In a deal that could defend turf and grow its presence on wealthy Long Island, Ahold Delhaize’s Stop & Shop division said it would acquire rival King Kullen Grocery Co.
The deal includes King Kullen’s 32 supermarkets, five Wild By Nature natural foods stores and use of its corporate offices in Bethpage, N.Y.
The acquisition is expected to close during the first quarter of 2019, subject to customary closing conditions. Financial terms were not disclosed.
Although plans for the acquired units were not immediately made clear, the deal signals an aggressive move to strengthen Stop & Shop’s leading market share on Long Island, where hard discounter Lidl is preparing to take over two dozen former Best Market stores. Aldi and ShopRite have also established a stronger presence in the market in recent years as the 2005 A&P bankruptcy crumbled one-time Long Island stalwarts Pathmark and Waldbaums.
King Kullen has likewise experienced declining market share. It calls itself “America’s first supermarket,” having pioneered the self-service store concept. The company was founded in Queens, N.Y., in 1930 by Michael Cullen, a veteran of A&P and Kroger. His descendants still run the company, with Brian Cullen and J. Donald Kennedy serving as co-presidents.
Photograph courtesy of King Kullen Grocery Co.
“King Kullen is a well-respected grocery chain in the Long Island market that has an 88-year tradition of excellent customer service,” Mark McGowan, president of Stop & Shop, said in a statement. “We look forward to bringing our quality, selection and value to more communities in Nassau and Suffolk counties.”
Stop & Shop is expected to shortly begin renovation projects at all of its existing Long Island stores as part of a comprehensive rebranding. It was not immediately made clear whether Stop & Shop would preserve King Kullen’s banner and branding, or even all of its stores. “We will evaluate the stores and make these decisions in the near future,” spokeswoman Jennifer Brogan said in an email to WGB.
“In 1930, Michael J. Cullen opened the first King Kullen and ushered in the era of the great American supermarket,” said Brian Cullen. “As a family-owned and -operated business, we are very proud of our heritage and extremely grateful to all of our associates and customers for their support over the years. We are confident the Stop & Shop brand will carry on our legacy of service in the region.”
Ahold Delhaize CEO Frans Muller said the acquisition of King Kullen “underscores our commitment to further strengthen the positions of our great local brands in the U.S., both through organic growth and fill-in acquisitions.”
The Food Partners LLC served as the financial and strategic adviser to Stop & Shop, while JP Morgan served as the financial and strategic adviser to King Kullen.
Despite its many advantages—good locations in dense and wealthy Northeast markets where it possesses leading share and has long been ahead of industry trends such as e-commerce, fresh and private label—it’s been a bit of puzzle that Stop & Shop has been a relative laggard in the Ahold Delhaize portfolio.
That, however, could change if the company’s new branding initiative succeeds as executives hope it will.
The strategy, rolled out last month in 21 stores in the Hartford, Conn., market, is rooted in a comprehensive response to its customers' changing needs—primarily a need for convenience, health, personalization and value along every step of the shopping journey—and is reflected in a radical new look and feel for the Hartford stores.
Mark McGowan, Stop & Shop’s president, says customers are responding strongly to the changes, and that interpretations of it would roll through all of Stop & Shop’s 416 stores over the next five years, starting with a new batch in Long Island, N.Y., next spring.
As part of the retailer’s Capital Market Day events, WGB visited newly renovated units in South Windsor and Windsor, Conn.
“The customer absolutely associates us with fresh food, but we were well undeveloped in prepared foods,” McGowan told WGB during a store tour. “When we did our research, we saw our customers were asking for this, and we didn’t just ask our customers—we talked to customers across our trade area to really understand why the people who weren’t shopping with us weren't shopping with us. Why were they going someplace else?”
In the beer aisle, this large touchscreen helps customers find a beer to match the meal they have in mind, or perhaps the other way around. Mark Messier, Stop & Shop's EVP of merchandising, demonstrates the screen here. He said both merchants and vendors contributed input to its suggestions, which are designed around a wider variety of brands than were previously available. Craft enthusiasts can also find beer brewing equipment now.
“We made price investments and departmental changes in the past,” McGowan said, “but it’s been a long time that we’ve done something new in center store. But that’s a real journey between the assortment and the layout and everything we need to do.”
Among the new twists in South Windsor was this refrigerated case in the pasta aisle containing all the ingredients for making a pizza at home. This provides ease and shopping and inspiration for shoppers whose busy lives leave them little time to plan meals. Similar displays highlight tacos and snacks.
In Windsor, about 12,000 square feet of what used to be a 60,000-square-foot store has been given over to Takeoff Technologies, which placed a mini fulfillment center to serve online orders through Peapod. Using robotic equipment licensed from Knapp, the unit autonomously stocks, receives and assembles products for online orders. It is expected to go online in January.
Takeoff CEO Jose Aguerrevere gave a demonstration of the unit, saying items could be picked every six seconds—a rate about 20 times faster than the alternative of a store employee shopping the store. That could greatly reduce pick costs that come along with click-and-collect and delivery orders, while providing a local base for staging local deliveries, saving on the last mile.