The recently announced store closures by Earth Fare and Lucky’s Market will likely impact scores of specialty food vendors, many of whom have spent years building their business with these chains.
“I think the general consensus is that’s it’s just a gut punch,” says Kelly Davis, owner of mustard brand Lusty Monk, which is based in Earth Fare’s headquarters city of Asheville, North Carolina. “You just spend so many years building up the business, and you fight, fight, fight, to get into their stores.”
Earth Fare was one of the first retailers to begin carrying her products about 12 years ago, she says, and as the chain grew, Lusty Monk grew with it.
“We got into a lot of states that we probably wouldn’t have been in had we not been able to get into Earth Fare,” she says.
Lusty Monk’s mustards, which are known for their spicy kick, are carried by Gourmet Foods International and other wholesalers, and are distributed both in retail and foodservice outlets, mostly in the Southeast.
Earth Fare and Niwot, Colorado-based Lucky’s Market both filed bankruptcy in the last few weeks, as did New York-based Fairway, another food specialty retailer.
Jay Jacobowitz, owner of consulting firm Retail Insights, Brattleboro, Vermont, says the impact on suppliers to these chains will likely resolve over time.
“It’s survivable for the vendors,” he says. “They’ll take a bit of a haircut, but I don’t think any of the the three will have much of an impact beyond a 12-month cycle for any of the vendors.”
Wholesaler United Natural Foods Inc. is the largest creditor in the bankruptcies of both Earth Fare and Lucky’s Markets, according to reports.
Straying from the Founders’ Vision
If there’s a lesson to be learned from the failures of these retailers, it’s that retail founders can lose control of their vision and mission when they accept outside investors, Jacobowitz says.
“Be careful what you wish for when asking for investor money,” he says. “When your strategy is controlled by financial investors rather than the founders, the potential consequences involve demoting the founders’ vision and mission.”
All three retailers struggled to manage expansion plans fueled by their investors that steered them away from their roots, Jacobowitz says.
Lucky’s Market, for example, which filed bankruptcy on Jan. 21 shortly after Kroger said it was divesting its ownership stake, was founded around the concept of “gourmet prepared foods,” he says. That vision was diluted by the banner’s Kroger-backed expansion in Florida, where Kroger previously did not have a presence.
“Had they stayed with a manageable number of stores, they might have been able to replicate ‘gourmet prepared’ effectively, but once they leaped across the country to Florida and became Kroger’s proxy, any hope of replicating gourmet prepared foods went down the drain,” Jacobowitz says.
Lucky’s more than doubled in size during the three years following Kroger’s 2016 investment, reaching 39 locations. The founders of Lucky’s Market, Bo and Trish Sharon, have agreed to acquire seven Lucky’s Market stores, while the company seeks buyers for the remaining 32 stores through bankruptcy.
Earth Fare, meanwhile, had long struggled with poor site selection under investor ownership, Jacobowitz says, before it filed Chapter 11 bankruptcy this month, citing industry pressures. The banner had expanded from 25 locations to 50 since 2012 under the majority ownership of private equity firm Oak Hill Management.
Jacobowitz says both Earth Fare and Lucky’s Market also suffered from an “inconsistent ingredient standard” that may have muddied their position in the market.
Likewise, Fairway essentially became just another conventional retailer when it expanded into suburban areas outside its core, inner-city Manhattan, he says.
Conventional supermarkets will be the biggest winners among the retailers that pick up business following the sale and closure of Lucky’s, Earth Fare and Fairway locations, Jacobowitz predicts. “Well-situated specialty chains” such as Sprouts Farmers Market and Whole Foods Market are next in line to reap the benefits of store closures, he says, followed by hard-discount chains such as Lidl and Aldi, and independent specialty retailers.
Publix Super Markets, Aldi and Winn-Dixie have all bid to acquire some of Lucky’s locations, and Village Super Market, an operator of ShopRite supermarkets, is seeking to acquire Fairway’s five Manhattan stores and its distribution center.
from Industry Operations https://ift.tt/2OJkY6r
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