Rouses going to self-distribution

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wnetmacman
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Rouses going to self-distribution

Post by wnetmacman » April 2nd, 2019, 8:53 am

Yesterday, it was announced that Rouses Markets of Thibodaux, LA would purchase a large building facility near Schriever, LA, between Thibodaux and Houma, to move their corporate offices, and to build a distribution center.

Story - Rouses moving headquarters

Until now, Rouses has been supplied by third parties; initially, they were a member of Associated Grocers of Baton Rouge. That didn't end well, and I believe there is still pending litigation. Since the split from AGBR, they have been supplied by AWG, who built a large warehouse near Slidell. I'm not sure of the impact to that just yet.

I've been noticing on my last few trips that there have been more Rouses-branded items in the stores, and fewer Best Yet. I kind of figured this was coming, however, because their current corporate office in Thibodaux is one of their older locations there, and it wasn't large enough for one of their stores, so how could they support 63 stores from it?

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Re: Rouses going to self-distribution

Post by pseudo3d » April 3rd, 2019, 8:51 am

While great news for Rouses, it sounds that would make them a more attractive acquisition target, if Albertsons, Kroger, or some other party went sniffing around in that area. Both chains could benefit from it, and neither one has stores in the New Orleans area.

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Re: Rouses going to self-distribution

Post by wnetmacman » April 3rd, 2019, 2:15 pm

pseudo3d wrote:
April 3rd, 2019, 8:51 am
While great news for Rouses, it sounds that would make them a more attractive acquisition target, if Albertsons, Kroger, or some other party went sniffing around in that area. Both chains could benefit from it, and neither one has stores in the New Orleans area.
I don't see either Albertsons or Kroger going for Rouses. Here's why:

Albertsons has been to New Orleans, and MASSIVELY failed there. Like several Albertsons stores became Sav-A-Center, and are now Rouses. Albertsons doesn't want them back. Additionally, in every Louisiana Market that both operate, the stores are very close by, namely Baton Rouge, Lafayette and Hammond. Wouldn't make any sense, plus Albertsons cannot afford any more acquisitions, even of 62 stores.

Kroger really doesn't seem to want to do business in Louisiana. In the last 20 years, they have closed 6 stores and built 5, which only replaced existing stores: Shreveport (2), Bossier City, Alexandria and one Lake Charles store. Their purchase of Rouses would be at a very inopportune time for them, as they're still trying to get Roundy's/Mariano's right, and integrate the ideas into the other divisions.

If anyone would or should be interested in Rouses, it would be Brookshire Grocery Company. Both could learn, and BGC could finally figure out how to operate outside TX, AR and LA. Even though there's a little overlap in Lafayette and New Iberia with Super 1 Foods, it is minimal because both cater to a different crowd. The new distribution in Houma would benefit both, as Lafayette's distribution drive is currently 3 hours one way from Monroe.

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Re: Rouses going to self-distribution

Post by storewanderer » April 3rd, 2019, 6:24 pm

I think the family involved with Rouses is in this for the long run. I do not think they will sell out.

I especially do not think they will sell out to Albertsons. Albertsons is not in a financial position to acquire much of anything unless they can get it for next to nothing (Rouses is a very good asset and would command a high multiple between its high store volumes, low average store age, and general reputation).

Kroger is clearly pissing away allocating its money toward things other than the stores at this point in time. I do hope that changes sooner rather than later because they are really missing out on a lot of opportunities and doing serious damage to the store model they spent the last 15 years building with their price increases, labor cuts, shrink initiatives causing out of stocks in fresh departments, and lack of new store growth in various growing west coast markets.

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Re: Rouses going to self-distribution

Post by pseudo3d » April 3rd, 2019, 8:34 pm

wnetmacman wrote:
April 3rd, 2019, 2:15 pm
pseudo3d wrote:
April 3rd, 2019, 8:51 am
While great news for Rouses, it sounds that would make them a more attractive acquisition target, if Albertsons, Kroger, or some other party went sniffing around in that area. Both chains could benefit from it, and neither one has stores in the New Orleans area.
I don't see either Albertsons or Kroger going for Rouses. Here's why:

Albertsons has been to New Orleans, and MASSIVELY failed there. Like several Albertsons stores became Sav-A-Center, and are now Rouses. Albertsons doesn't want them back. Additionally, in every Louisiana Market that both operate, the stores are very close by, namely Baton Rouge, Lafayette and Hammond. Wouldn't make any sense, plus Albertsons cannot afford any more acquisitions, even of 62 stores.

Kroger really doesn't seem to want to do business in Louisiana. In the last 20 years, they have closed 6 stores and built 5, which only replaced existing stores: Shreveport (2), Bossier City, Alexandria and one Lake Charles store. Their purchase of Rouses would be at a very inopportune time for them, as they're still trying to get Roundy's/Mariano's right, and integrate the ideas into the other divisions.

If anyone would or should be interested in Rouses, it would be Brookshire Grocery Company. Both could learn, and BGC could finally figure out how to operate outside TX, AR and LA. Even though there's a little overlap in Lafayette and New Iberia with Super 1 Foods, it is minimal because both cater to a different crowd. The new distribution in Houma would benefit both, as Lafayette's distribution drive is currently 3 hours one way from Monroe.
Albertsons closed the New Orleans stores back in 2004, while still trying to pull out of the slump caused by ASC (though they survived the 2002 closings). The other Louisiana stores either don't overlap (at least as last check) and the few that do there is a clear "better" store. And even Albertsons had the money and would let Rouses operate semi-autonomously, Rouses wouldn't want to sell.

Kroger doesn't seem interested in Louisiana, you are right. They replaced a Lake Charles store just about two years ago, but the majority of their stores haven't been touched. (Arguably, the Houston division as a whole isn't doing terribly hot, with a flurry of Marketplace activity about five years ago, but idling as H-E-B moves into Kroger's core territories). Their operations chain-wide aren't particularly encouraging, with the Mariano's operation becoming more "Kroger-like" instead of the other way around.

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Re: Rouses going to self-distribution

Post by wnetmacman » April 3rd, 2019, 9:01 pm

pseudo3d wrote:
April 3rd, 2019, 8:34 pm
Albertsons closed the New Orleans stores back in 2004, while still trying to pull out of the slump caused by ASC (though they survived the 2002 closings). The other Louisiana stores either don't overlap (at least as last check) and the few that do there is a clear "better" store. And even Albertsons had the money and would let Rouses operate semi-autonomously, Rouses wouldn't want to sell.
Albertsons' 7 New Orleans stores closed because they were MASSIVELY unprofitable. While it was around the time of the ASC meltdown, that alone wasn't the cause.

New Orleans is a totally different place, supermarket-wise. You can't use a cookie cutter approach as Albertsons did. Their pricing was waaaay off, the selection was dismal compared to the locals, and the stores just weren't up to par. One comparison told that a store in a very highly trafficked location was doing as much in one week as one of their better stores did in a day, roughly $200k, and that was a high sales store for the area.

I'd check your maps before you say Albertsons has no overlap with Rouses. They have significant overlap in Lafayette, with 3 Rouses stores near 4 Albertsons stores, including a Rouses just 1/2 mile from their Johnston St. Flagship store, a Johnston St. store that takes customers from both Ambassador Caffrey Albertsons stores, and a Youngsville store that pulls from the entire southern part of Lafayette Parish, including the Broussard Albertsons. And the Rouses stores see double the traffic. In Baton Rouge, they just took over LeBlanc's, where there were 9 stores, plus one already open. Albertsons only has 7 stores in Baton Rouge, a 3 store deficit. Plus no BR Albertsons is less than 18 years old, where all but one of the new stores Rouses has there are fairly new. In Hammond, the Rouses store is down the street from Albertsons. There are only 2 Rouses stores in Lake Charles, in Sulphur and Moss Bluff. There are only 2 Albertsons stores left there as well, both on the south side of town, and neither does high traffic.

A general rule of overlap doesn't mean the stores are right next to each other. If they're in a 10 mile radius in Louisiana, that's competition. Folks here will go out of their way for a better store. I used to drive from the north side of Lafayette down to Youngsville to shop Rouses because they were better. It's a 12 mile drive out there.

Rouses operates the better stores in every instance, and Albertsons won't try to take that on.

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Re: Rouses going to self-distribution

Post by klkla » April 4th, 2019, 3:26 pm

Self distribution can be risky for smaller retailers. Part of the undoing of Hughes Markets here in SoCal was their decision to spend a lot of money building a full service distribution center in Irwindale. As a result, they added a lot of debt and didn't spend as much money on building and remodeling stores.

Smaller retailers are unlikely to have the buying clout that they would from using a wholesaler or joining a cooperative. IMO it's best to have your own DC for perishables and some dry goods but to fill everything else in with a wholesaler or cooperative.

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