News/Analysis/Commentary
A syndicate of banks, including the main debt-holders Bank of Ireland, AIB and National Irish Bank, announced today the 51-year-old Irish supermarket chain Superquinn is being put into financial receivership due to the struggling grocer's debts, which are said by its creditors to be in the range of €400 million, which is about $635 million based on today's Euro-to-dollar conversion rate.
The banks said in the statement today they've appointed Kieran Wallace and Eamonn Richardson of the KMPG accounting firm as the receivers.
The recievers' charge from the bank creditors is to find a buyer for the 23-store Superquinn supermarket chain, which was founded by Fergal Quinn in 1960 and sold by the family to the Select Retail Holdings consortium in 2005 for about €450 million (slightly more than the current debt-load), post-haste.
Here's what one of the receivers, Eamonn Richardson, said today: "The Group [Superquinn owner Select Retail Holdings], which has been operating in a tough trading environment, has been heavily indebted, primarily due to property related loans. Therefore, this receivership, together with the planned sale as a going concern is a positive development for Superquinn, its employees and customers. We hope to be in a position to release further details on a proposed sale in the coming days."
The statement also said Superquinn's current CEO, Andrew Street, will remain in charge of the supermarket chain during the receivership process.
The banks and receiver administrators added in the statement today they're "confident of a successful sale of the business to a suitable buyer with a view to maintaining the Superquinn brand, the existing Superquinn stores, all of the jobs in these stores, and the highly regarded Superquinn product and service offering."
That's a tall order. But we imagine the creditors would settle for any one element out of the four listed above if the acquisition price is right.
The Superquinn brand does have iconic status in Ireland. For readers in the U.S. or elsewhere unfamiliar with the Irish grocer, think Ralphs in Southern California or H-E-B in Texas, for example, two chains with decades of operation and solid brand equity.
Therefore, the buyer - say any of the UK's top grocers like Waitrose, Morrisons, Tesco, Walmart-owned ASDA or Sainsbury's, for example - will have a struggle in deciding whether to change the banner, although if a big chain does buy Superquinn, it would probably eventually change the banner to its own, regardless of what it does in the interim.
Superquinn says it has about 2,800 employees at its stores located throughout Ireland and at its headquarters offices.
The chain had 24 stores until 2009, when it closed its store in Dundalk. Superquinn also fired 400 employees the same year, including those who worked at the shuttered supermarket.
It's hard to say because of the heavy debt load, but in our analysis the two leading candidates to acquire Superquinn are probably the UK supermarket chains Waitrose and Morrisons. Of the two, Superquinn's up-market format and fresh foods-focus fit Waitrose best from a merchandising standpoint, in our analysis, although the fit is also a good one for Morrisons.
Tesco, which is the food and grocery sales market share leader in Ireland with a 27.1% share, according to the most recent figures (12 weeks ended April 18, 2011) from Kantar Worldpanel Ireland, might also be interested in acquiring Superquinn, although we believe the competition authorities would likely veto any such deal because of its dominance in the Republic.
Also from Tesco's perspective as the market share leader in Ireland, as it is in the entire UK, the cost-benefit analysis - 23 stores (14 of which are in the metropolitan Dublin area) with about €400 million in debt - makes little sense in terms of a Tesco buy, at least in our analysis.
Ireland's second-largest supermarket chain by market share, Dunnes, (23.6% according to Kantar) and number three Supervalu (19.5%), which isn't affiliated with the U.S. grocery chain of the same name, might also be interested in buying Superquinn, which according to Kantar Ireland has a 6.4% share of the national market, which is down from 6.9% last year.
However, in our analysis, competitiveness would also be a potential political issue for both chains, as would the simple fact Superquinn's heavy debt load might not justify buying a competitor grocer with a declining 6.4% market share, although that share is pretty good for 23 stores.
Walmart's ASDA chain and Sainsbury's, Tesco's top two competitors in the United Kingdom and which according to Kantar have a meager combined 1.5% market share in Ireland, might also be interested in Superquinn, although of the two we think Sainsbury's would be the more likely grocer to perhaps make a bid because of its closer fit (than ASDA's) from a merchandising standpoint with Superquinn. In fact, in our analysis Superquinn would be a good play for Sainsbury's if it can get a good deal.
Whole Foods Market's Irish Opportunity
But it's not just UK-based chains that Superquinn presents an opportunity for in our analysis.
For example, we think the Superquinn "Irish sweepstakes" offers an interesting strategic opportunity for Austin, Texas USA-based Whole Foods Market, which currently has just five stores in the UK, four of which it acquired when it bought the small Fresh & Wild chain a few years ago. The fifth store,Whole Foods' only built-from-the-ground-up unit to date in the UK, is its 80,000 square-foot High Street Kensington mega-market in London, which it opened in 2007. All five stores are in and around London, England.
Earler this year Whole Foods Market co-founder and co-CEO John Mackey said the natural grocery chain plans to at least double the number of stores it has in the UK over the next five years.
Thus far the natural grocer has signed two new leases in London's Richmond and Fulham districts, which is nearly half-way to that doubling. The two stores are scheduled for late 2012 or early 2013 openings.
Whole Foods Market is also opening its first store outside the London area soon, in the city of Gifnock, which is a fairly high-income suburb just south of the city of Glasgow. Walter Robb, Whole Foods' co-CEO, said in a talk given earlier this year we attended that additional stores are being planned in metropolitan Glasgow, Scotland.
The Texas-based natural and organic grocery chain has been struggling and losing money in the UK for years, although its getting closer to break-even with its operations there. In its fiscal 2010 year Whole Foods' lost £3.06 million (about $5.8 million) in its UK operations, which was down significantly from the previous year's loss of £4.36 million (about $7 million).
On top of that improvement, Whole Foods' mega-Kensington High Street store in London turned a profit for the first time since 2007 in the grocer's latest quarter, along with experiencing strong comparable store sales in the double-digits.
Whole Foods Market says its committed to expanding in the UK. In fact, last year co-founder/co-CEO Mackey said publicly that if the natural-organic grocer had to choose between Canada and the UK - its two international divisions outside the U.S. - it would choose the UK.
Despite this commitment, Whole Food Market suffers from a lack of critical mass in the UK.
It's also not clear to us if Whole Foods' focus on London and the surrounding environs makes much sense, considering the competition from up-market grocer Waitrose, which offers a substantial selection of natural and organic foods and has a strong brand franchise in the UK. This geographical focus in fact is something Whole Foods agrees on in part, which is why it's expanding into Scotland - to geographically diversify.
In our analysis, Ireland, which shares a long kinship with the United States where Whole Foods is a huge success, is as good or better a potential market for the natural grocer as England or Scotland is.
And Superquinn, which shares numerous merchandising and operational elements with Whole Foods Market - a focus on fresh foods; local foods procurement, merchandising and promotion; natural, organic and specialty product offerings; a high-level of customer service; and more - is as good an acquisition fit as Whole Foods' could find across the pond, in our analysis, assuming it could get a good deal on the 23-store chain, considering the heavy debt-load it's carrying.
Superquinn operates as a conventional supermarket along with its specialty and fresh foods focus. This isn't something that fits Whole Foods Market's culture or strategy in the U.S. But Ireland isn't the U.S. And different countries often call for different approaches and strategies, including within those regions or nations.
For example, after it acquired chief rival Wild Oats Markets in 2007, it sold the then hybrid conventional-natural-specialty 30-plus-store Henry's Farmers Market chain to Southern California-based Smart & Final, giving as the reason that operating such a chain wasn't part of its culture or strategic plans. We suspect that might be the case with Superquinn, although it need not be.
But that wouldn't have to be a problem for Whole Foods Market were to acquire the Irish supermarket chain.
For example, under one scenario, it could keep all of the Superquinn units that make sense from a demographic and lifestyle perspective (Whole Foods' key data point in terms of store locations is percentage of college graduates and consumers who've attended college), change the banner to Whole Foods Market on those stores and sell off the remaining Superquinn markets, using the proceeds to help pay down the debt.
Another scenario, regardless of how many units it were to keep, would be to co-brand the stores using the iconic Superquinn brand in combination with the Whole Foods name - or keep the Superquinn name completely, which might be its smartest strategy.
Doing this wouldn't be unheard of for the grocer. For example, Whole Foods Market operates a few stores in the U.S. that don't have the Whole Foods Market name, including the Harry's Farmers Market stores in Georgia, which were acquired via acquisition a number of years ago.
The Harry's stores in fact are a hybrid conventional-natural-organic-specialty format. In other words there's precedent for the natural grocer's doing so.
Therefore, in our analysis it wouldn't be a stretch, and perhaps would be a wise move, for Whole Foods Market to operate the Superquinn stores, in this scenario, as a hybrid format, keeping the best of what the 51-year-old Irish chain offers and adding some of the best elements from Whole Foods, such as its focus on organics. Both Whole Foods Market and Superquinn put a major focus on fresh foods - produce, meats, deli, in-store bakery and fresh-prepared foods - which is a natural marriage.
We also think Whole Foods' decentralized culture and operations structure, particularly as it pertains to its UK operations but also the way it operates in the U.S., would serve it well were it to acquire Superquinn and operate it as a best-of-both-chains-type hybrid conventional-natural-organic-specialty food and grocery chain. It could retain many of the Superquinn people, who all have a local focus, and blend them with the Whole Foods' UK folks, who already understand the grocer's culture, for example.
Superquinn also operates an online ordering and home delivery business, which could allow Whole Foods Market to extend its business and sales on the Emerald Isle far beyond the 23 (or however many Superquinn units it would end-up keeping) brick-and-mortar supermarkets.
When Irish eyes are smiling
The Devil is always in the details when it comes to deals like Superquinn, particularly since the chain has a heavy debt-load, a declining market share and negative sales growth. Kantar Ireland's figures for the period described earlier have Superquinn with negative sales growth of about 5%, for example.
But it is also under such circumstances - heavy debt and a decline in market share - that good deals can also be made. In those cases ... God is in the details.
As far as Whole Foods Market - which recently announced its long-term strategy is to go from slightly over 300 stores currently in America to 1,000 units, which could easily more than triple the grocer's current annual sales of nearly $9 billion - goes outside the U.S. (a few stores in Canada and the UK), an acquisition of Superquinn and a presence in Ireland is certainly something the Austin, Texas-based grocer should seriously look into, in our analysis.
After all, from a historic and cultural perspective, is there really any better and more logical place for an American grocer to go overseas than Ireland, where nearly every resident either has a family member or friend who at one time or another has lived in the U.S?
Whole Foods Market is also a known brand name in Ireland because of the extensive travel and trade relationships between the two countries.
Like the U.S., Ireland is in an economic slump. But also like in the U.S., there continues to exist in Ireland a food and grocery retailing up-market. Superquinn offers a opportunity for Whole Foods Market to perhaps participate in that niche, as well as to jump-start its strategy across the pond and from there across the channel.
Like we said, both the Devil and God are in the details. But we do think Superquinn is worth a look for Whole Foods Market. After all, co-founder and co-CEO John Mackey's Irish eyes do remain clearly focused across the pond.
Tidak ada komentar:
Posting Komentar