Monday Q&A: Grocery industry insider

Soon the signs will change on 24 Ukrop’s stores around Richmond as they morph into Martin’s Grocery stores. This week RBS chats with Jeff Metzger, a longtime follower of the grocery industry and the fellow who broke the story open with his reporting in June of 2009 for the trade magazine Food World.

Richmond BizSense:
What was most interesting to you about the Ukrop’s deal?

Jeff Metzger: The price. I thought it was low, coupled with fact that Ukrop’s assumed the existing debt.

RBS: What does the timing of the deal tell you?

JM: I can only speculate, but it told me that even though Ukrop’s had tremendous run, it was trending downward to a degree, and that made it more challenging. Overall in the industry, it’s very much a buyer’s market.

RBS: How are prices going to be different at Martin’s?

JM: I think you’ll see prices [become] significantly less expensive. That is my esteemed guess.

RBS: Across the board?

JM: Yes, across the board. I also think you’ll see more balance in merchandise: more health and beauty and obviously beer and wine.

RBS: Ukrop’s had a full store packed with goods and now Martin’s is going to add an entire beer and wine section. At Kroger, that’s an entire aisle. What will they get rid of?

JM: I can’t answer that specifically. My best guess is some reduction in perishables. You are going to see ultimately more priority to health and beauty and general merchandise. What they’re going to try and do is look at what the customers are buying. They will see what local items they need to keep in place.

And obviously Martin’s/Giant has a strong private label program. Ukrop’s over the years increased private label, but I expect a strong presence in that sector.

RBS: Do you think locals will sour on Martin’s because it took out their beloved local grocer? Is there some ill will out there?

JM: When the Martin/Giant people did their focus groups market research, the Ukrop’s name had become obsolete.

RBS: How much can Martin’s boost sales by opening on Sundays and selling beer and wine?

JM: There is tremendous advantage in just the Sunday opening, maybe a 12 to 15 percent sales hike in revenue. Certainly beer and wine is another modest revenue booster. I think the key long-term is getting stores a bit more modernized. Getting the Martin’s pricing and merchandising program fully integrated will take some time in execution and consumer traction.

RBS: Why didn’t Ahold buy the prepared food operation, too?

JM: It was my impression that Bobby [Ukrop] wanted a carve-out on the deal for his family, to keep independent.

Aaron Kremer is the BizSense editor. Please send news tips to [email protected]

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DG

Martin’s use of it’s existing supplier over Supervalu signals an intent to hold down pricing to compete on price with it’s competition here.Kroger is gearing up to fight and the most visible indication is they now carry your bags to your car.The main reason Martin’s will build on non food items is the profit margin is higher,as much as 40% whereas food is generally less than 15%.That said Ukrop’s wastede space with this type of merchandise in some stores,Martin’s will likely balance this out.

John C. Ficor
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John C. Ficor

Martins’ giveback to the community at-large will most likely be zero, another factor enabling them to offer lower prices. Unfortunately we can’t have it both ways, and if saving money at the register is paramount, then scholarship, Folk Festival and Monument Ave. 10-K support go bye-bye. Although many don’t much care about this, the U’s made a positive impact on the social fabric of our fair city. Here’s hoping someone else steps into the breech.