Friday, January 25, 2008

Breaking Retail News: SuperValu, Inc. to Close Sunflower Market Stores

Eden Prarie, Minnesota-based SuperValu, Inc., is closing all of its Sunflower Market natural and organic foods' format stores in Ohio, Indiana and Illinois, Natural~Specialty Foods Memo has learned.

There are five stores in the small chain: three stores in Ohio, and one each in Indiana and Illinois respectively. (See store location addresses here.) All five stores will be closed the week of February 18, 2008, according to Haley Meyer, a SuperValu, Inc. spokesperson. The format will cease to exist once the stores are closed.

Meyer said the Sunflower Market units are being closed because the stores' performance wasn't meeting the company's goals. "Sunflower Market was an innovative approach to the national organics market and we'll take the learnings from that format and apply them elsewhere in our organization," she said by way of explaining the Sunflower Market format experience.

The Sunflower Market format, which we've written about here before, is a fairly no frills, price-impact, natural and organic products' category-killer concept. The stores are small-format, and offer a limited but strong selection of fresh natural and organic foods, groceries and non-foods' natural products. The markets' have all the departments of a supermarket: fresh meat and seafood, produce, grocery, perishables and non-foods. They also have an attractive in-store combination bakery/cafe which has table and bar seating for customers as well as offering takeout foods and beverages.

Sunflower Market's everyday prices for fresh and packaged natural and organic foods, groceries and non-foods are about 15-20% cheaper than Whole Foods Market store prices and prices at upscale supermarkets' that offer broad selections of natural and organic products. This is the "category killer" aspect we referred to.
As we've written before, we believe the format has lots of potential. We even suggested in a piece that SuperValu consider taking the concept national after the acquisition of Wild Oats Markets by Whole Foods Market, Inc. created what we see as an opening in the supernatural food retailing category for a limited assortment, national natural products retailer that offered considerably lower retail prices on organic products than Whole Foods does.

In fact, towards the end of last year SuperValu announced it planned to expand the chain, saying it would build about 50 stores over the next four -to- five years. Apparently the grocer changed its corporate mind.

SuperValu, Inc. has seen its stock share price fall dramatically in the last two quarters, and has had its hands full integrating the Albertsons stores it acquired when it bought Albertsons, Inc. a few years ago.

Further, the retailer has been reorganizing, and its our opinion that as part of this reorganization SuperValu executives felt Sunflower Markets was just too far from their core business--large, full service supermarkets, discount stores and grocery wholesale distribution--to continue trying to nurture the small natural and organic products' chain, which the retailer has had to continue putting funding into without taking any profits to date.

That fact, combined with the performance issue Meyer described, resulted we feel in the corporate decision to shutter the five stores and eliminate the format.

We're sorry to see it go. Perhaps another major food retailer will pick-up on it, as we see a market for such a natural products chain nationally. There is another sunflower actually; Boulder, Colorado-based Sunflower Farmers' Market.

This retail sunflower is an independently-owned chain which operates a format very similar to SuperValu's Sunflower Market. Sunflower Farmer's Market recently announced plans to grow rapidly, and its stores are doing well. We think this proves the format is solid. Perhaps its more at home all by itself, rather than as a tiny part of a huge multi-format, multi-billion dollar grocery distribution and retailing corporation?

Sunflower Market Linkage: Below are some articles we've written about, and relating to, SuperValu, Inc.'s Sunflower Market:


Ryan for Supervalue Inc. Stock Market said...

For the 28 weeks ended 10 September 2005, SUPERVALU Inc.'s revenues rose 1% to $10.53B. Net income fell 45% to $125M. Revenues reflect an increase in turnover from Retail Food and Supply Chain Services segments. Net income was offset by the absence of a $109.2M gain on sale of WinCo Foods, Inc. and an increase in selling & administrative expenses. The Company is engaged in the business of selling food and non food products.

Natural~Specialty Foods Memo said...

Ryan: We published your comment. But curious: Why 2005 Supervalue financials on a story in the Blog that's over a year old? Just trying to get attention to your site? That's fine -- but curious.