In the grocery and distribution wars, Spartan Stores is up for the fight. The grocery retailer and wholesaler operates 100 Michigan retail supermarkets under the banners Glen's Markets, Family Fare Supermarkets, D&W Fresh Markets, and VG's Food and Pharmacy. Besides selling national brands, stores offer private-label goods under the Spartan, Top Care, Valu Time, and Full Circle names. Spartan is also a leading grocery wholesaler, distributing more than 40,000 food and general merchandise items to about 375 independent grocery stores in Michigan, Indiana, and Ohio from its Grand Rapids, Michigan, distribution center. Founded in 1917 as a cooperative grocery distributor, Spartan Stores is buying Nash-Finch.
Change in Company Type
In a strategic move that gives Spartan Stores an extended reach beyond its Midwestern stronghold and boosts its retail holdings, the company in mid-2013 announced that it's purchasing grocery distributor Nash-Finch. Valued at $1.3 billion, the all-stock deal will make Spartan Stores the largest food supplier to US military stores. The deal, structured as a tax-free exchange and a merger, involves Spartan Stores assuming about $380 million in Nash-Finch's long-term debt. The stock portion of the purchase comes in at about $340 million. In the end, Nash-Finch shareholders will have a 42% stake in the combined entity. Consolidating the Nash-Finch business will eliminate duplicate functions and -- as speculated -- the Nash-Finch headquarters. As a result of the purchase, Spartan Stores aims to generate savings of about $50 million annually by the third year. Overall, the companies are looking to lower their risk as top industry suppliers.
Difficult regional economic conditions and competition from supercenters , such as Wal-Mart Stores, have depressed Spartan's sales of late. In fiscal 2011 (ends March), the company's overall sales dipped by less than 1%, with retail sales down 1.2% and distribution sales essentially flat, vs. the prior year. Sales were negatively impacted by price deflation and the closure of several grocery stores in 2010, as well as the tepid regional economy and competition. Higher retail fuel prices helped prop up sales. Net income rebounded in fiscal 2011 however, up about 26% vs. fiscal 2010. To meet the needs of cash-strapped shoppers the company launched Valu Land, a value-price banner with two stores in northern and central Michigan. The company closed the last of its Felpausch stores (acquired in 2008).
As the Michigan economy gradually improves, Spartan Stores expects its fortunes to as well. In fiscal 2012, the company plans to focus on growing sales in both its retail and distribution divisions. To this end, the company in 2013 inked a deal with Chief Super Market to be its primary wholesale grocery supplier. To drive sales and foster customer loyalty Spartan will further develop its private-label brand program and rollout its loyalty card program to all of its banners. Through Spartan's neighborhood market strategy, the company endeavors to distinguish itself from other food retailers, such as supercenters and limited-assortment stores. It does this by emphasizing convenient locations, as well as offering demographically targeted merchandise, high-quality fresh foods, and value pricing. Leading Spartan's turnaround efforts Dennis Eidson was promoted to CEO in 2008.
About 70% of Spartan's food stores offer pharmacy services and 24 have fuel centers. The fuel centers -- named D&W Quick Stop, Family Fare Quick Stop, Glen's Quick Stop,and V.G.'s Quick Stop -- offer refueling facilities and adjacent convenience stores. Spartan has seen increases in its sales as a result of fuel-center operation and related cross-merchandising activities. The company plans to open additional fuel centers at its supermarket locations during the next few years.