the rampant industry upheaval, however, there is negligible deviation in the comparable standings of this year’s retail power players, which further underscores the grocery industry’s prevailing pattern of a being slow to change.

Lest the lack of a reordering of the rankings deceive, our 2019 Power 25 provides a great opportunity to reflect on the victories and lessons that have been revealed in the past year. To that end, I enlisted the viewpoints of sage industry expert Burt P. Flickinger III, managing director of Strategic Resource Group, to assess what believes has been most effective in powering the retail leaderboard’s grocery playbooks in the past four quarters.

Walmart (1)

The strong performance that top-ranked Walmart has achieved of late is tied directly to its dynamic President and CEO Doug McMillon. After over 40 years of Walton family management, Walmart has transitioned very effectively to highly capable professional leadership with McMillon, who is the last executive “Mr. Sam” personally hired out of Jonesboro, Ark. The son of a Vietnam veteran, McMillon has transformed Walmart as a very humble, grass-roots level leader of Walmart worldwide.

As the first Walmart CEO in nearly 25 years to have experience starting as an hourly worker/laborer in the stores and distribution center, loading and unloading trucks in the sweltering high Arkansas heat, McMillon is the first Walmart leader since Don Soderquist and Jack Shewmaker retired who has spent his entire career in all essential areas of retail operations, buying, merchandising and marketing, and national and international leadership.

Other than technology, Walmart, prior to Doug McMillon, had viewed too many strategic opportunities as an expense rather than an investment. Further, after five failed resets under past leaders, McMillon decisively bought and hired seminal genius, Marc Lore, to build into a powerhouse that is poised to become Amazon’s worst nightmare.

Previously, Walmart had been frugal with marketing; McMillon and Lore are now working decisively with Arthur Sadoun and his Publicis team to develop the best TV and digital ad campaigns for its stores, website, customer pickup and in-home delivery.

Walmart’s best-in-class national and international advertising and marketing are driving the best same-store sales in 10+ years, as the retailer’s strong operations and buying teams are rolling back record amounts of prices. Walmart’s higher compensated and more productive store teams are also executing with better conditions, standards, and service scores.

The Kroger Co. (2)

While Kroger appears to be unfairly covered by Wall Street, it has some of the best initiatives connecting with consumers on Main St. USA. Of the major publicly held supermarket chains, Kroger has the best merchandised and operated stores. Continuing on Dave Dillon’s transformational leadership for decades as the best in any sector of U.S. retail, CEO Rodney McMullen is continuing dynamic initiatives in technology, delivery, stores and community support, all the way to helping to take the best local and regional family brand entrepreneurship to great scale and success across the U.S.

Like Walmart, B.J.’s Wholesale Club and Costco, Kroger has invested in lower and more competitive prices alongside its best-in-class private brands programs to raise shoppers’ standards of living by helping families of five save $2,000-$3,000 per year on getting a great depth and range of great products and services at very competitive prices.

From our four-generation Flickinger family experiences, Kroger and its operating companies also excel at being the best in distribution and operations from the “Blizzard Belts” in the Great Lakes region to “Hurricane Alley” along I-10 and U.S. Highway 80 in the Gulf Coast region—thanks to having the nation’s best “special situation” playbook for its before-and-after response to massive storms and “force majeure” disasters for its consumers and communities. This has been an ongoing competitive advantage for Kroger over all its grocery, wholesale club, supercenter, chain drug, dollar, and category dominant retail competitors.

Costco Wholesale (5)

Costco is the unchallenged leader in sales growth per store and per market area, thanks to the visionary leadership of its co-founders Jim Sinegal and Jeff Brotman and Sol and Bob Price (founders of its forerunner, Price Club), and Craig Jelinek and his dynamic merchant leaders, including Mike Parrott, Costco’s excellent e-commerce exec.

After the 2003-04 California supermarket labor impasse and strike, many families and first generation Americans switched from their regular grocery store to Costco, which has doubled its store count in the Golden State and focused on food and comparable grocery item sales, which represent about 70% of its total sales. Now each California Costco can displace the sales volume per store of up to 8-10 Albertsons or other stores. Also, in addition to being the U.S. leader in sales per property/store, Costco during this decade has generated the highest same-store-sales increases in food retail.

Along with B.J.’s Wholesale Club, Costco is the low price leader on gas, which is financially very import to large families with young children and pets who are transported in gas-guzzling mini-vans and SUVs, as well as daily commuters and contractors in pick-up trucks.

Costco is a market leader in commercial solar power, which gives it a distinct advantage over many other retailers, especially with Costco using the significant sums its saves on Utilities and the meaningful money Costco makes on both U.S. and state/s’ Commercial Solar incentives to lower costs & prices to increase Costco customer counts.

More than any other retailer, Costco has transitioned its leadership more successfully than any other retailer in the U.S. or worldwide during the last four decades.

Ahold Delhaize USA (7)

Through a dizzying series of acquisitions of leading regional supermarket chains (Food Lion & Hannaford; Giant of Carlisle; Stop & Shop; Giant of Landover; the late, great Mel Weitz’s Melmarkets Foodtown; Mayfair; Tantleff Foodtown; Edward’s; Finast; and bankruptcy fill-ins from Grand Union (40), Pathmark (7), Waldbaum’s and others, Ahold-Delhaize has built the largest, publicly held chain along the Eastern U.S. Seaboard.

Ahold Delhaize USA faces some challenges with the King Kullen acquisition, as well as recovering from the lingering effects of the devastating Stop & Shop strike during Passover and Easter.

While the retail conglomerate owns a tremendous and highly efficient distribution center network throughout the Northeast and Southeast for its Delhaize banners, it remains a mystery to many suppliers why Stop & Shop and Giant Landover are not converted to the network, rather than using second- and third-party suppliers like C&S and others, outside of its own network.

As the proverbial last man standing in multi-employer union pension plans, Stop & Shop and Giant Landover have ongoing pressure to fill underfunded portions of critical status union pension plans in the yellow zone and red zone. And it’s an incongruent position for Ahold Delhaize to be, as the employers and unions had reportedly worked constructively for years during President Obama’s second term to agree on important the defined benefit pension ERISA Pension Plan Reform. In the waning months of President Obama’s administration, his special master, Ken Feinberg, failed to approve the reportedly agreed upon reforms by all the employers and organized labor, which has put all who worked well together in a challenging position for the future.

Food Lion and Hannaford continue to be very well run value powerhouses facing record expansion from worldwide power players Lidl and Aldi, as well as Walmart and B.J.’s Wholesale Club.

As highly efficient, lower cost, strong sales volume competitors ranging from Wegmans and DeMoulas/Market Basket, Walmart, Target, B.J.’s Wholesale Club, Costco, Amazon, Lidl and Trader Joe’s all accelerate, expect to see Gordon Reid bring his decisive, strong leadership to his new role as Stop & Shop president help the brand fight back from unprecedented current and future pressures.

Publix Super Markets (8)

The founding Jenkins family and Todd Jones have built on the exceptional foundation of Publix’s multi-generations of strong retail operational leadership.

Publix has the combined benefits of operating in the strongest population growth in the U.S., coupled with the highest number of supermarket bankruptcies in any region across the nation.

(The bankruptcies were due to either contrasting, or worse, private equity food retail ownership, unbalanced outsourcing to key suppliers, and management incongruencies, or combinations of all of the above.)

All of these bankruptcies have been accommodative in Publix’s rapid retail growth, which is always accelerating due to the Lakeland, Fla. retailer’s skill, scale, and size.

Target (9)

Target has evolved from the bankruptcy of Target Canada and some infamous Target Guest Red Card Credit Card breaches to be the destination retailer for Gen Z and millennials, as well as the parents and grandparents. Building on the community commitment of Dayton-Hudson-Target Corp. founder George Draper Dayton’s “Golden Rule” principles of giving 5% of company profits to key causes for women and children and arts and education, among others key causes.

Its ongoing innovation ranging from CVS Rx in-store to Harry’s grooming to the two-day prestige designer deals and its growing leadership position for babies and toys, Target for the first time in two decades has transformative, entrepreneurial, sustainable innovation driving its momentum. 

Target’s strength is weakening a number of large retailers in the department and specialty store sectors. As Bon Ton Group-Herberger’s to ShopKo and others liquidate, Target will continue to capitalize and convert more consumers.

Aldi (10)

Albrecht Brothers’ sister company to Trader Joe’s, Aldi has brilliantly evolved into a great strategic growth leader during this decade. While being co-value leaders, Aldi’s more recent capital expenditures and store design package are taking significant sales and market shares from legacy supermarket sector companies from coast to coast.

While Lidl is a formidable competitor in the U.S., Aldi is the leader in commercial solar with both its stores and distribution centers, which is in turn connecting Aldi with millions more environmentally aware consumers while giving it greater cost savings to lower prices even more.

Within the next five years, after 50 years of relatively slow, disciplined U.S. growth, Aldi will move decisively from a multi-regional to a national powerhouse.

H-E-B (12)

Like the legendary “Hellfighters” movie starring John Wayne as Red Adair, who could beat every previously unbeatable oil blow-out and explosion, Charles Butt has led H-E-B like a proverbial “David” vs. every “Goliath” over each and every competitor ranging from Walmart and Target, to WinCo Foods and Costco to Dollar General and Dollar Tree. Charles Butt has prevailed and won the “scorched earth” price wars started by Walmart’s “Mr. Sam” Walton to unprecedented, record-breaking, expansion.

From its world-class private brands program to being one of the finest in the food sector in consistently providing excellent quality, value, brands and service, H-E-B is the most formidable competitor in Texas and Mexico.

Wakefern Food Corp./ShopRite (14)

Wakefern is the most formidable co-op in America and its flagship ShopRite banner is the preeminent leader in its home state of New Jersey, a power player in the Mid-Atlantic and a growing, strong force in Southern New England.

ShopRite has tremendous multi-generational co-op members and family owner-operators throughout its geographies. After ShopRite went from a market leader on Long Island decades ago to transitory reported financial insolvency, it has taken a Long time to ShopRite to re-establish Long Island leadership. Wakefern’s “Achilles heel” may be that there are fewer retail operators and practitioners at the corporate level.

In my expert professional view of analyzing food retail for 40+ years, Wakefern might also be guilty of being institutionally and competitively overconfident, along with being somewhat complacent on not fully capitalizing on the liquidation of A&P/Pathmark/Waldbaum’s on Long Island. In part, as a result, Lidl has strategically seized the Long Island opportunity to aggressively expand and compete against Wakefern and its members.

With Long Island remaining as the far most underdeveloped legacy market for Wakefern and ShopRite over the past 40 years, it will be worth the price of admission to see how Lidl’s encroachment unfolds on Long Island and in other northeastern U.S. markets. That said, ShopRite demonstrates strong leadership in loyalty, bricks and clicks, merchandising, marketing, branding, media and anti-hunger/community support efforts.

Meijer (19)

Meijer is having great success competing against the toughest of food retailers ranging from Walmart to Costco and appears that it will continue to expand successfully vs. Giant Eagle in the Great Lakes region.

Meijer’s ongoing strategic initiatives—from its outstanding private brands to its food-drug-discount format excellence—will make it a winner from Cleveland to Minneapolis.

While Fresh Thyme is a constructive development, Meijer will win far more with its superstore expansion into the North Central states and the Great Lakes region.

Hy-Vee (20)

Hy-Vee has some of the best food-drug-Rx superstores in the Midwest. The Minnesota retailers are fighting aggressively to try to sustain market share vs. Hy-Vee’s record-breaking expansion. As part of Topco, however, Hy-Vee and other members are paying a price for some key Topco supermarket members filing for bankruptcy.

Wegmans Food Markets (23)

Carrying on the legendary leadership of the late, great Bob Wegman Sr., Wegman’s is continuing to win vs. all major New England competitors, and from my observations, it appears many shoppers who switched from Stop & Shop during the Holy Week strike are staying with Wegmans.

Wegmans continues to lead to U.S. in fine food and wine and on premise dining to casual and carry-out food service. In addition, its leadership development and scholarship programs are some of the best nationally and internationally.

Wegmans has many high opportunity markets to “fill-in,” including in Connecticut, Rhode Island, lower New York State, Long Island, Virginia, the Carolinas and Western Pa.

In my observations, however, New Jersey appears to be an ongoing challenge for Wegmans, especially in North Jersey. Wegmans tends to win wherever it goes and developers will want to help support new Wegmans stores in many new markets, especially in this accelerating “Retail Ice Age,” when so many food, drug, discount, department, specialty and category dominant retail chains are contracting, collapsing, and filing for either bankruptcy and/or liquidation.

Giant Eagle (24)

Giant Eagle has benefitted from many market failures from Penn Traffic/Big Bear, Tops in Ohio, Phar-Mor, Supervalu  & Fleming corporate retail, Super Kmart & Kmart. However, Giant Eagle now faces growing competitors with Meijer, Wegmans, Aldi, Lidl, Marc’s, Walmart, Target, Costco, B.J.’s Wholesale Club and other highly capable, well capitalized competitors expanding.

Giant Eagle has a winner in in its GetGo fuel and food c-stores while it fights unprecedented competition.

WinCo Foods (25)

WinCo Foods is the U.S. low price leader in our Strategic Resource Group pricing studies. In our expert work on behalf of the Piggly Wiggly ESOP shareholders, in the 35 years since WinCo bought itself from Supervalu, one share of WinCo stock has appreciated to nearly $3,000 per share while one share of Supervalu stock (fully adjusted for splits and the UNFI purchase) hovers at $3.27 per share.

WinCo has fantastic professional leadership in every key operating area, and with every team member a shareholder, WinCo is unstoppable with some of the best and most enthusiastic and productive people in each store area that I’ve seen anywhere worldwide for the last nearly 43 years in every major continent, country, region and geographic market.

WinCo’s one remaining opportunity is commercial solar as Amazon, Aldi, Walmart, Target and Costco are eclipsing almost the entire supermarket and food retail sector in this domain.