Delhaize(parent of Food Lion) in merger talks with BiLo

[krogerclerk]

Delhaize has entered talks to discuss acquiring BiLo's assets. Considering that BiLo's core market is basically the same geography as Food Lion's and they draw from the same general demographic, the end result will be Food Lion becoming the dominant grocer in Greenville-Spartanburg, SC, the home market of BiLo, where Food Lion has a small presence, but enough to shore up BiLo against a growing Publix, Walmart and Ingles presence. Charlotte, Columbia, Charleston and Chattanooga will see a lot of closures and divestures. But the long term will bring a more Hannaford style of merchandising to the market quicker than the selected rollout of Bloom to higher demographic markets will do.

http://www.prnewswire.com/news-releases ... 11707.html

[Alpha8472]

People are saying that the merger might be blocked by the FTC.

http://supermarketnews.com/retail_finan ... rger_1009/

It would make Food Lion number one in market share in 14 of 17 markets where they both do business. In many of the markets it would boost market share above that of Walmart Supercenters.

[krogerclerk]

Whether or not the FTC views Walmart Supercenters as a competitor will be a deciding factor in this merger. Of the 17 overlapping markets, Food Lion and BiLo are already well represented in store counts, so some divestures and conversion to Bloom and Bottom Dollar will have to happen. In South Carolina, Food Lion has 145 stores under Food Lion, Reids and Harvey's banners while BiLo has 130 stores(with greater market share than FL). Walmart Supercenter with fewer than 80 locations is the statewide market leader with almost 33% market share that would be close to that of the two merged operators. Columbia and Myrtle Beach would be the most concentrated areas while BiLo's home market in the I-85 corridor with Greenville, Anderson and Spartanburg has a limited presence from Food Lion. Charleston and the South Carolina portion of the Augusta, GA metros also have a sizeable amount of overlap with the two.

Conventional competitors will be the long-term gainers, as Publix is closing in on BiLo in its home market and Asheville, NC based Ingles Markets has a strong presence. Lowes Foods is expanding its South Carolina presence in suburban Charlotte and Myrtle Beach, the two markets which are served by Publix. Harris-Teeter and Kroger both have gone through expansions and retrenchments is the state, so they may or may not gain from this merger in the areas they are present. Charleston-based Piggly Wiggly Carolina has a major presence in the state, particularly the coast and Midlands region, with only a minor presence Upstate.

Another area, Chattanooga, TN, has long been dominated by a single chain. BiLo's predecessor, Red Food by the late 80's had almost 60% market share when the FTC allowed them to buy the 7 Kroger locations which would take market share past 70%, citing while the market had concentrated and many chains before Kroger had failed in the market, there were no barriers to entry in the market, citing the recent expansion of Food Lion to the area(1987-88).
Walmart would in the current market still have a third of the market to a merged BiLo/Food Lion's 43%. Again I expect Publix to benefit and open more locations above their current 3 which have opened in the last 2 years.

If the FTC doesn't allow this merger, it would only slow the pace of industry consolidation in the areas impacted while condemming BiLo to a slow death while its competition expands. Since FL is rolling out larger and more upscale stores and is the biggest traditional competitor, again it achieves the same goal, though it likely loses out in the Greenville Upstate market, the state's largest market. Delhaize, parent of Food Lion, Hannaford and Sweetbay, has long been a rumored suitor for Ahold's US operations-Giant-MD/Stop-n-Shop and Giant-PA, and BiLo's former parent company.

[krogerclerk]

If the FTC allows the merger, it's likely the BiLo banner will be retired as Delhaize is seeking to purchase only certain assets and none of the liabilities that sent the chain into bankruptcy. Also, this will greatly facilitate Food Lion's recent entry into the pharmacy business, speed the roll out of the more upscale Bloom format, and result in the conversion of more older and smaller stores to Bottom Dollar, a Save-a-Lot type Food Lion format.

Since BiLo fits within Food Lion's existing footprint, the Mauldin, SC distribution center will likely close or be slowly phased out, as will headquarters, since the Salisbury, NC hq of Food Lion is less than 2 hours away.

Store wise, the two largest markets impacted by the merger, Charlotte and Greenville-Spartanburg, will see few store closings as BiLo dominated upstate SC and Food Lion's presence is small, while Food Lion and Harris-Teeter have an overwhelming lead over BiLo in the Charlotte area.

[Groceteria]

It will be interesting to see how this advances the Bloom and Bottom Dollar conversion programs. Bloom doesn't really impress me that much; it's pretty much Food Lion with slightly nicer decor and lots of electronic gimmicks. But the newest Bottom Dollar stores (as opposed to the initial bunch) are very interesting. They remind me less of Save-a-Lot and more of the Canadian "warehouse" chains, like Loblaw's No Frills stores, with name brands and a very attractive (but still inexpensive) graphic-intensive and colorful decor. There's actually kind of an excitement there that I haven't seen in a while, and I think it really could catch on. Some of the Bi-Lo stores in Charlotte (one or two of them are former Krogers) are perfectly sited for this format as well.

[krogerclerk]

Upon visiting one of the local BiLo's Staurday, I noticed an increase in the amount of Topco branded private label over the last few months. Full Circle, TopCare, and ValuTime are replacing the Finast brand for general merch, OTC and HBC. Evidently the licensing for Southern Home is expiring, Southern Home had begun as a Bruno's brand, but now SH brands say distributed by Southern Home
Mauldin, SC(BiLo's hq) instead of Bruno's Birmingham, AL as it was prior to Ahold acquiring Bruno's. After Southern Home became BiLo/Bruno's house brand, under Ahold ownership, the labels said distributed by FoodHold Landover, MD. as Southern Home sodas-Mainstreet, Ralley, etc. still do. The variety of SH sodas is diminishing and Faygo is taking the shrinking space. BiLo still has Walter's produce, which is shared with Giant-PA, but likely Walter will be gone if licensing is expired or has been voided by bankruptcy court.

Whether or not BiLo is merged into Food Lion, a very different BiLo will emerge from bankruptcy, one that seems to be more of a return to the small regional that existed before Ahold acquired them in 1977. It's doubtful that BiLo can remain competitive as a small regional in the current environment that pits most of it stores against Food Lion that targets the same demographic, Publix which has the upscale market and Walmart with the low price end of the market with specialized niche operators expanding ranging from Whole Foods, Earth Fare, The Fresh Market, Trader Joes to Aldi and Sav-a-Lot.

[krogerclerk]

For the time being, BiLo has rejected the Food Lion and will continue as an independent entity.

http://www.charlotteobserver.com/busine ... 72397.html