Capping off the best year in its 85-year history, Key Food recently held its first vendor meeting in nearly four years at the Teaneck (NJ) Marriott at Glenpointe. Nearly 900 suppliers, brokers and distributors attended the event which was canceled in 2020 and 2021 due to COVID-related restrictions and concerns.
Led by CEO Dean Janeway and COO George Knobloch, the Matawan, NJ-based retail co-op provided some background on important events over the past three years that have impacted the company and also asked the vendors in attendance to engage in helping to grow Key Food from a different perspective.
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Knobloch kicked off the two-hour confab by highlighting the company’s business priorities. Areas of focus included increasing net operating profit (and gross margin) as well as establishing stronger comparable store growth by adding new members and stores, which would ultimately enhance Key Food’s market share. The growth curve over the past 10 years has been very impressive by itself. Annual sales over that period (FY ’23, which ends in April, is projected) have increased between 7.5 percent to 14.5 percent and annual revenue has also skyrocketed from $1.4 billion in fiscal 2014 to $3.9 billion in 2022 and $4.4 billion this year.
A familiar theme in many of Knobloch’s previous presentations has targeted the buying power of the “5 Borough Market,” those five jurisdictions which comprise the City of New York. Population-wise alone, Brooklyn (#3 in the U.S.), with an estimated 2.6 million people; Queens (#4), where approximately 2.3 million people reside; Manhattan (#8), with a population of $1.6 million; and the Bronx (#10), with about 1.4 million residents, would all be among the largest U.S. markets if they were broken out separately. Key Food currently commands a 16.9 percent share of NYC’s $14.5 billion supermarket business, according to Food Trade News’ market share data.
And then, the former Wrigley executive addressed what he’d like to see from the company’s vendors when it comes to differentiation. “This is not just about us seeking more money,” Knobloch stated. “We need more face-to-face and top-to-top meetings. We need to hear your feedback and new ideas about how we can both improve our businesses. Rather than only the result, I’m looking for a higher quality of engagement from our suppliers and brokers.”
More tangibly, Knobloch told vendors in the packed room that he wants them to focus on several areas that will mutually grow sales and help Key Food move its revenue needle forward, too. Those include more: effective utilization of vendor scorecards to identify growth opportunities in a proactive manner; match, enhance and increase event frequency (including display programs); participate in Key Food’s “elite vendor” program; help fix distribution challenges; participation in the co-op’s food show; and a maintenance or increase in trade spending (as a percent of sales).
After Knobloch finished the first part of his presentation, chief executive Dean Janeway spoke to the large gathering about Key Food’s relationship with its new wholesaler UNFI, store counts, geographic expansion and the overall marketplace in which the company competes.
In October 2021, Key Food announced that it would be utilizing the services of UNFI as its primary wholesale grocer, signing a 10-year deal estimated to be worth $9.5 billion total sales (negotiations actually began in July 2019). In turn, UNFI agreed to build a new dedicated 1.3 million square foot distribution center near Allentown, PA that would allow Key Food’s nearly 360 member stores to be supplied using multi-temperature trucks (dry grocery and perishables) rather than the old system of two-truck supply. The new facility included many state-of-the art features and is located in an area that will support Key Food’s planned geographic expansion.
Janeway also reviewed a 10-year profile on the company’s member store count additions, reporting that the growth has been significant. In fiscal 2014, the co-op, then based in Staten Island (it relocated its offices to Matawan in late 2020), had a base of 150 members, most of whom traded as Key Food stores. With annual store counts increasing from 10 units per year to as many as 34 new stores annually, Janeway predicted that as many as 45 new stores could be added in fiscal 2023. Moreover, the company has expanded its “banner versatility” with new retailers displaying such other names as The Food Emporium, Food Dynasty, Superfresh, and Key Food Fresh.
Janeway also noted that the co-op has recently been adding members and stores outside the New York Metro region (New York, New Jersey and Connecticut) where it currently serves 330 stores that rang up sales of approximately $3.61 billion last year.
Florida is also targeted to be a major growth area for the merchant. With 62 stores now operating in the Sunshine State, Janeway projected that store count could jump to 90 in five years. In Pennsylvania, where only four stores are currently affiliated with Key Food, that number could quadruple by 2027. The 54-year old CEO also said that he expects growth to occur in his own backyard, with as many as 27 stores being added over the next five years in New York and 15 new supermarkets in New Jersey to be part of the co-op in the same time frame. If those projections are realized, Key Food would service about 500 stores which amass more than $5 billion in annual revenue.
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In analyzing the highly competitive New York Metro (NYM) market, Janeway said that the only certainty would be a continuation of instability and change. He named several major retailers – Stop & Shop, Morton Williams, Western Beef and Key Food – as NYM operators that have changed primary suppliers in the last three years. He also included the Fairway Market bankruptcy and subsequent store divestitures, and the cancellation of the Stop & Shop/King Kullen deal as factors which have impacted the market.
And Janeway is counting on more change and consolidation as a prime opportunity for Key Food to continue on its 10-year growth spurt. “As we’ve consistently seen change among the independents, often times because of family succession issues, I think among all the co-ops that we compete against, I believe we offer the independent retailer the best chance to succeed in part because of our loan programs, rebates, our real estate expertise and personal level of customer service.”
Dan Kupferberg, who is director of Key Food’s southern region, updated the audience on the company’s Florida expansion which he predicts will have 62 stores by the end of fiscal ‘23 and more than $750 million in annual sales. Key Food first entered Florida in January 2019 and Kupferberg predicted that by 2024 Key Food will operate about 80 stores and surpass the $1 billion sales threshold there.
Knobloch then returned to the stage to discuss inflation and the effects it is having on supply chains and buying habits. Noting that “everything has changed” since COVID first emerged in early 2020, the challenge in receiving product and the cost of those goods has made it difficult to forecast how to run many elements of Key’s business. “I don’t see inflation subsiding over the next year,” Knobloch said and he openly wondered, “what happens when we start anniversary inflation?”
And like Janeway, Knobloch emphasized the importance of comparable store sales growth and the benefits of Key Food’s store financing options. He also touted the advantages of the co-op’s “elite vendor” program where suppliers and brokers are given preferential access to initiatives such as speed-to-shelf, joint planning sessions and bi-monthly scorecards.
Allison Rubino, Key Food’s director of sales operations, provided an overview of some of the company’s marketing plans, including its focus on store brands, especially its proprietary Urban Meadow label. Expanding the retailer’s digital couponing effort will also be a priority with a national digital FSI pilot program to be launched next month. According to Rubino, who joined Key Food nearly nine years ago and has held a variety of positions with the company, a successful digital launch should feature a combination of store-influenced communication – shelf signage, a digital coupon gallery, weekly circulars – and some direct digital output including e-mail blasts and social media as well as radio and television. She also told vendors that they can utilize other Key Food programs in social media and through its purchase incentive programs. She also urged the suppliers and brokers in attendance to take advantage of Key Food’s collaborative marketing programs which she said would provide “a louder voice together.”
To wrap up the meeting, Knobloch highlighted two food industry non-profit groups which he is especially committed to. The Future Food Industry Leader program run by Saint Joseph’s University allows students in the school’s food marketing program (George’s daughter is an alumnus) to interact with leading retailers in the Mid-Atlantic and Northeast and provides an opportunity for the student to begin a career in food retailing while also allowing merchants to find and groom talent in an industry that needs to hire younger people with emerging skills.
Knobloch also spoke passionately about the Los Rancheros Foundation, a charity he’s been associated with for many years which is named for a village in the Dominican Republic where many retailers hail from. With Dominicans comprising 65 percent of all independent food retailers in the five boroughs, the foundation has built and donated more than 300 homes and provided electricity, water and walk-in medical services to residents of the tiny village located in the north central part of the country.
This year’s meeting was a bit more low-key than previous Key Food vendor sessions, but the wealth of content that was professionally presented by the company’s executives made it a worthwhile endeavor for those who attended.
And with sales at an all-time high and a very bright future ahead, there was a lot to be proud of.
‘Round The Trade
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Natalie Knight, who has served as Ahold Delhaize’s CFO since 2020, informed the large Dutch merchant that she will be leaving her post in six months to pursue another job opportunity in her native U.S. Knight has spent the past 25 years working in Europe, most notably with Adidas.
In its latest report, which was released in mid-January, the Bureau of Labor Statistics’ Consumer Price Index (CPI) provided the best inflation news in more than a year. However, food price inflation once again was higher than all other categories and continues to be a major national economic issue. The overall inflation rate declined 0.1 percent in December with inflation now at 6.5 percent over the last 12 months. But food prices have increased 0.3 percent since November. Two of the six major food measuring groups increased or remained level over the past month. Those include: meat/poultry/seafood/eggs (+7.7 percent) and other food at home (+13.9 percent). The other four categories – cereal/bakery products (+16.1 percent); dairy (+15.3 percent); fruits and vegetables (+8.4 percent); and non-alcoholic beverages (+12.6 percent) – dipped slightly but saw levels remain high. The CPI is a bit deceiving because energy plays such a major role in its measuring criteria. For example, the agency’s gasoline index declined 9.4 percent month-over-month and has dropped steadily since mid-summer. That drop alone makes the overall CPI sound more favorable; however, the fact remains that overall food prices have increased more than 10 percent during the past 12 months and most retailers agree it will become an even larger sales hurdle to overcome in the coming months.
On the digital front, according to research firm Brick Meets Click/Mercatus, total U.S. online grocery sales rebounded for the first time in nearly five months as digital-driven sales increased 2.4 percent to $9.1 billion. However, there was some nuance in the reporting including the fact that pickup was the only method to gain sales during December, up 14.7 percent. Delivery declined slightly, down 1.8 percent, and ship-to-home dropped more dramatically, down 16.2 percent. As with November trends, orders placed with mass retailers contributed more significantly to the growth of total online grocery sales than orders placed with grocery retailers, driven by changes in the two formats’ monthly average users (MAUs), average order value (AOV), and order frequency. “The investments that mass retailers have put into their pickup services are a significant driver of the format’s gains,” said David Bishop, partner at Brick Meets Click. “And while lower prices are a contributing factor in the growth of the mass MAU base, being able to more consistently execute at the store level is also helping to strengthen retention and engagement with existing customers, especially when compared to grocery.” The December report also notes that in December 2021, mass and grocery were at parity on this measure. A year later, mass gained a 10-point advantage driven by grocery’s significant drop during the month.
Strange comment from James Kehoe, Walgreens’ CFO, who during the Deerfield, IL drug chain’s earnings call with financial analysts said, “Maybe we cried too much last year,” when it came to the company’s shrink from theft losses. Kehoe’s comments differ radically from other senior retail leaders – particularly Brian Cornell at Target and Walmart’s McMillon. A year ago, Walgreens said its shrink increased more than 50 percent from the prior year and the drug chain closed a number of stores due to the problem. Go figure.
Local Notes
And speaking of shrink from theft, there was an interesting and accurate opinion piece in the New York Post earlier this month supporting the position of the Collective Action to Protect our Stores (CAPS), a coalition representing about 4,000 retailers (many of them grocers) across NYC that has offered an innovative way of dealing with shoplifters, particularly serial offenders. According to Carlos Collado, who owns two Fine Fare stores in the city, “Repeat offenders are the key words. We are not asking for elevated charges for first-time offenders, but to send a message to those who make it a career.” Collado is spot-on, but somehow it sounds much too logical for the city with the worst bail reform policies in the country to actually take seriously.
Lidl will open its first “from the ground up” store on Long Island on January 18 in Deer Park. The 36,000 square foot unit will employ about 50 associates whose starting pay will be $17.50 per hour. And Asian grocer HMart announced it will be opening its ninth New Jersey store, a 35,000 square foot unit, later this year in the American Dream Mall in East Rutherford, NJ, across from Giants Stadium.
Way too many deaths have occurred over the past 30 days including three from our industry. Just after Christmas we lost Frank Tummarello, 79, one of the best peddlers I’ve met. I’m not sure anybody in the Mid-Atlantic ever sold more ice cream than Frank (although none to Eskimos) or had a more relaxed method of selling. A great storyteller who was also extremely knowledgeable about his craft, Frank Tummarello overcame a lot of physical hardships in his life (polio, amyloidosis – which led to a heart transplant and cancer) to lead a productive and successful life filled with love from his family.
Also passing on was Michael Perlmutter, 79, CEO of Perlmart, the ShopRite member who sold its seven Jersey Shore stores to Saker ShopRites last summer because of Michael’s long illness. I only met Mike a handful of times in my career, but always found him to be a warm, smart and funny person who had a natural curiosity about people. A very interesting person, you will be missed, Mike Perlmutter.
And then there’s Dave Landis, former CEO of Landis Markets, which operates five stores in Bucks and Montgomery counties near Philadelphia. Dave, 81, left us late last year after a stellar career in independent retailing that encompassed more than 60 years. After we acquired Food Trade News in 1978, Dave Landis was one of the first people I met. That meeting was memorable to me – he gave me a tour of the family’s flagship store in Telford, PA and I recall being so impressed with Dave’s wisdom and integrity. To me, Dave Landis was the epitome of the independent retailer – hard-working, creative and honest. To his wife, Carolyn, and sons Scott (who remains in the family business that was started by Dave’s father, Frank, in 1938) and Jeff (a successful attorney in Philadelphia), my deepest sympathies.
Outside the business, we learned of the passing of Jeff Beck, 78, one of the best guitar players in the history of rock and roll. Beck first gained fame as the second of the three great guitarists that played for the iconic British blues band The Yardbirds (Eric Clapton, followed by Beck, who was followed by Jimmy Page). In 1968, he ventured out on his own and released “Truth,” one of best debut albums of all time and one that featured the first vocal work by a then-unknown raspy-voiced singer named Rod Stewart (check out the instrumental “Beck’s Bolero” and the gritty remake of Howlin’ Wolf’s “I Ain’t Superstitious”). Another one of my favorite Beck performances appears on Stevie Wonder’s amazing “Talking Book” (1972) album (listen to his subtle, but distinctive “fills” on the beautiful song “Lookin’ For a Pure Love”). For the past 50 years, Beck has been a sort of Pied Piper of the ax, playing all over the world with many musicians and playing many musical styles. His mastery of so many musical genres on his Stratocaster – rock, blues, R&B, jazz fusion, electronica and even opera – put him into an “other worldly” class, especially with his peers. To hear Jeff Beck on stage, with his amped up white Strat, was a truly a thing of beauty.
Source: https://t-tees.com
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