Jewel-Osco operates about 180 combination food-and-drug stores mostly in Illinois, but also in Indiana, and Iowa. The regional chain is the #1 seller of groceries in Chicago with more than 30 stores there and about 31% of the market (triple that of its nearest competitor Safeway-owned Dominick's). Jewel-Osco trails rival Walgreen in pharmacy sales in the Windy City. The company also runs about 30 fuel centers. Started as the Jewel Tea Company in 1899, Jewel-Osco is the largest traditional supermarket chain owned by grocery retailer and wholesaler SUPERVALU. Long accustomed to being #1 in a two-company market, Jewel-Osco is fighting to stay on top of an increasingly crowded Chicago grocery scene.
Uncertainly at SUPERVALU, is casting a shadow over Jewel-Osco's future. In mid-2012 SUPERVALU announced it's considering strategic alternatives, including the sale of all or parts of its business. Jewel-Osco, with its top spot in the lucrative Chicago market, presents an attractive takeover target for other grocery operators, including market leader Kroger.
While SUPERVALU doesn't break out annual sales for its individual supermarket banners, its retail food sales have tumbled nearly 12% over the past two years and it has been unprofitable in three of the last four years
There's no shortage of challengers for Jewel-Osco's top spot in Chicago. Jewel-Osco has already seen its market share dip significantly since 2007 as discounters, including Wal-Mart and limited-assortment ALDI, sipon its sales. Indeed, Chicago has become an magnet for grocery companies looking to expand. Relative newcomers include Wal-Mart Stores, and Roundys-owned Mariano's Fresh Market. Grocery-and-general-merchandise-giant Meijer is also very active in and around Chicago. Also, Wal-Mart has announced plans to open several dozen of its supercenters in the area through 2015. Jewel-Osco is also facing price pressure from its own parent company's Save-A-Lot hard discount grocery store chain. In 2011 five Save-A-Lot stores opened on Chicago's South Side, while a Jewel-Osco store closed. Save-A-Lot, which already operates about 120 stores in Jewel-Osco's markets, plans to open as many as 30 more stores in the Chicago area by 2016. On the merchandising front Jewel-Osco is cutting prices to fend off discounters and is expanding a test program that began in a Chicago supermarket that purged between 15% and 25% of the products from store shelves. While the program -- dubbed project "SHE" for Simplify Her Experience -- doesn't go as far in restricting product ranges as a limited-assortment grocer like ALDI, it's designed to make shopping easier by reducing clutter, creating more space for store brands, and thereby boosting profits.
SUPERVALU acquired Jewel-Osco in 2006 as part of its purchase of more than 1,100 stores from Albertson's. (Albertsons acquired Jewel when it bought American Stores in 1999.)
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