Kroger speculated to acquire The Fresh Market

[Knight]

A Reuters article, "Exclusive: Kroger in bid to acquire Fresh Market - sources," mentions Kroger to be in the running to acquire Greensboro, North Carolina-based specialty-gourmet grocer The Fresh Market.

[pseudo3d]

A Reuters article, "Exclusive: Kroger in bid to acquire Fresh Market - sources," mentions Kroger to be in the running to acquire Greensboro, North Carolina-based specialty-gourmet grocer The Fresh Market.

Hmm...that seems a little weird. I've never been to a Fresh Market, but from what I can tell, they run small, like "I can't stand even 40k square feet" small. They took over a number of Rice Epicurean stores in Houston (all but one), many of which were former AppleTree stores (which were all 1970s-era Safeway stores), and cut down the square footage in all of them but one (which was not an AppleTree/Safeway, but rather a small independent called Lewis & Coker). Problem is, Kroger already exists in that market with a huge market share. What are they going to do? Have tiny 25k square foot Kroger stores (even if not in name?) Drive off TFM's customer base by Kroger-izing it and switching it to the inferior local Kroger division? Integrate it as a replacement to Fresh Fare? Plunder its bakery program to replace their inferior garbage? Create dark stores to funnel traffic to Kroger stores?

Personally, I think it's all just talk and that it will probably go to an investor.

[Knight]

If Kroger acquires The Fresh Market, it would operate as a subsidiary like Harris Teeter and Roundy's. The Fresh Market is a specialty/gourmet grocer, and attracts a different customer.

[wnetmacman]

Based on what I've read about Main & Vine, it would be an excellent expansion tool for that concept. TFM stores are small operations that are essentially a collection of specialty shops in one building. Huge butcher, large deli, made from scratch bakery, exceptionally fresh produce and a large wine department. They're nice, overpriced stores. The departments make some really good stuff.

Might be what Kroger is thinking, anyway.

[Knight]

Main and Vine is different from the The Fresh Market because of a focus on organic health and beauty. The Fresh Market does not have much in non-food items.

[storewanderer]

TFM has a nice offering, I think they failed in California because they are a "gourmet" store rather than a "natural/organic" store and in northern California the average customer doesn't seem to understand the difference between gourmet, natural, and organic. In SoCal there are already others doing a better job at being gourmet stores.

TFM also wasn't run very well in California, they were distributing from across the country, and they took strange/poor locations that did not tie up real well with the demographic they were trying to attract.

TFM stores seem to be around 24,000 square feet.

I think Kroger is starting to have a few too many formats on the plate and am not sure if adding this is a great move or not. I think Kroger is looking for an ideal small store concept to do organic expansion of. Small stores with cheaper labor, fewer SKUs, and a more limited product mix. Ruler Foods being a hard discount format appears to be getting a little bit of traction. Now we have this Main & Vine idea that is a small format natural/organic. The Fresh Market would add a third layer (gourmet) to their mix. What is interesting about this is Kroger has private labels distinctly for all of these formats; Kroger Value/Kroger for Ruler, Simple Truth for Main & Vine, and Private Selection and Hemispheres (if that one is staying around, most of it has already been reduced out at Smiths) for The Fresh Market.

[pseudo3d]

TFM has a nice offering, I think they failed in California because they are a "gourmet" store rather than a "natural/organic" store and in northern California the average customer doesn't seem to understand the difference between gourmet, natural, and organic. In SoCal there are already others doing a better job at being gourmet stores.

TFM also wasn't run very well in California, they were distributing from across the country, and they took strange/poor locations that did not tie up real well with the demographic they were trying to attract.

TFM stores seem to be around 24,000 square feet.

I think Kroger is starting to have a few too many formats on the plate and am not sure if adding this is a great move or not. I think Kroger is looking for an ideal small store concept to do organic expansion of. Small stores with cheaper labor, fewer SKUs, and a more limited product mix. Ruler Foods being a hard discount format appears to be getting a little bit of traction. Now we have this Main & Vine idea that is a small format natural/organic. The Fresh Market would add a third layer (gourmet) to their mix. What is interesting about this is Kroger has private labels distinctly for all of these formats; Kroger Value/Kroger for Ruler, Simple Truth for Main & Vine, and Private Selection and Hemispheres (if that one is staying around, most of it has already been reduced out at Smiths) for The Fresh Market.

All of those brands (except for Hemispheres, which I've never heard of) are available at most Kroger stores.

I really don't think Kroger is after The Fresh Market, and it's all talk. The Simple Truth brand was envisioned as an organic brand for Kroger consumers and not really trying to go head-to-head with other brands. Even Main & Vine was fashioned out of a QFC, which Kroger has owned since the late 1990s, and the fastest way to alienate consumers is to buy a brand and refashion it in your own image, especially when the brand in question is so far out of touch of what consumers expect out of your brand.

[veteran+]

F/M new builds are 28sft. (that is their prototype). There is flexibility of course in execution and also take overs vary as well.

As noted above, F/M failed in Cali for several reasons:

1. over expansion
2. distribution logistics
3. the person in charge of the area and the expansion

If Kroger is truly interested, I don't think it's a stretch.

Blending a gourmet format with an organic format makes total sense to me and I believe Kroger has the skill to do it.

I'm pretty sure there are Fresh Markets in Florida so that would be an interesting re-entry for Kroger.

[pseudo3d]

F/M new builds are 28sft. (that is their prototype). There is flexibility of course in execution and also take overs vary as well.

As noted above, F/M failed in Cali for several reasons:

1. over expansion
2. distribution logistics
3. the person in charge of the area and the expansion

If Kroger is truly interested, I don't think it's a stretch.

Blending a gourmet format with an organic format makes total sense to me and I believe Kroger has the skill to do it.

I'm pretty sure there are Fresh Markets in Florida so that would be an interesting re-entry for Kroger.

For a re-entry to Florida, that's a bad choice for Kroger. They'd still be playing second fiddle to Publix, and their small fleet of smaller stores really have the risk of alienating existing customers. The worst case scenario for Kroger is for them to alienate TFM customers in Florida with re-merchandising and new policies (plus with a small square footage) while Albertsons expands in Florida as it converts Winn-Dixie stores to new Safeway stores that customers actually want to shop at.

[klkla]

For a re-entry to Florida, that's a bad choice for Kroger. They'd still be playing second fiddle to Publix, and their small fleet of smaller stores really have the risk of alienating existing customers. The worst case scenario for Kroger is for them to alienate TFM customers in Florida with re-merchandising and new policies (plus with a small square footage) while Albertsons expands in Florida as it converts Winn-Dixie stores to new Safeway stores that customers actually want to shop at.

The Fresh Market is a specialty format, not a full service supermarket. The square footage suits the format. They're very similar to Bristol Farms. Their stock has been pummeled recently making it a good deal for someone with deep pockets to buy them out. If Kroger did this I think they would keep operations separate from mainline Kroger stores but use their buying clout to lower costs while still maintaining The Fresh Market's sales (which would increase profit margins).

As for Albertsons expanding in Florida by converting Winn-Dixie stores to Safeway seems pretty far-fetched at this point.