February 14, 2007
CEO Returning to Chicago Home
Robert Mariano knows Chicago. In the late 1990’s, he ran Dominick’s Finer Foods and was there when the then market leader rolled out its “Fresh Store” concept.
It wasn’t long after, however, that Safeway bought Dominick’s, scrapped the “Fresh” concept and started a period where it steadily lost market share. Interestingly, Dominick’s began a rebound, of sorts, in the past couple of years when it started remodeling stores under Safeway’s “Lifestyle” concept. The new format, it should be pointed out, bears a number of similarities to the “Fresh Store.”
Mr. Mariano, for his part, has moved on to other challenges. Specifically, he has taken the helm of Milwaukee-based Roundy’s, a grocery wholesaler and operator of stores under the Copps, Pick ‘n Save and Rainbow banners.
Now, Mr. Mariano is looking to return to his Chicagoland home in a big way.
Roundy’s has announced plans to open its first Chicago store on the New City YMCA site at 1515 N. Halsted in the summer of 2008.
The store, according to a company press release, will be about 80,000 square-feet on two floors. It will focus on fresh offerings across the store along with a wide selection of prepared foods for all meals. Natural products and organics will have a strong presence in foods and non-foods.
Roundy’s has plans to open as many as 13 new stores, as yet unnamed, in Chicagoland over the next three years, possibly including a store in the Carson Pirie Scott building on State Street. The company is reportedly looking at some of the locations being vacated by Dominick’s along with others that may be more suitable to its needs.
The Chicagoland stores, according to Roundy’s, will be supplied through the company’s new 1.1 million square-foot distribution center in Oconomowoc, Wis.
Mitch Corwin, an analyst with Morningstar, said Mr. Mariano and Roundy’s might have Chicago sized-up properly.
“For a big market, Chicago doesn’t have a lot of large players,” he told the Chicago Tribune. “It is unusual for a player to have more than a 40 percent market share.” (Supervalu’s Jewel has a 45 percent share; Dominick’s has 15 percent.)
At the same time, no one should expect Mr. Mariano and company to walk in and take over the city. “Chicagoland has been traditionally brand loyal, and it will not be easy to introduce a new brand into this marketplace,” said Mr. Corwin.
Bill Bishop, chairman of Willard Bishop Consulting and a RetailWire BrainTrust member, said, “There is a real evolution in what people are looking for in food stores… There could very well be an opportunity for a couple of really viable new supermarket competitors in the Chicago market.”
Discussion Questions: Is Chicagoland ready for a new grocery store chain? Is Roundy’s, under Robert Mariano’s leadership, the right company to make a big push in the market?
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Don’t anyone tell Whole Foods, Wild Oats, or Trader Joe’s that a “lack of brand equity” or “advertising economies of scale” should have prevented them from entering new markets with small numbers of stores. Also, please keep these truths from Wal-Mart, which began this way.
We’re not as “neighborhoody” here in Sacramentoland as they are in Chicagoland, but our supermarkets tend to position themselves as neighborhood stores rather than impersonal links in a chain. It’s that way and even more so in Chicagoland, where geographical divisions are even drawn to delineate baseball loyalties. Very neighborhoody. In fact, you could call Chicagoland “Neighborhoodland.”
Chicagoland, and Everyland, are always ready for a new grocery store chain. The “ready” magnets are change, newness, something better and contemporary. Demographics and lifestyles keep revising. They need to be accommodated “to their own standards.” Robert Mariano is as qualified as anyone to attempt a push in the Chicagoland market, but does he have both a 2012 vision and the big, big bucks to slug it out with Safeway and SuperValu? Let the game begin.
With only 13 locations planned, it won’t be easy for Roundy’s to market itself in Chicago. Advertising economies of scale aren’t possible for 13 locations in a market that huge. Roundy’s will need to be creative to affordably reach the likely shoppers for each location.
As a foodie and a Chicagoan, I say bring it on! The supermarkets in the city are less than stellar and daily I find myself pining for the uniqueness and differentiation I write about everyday at grocers such as Wegmans, HEB and others creating great shopping experiences for their customers. If Roundy’s is set to make an imprint in Chicago, I’m ready for it. And the location for the first store is great–tons of young people, lots of new developments and a Dominick’s not far away that was once less than mediocre but is seeing signs of life with the new Lifestyle efforts.
Bob has one other thing going for him that has largely gone unmentioned: he has the “cream of the crop” of the old-school Dominick’s merchants. As Safeway slowly squeezed the “Dominick’s” out of Dominick’s, department heads that had served the Chicago market for years slowly started to drift north. He has a team in place that knows what Chicago wants and can definitely deliver the goods!
In the past, when grocers crossed the state line they weren’t very successful. Twice Jewel has come into Wisconsin and twice they have failed. The now defunct Kohl’s Food Stores tried its hand in Chicago a few decades ago and left a few of its distinctive arched buildings, but not much more than that as a memory.
Despite the history, I think they do have slightly better than even odds at success this time around. The new concept is clean and trendy and if there is anything Chicago likes it is the cool factor. It will be interesting to hear what the new name will be. Also, by locating the stores in high population density areas, they could almost be successful by accident.
A State Street location however they may face some challenges as far as logistics go. I’m not nearly as familiar with the loop as I once was, but the immediate area was definitely more business than residential. How are customers going to schlepp it all home? Will they offer free parking, parcel pick up, or free delivery? I’m sure numerous condos have sprung up in the periphery, but shopping for groceries in the loop sounds like a logistical nightmare.
To add to BobX’s comment about Roundy’s pirating the best executives from Dominick’s, well you ain’t seen nothin’ yet. I would bet that once more stores are announced, Roundy’s will be able to recruit the very best store directors and department managers that once made Dominick’s great. Safeway tied their hands and Roundy’s is going to set them free, leaving Dominick’s with second stringers to do the fighting. I think some of these execs have struggled in Wisconsin as evidenced by negative same store sales with Roundy’s–some as a result of cannibalization and some from new competition. Put this group back on their home turf and we will see some excitement. I think this group has a chip on their shoulder and is ready to deal out a bit of punishment to Dominick’s. Roundy’s is privately held which will allow them to react fast to market changes. Dominick’s and Jewel are no longer masters of their territory but rather slaves to a large, sterile out-of-state corporation where decisions are not made until they go through layers of bureaucracy.
I think Roundy’s has a very good chance of success. Though we Chicagoans are mostly brand loyal, a lot of people are unhappy with their grocery store. How Jewel maintains its market share with its run-down stores in the city amazes me. Whole Paycheck is just that–too expensive. Many people, myself included, don’t like Trader Joe’s emphasis on private label brands and limited assortment. And though in general I am happy with the new Lifestyle Dominick’s near my condo, it runs out of S. Rosen’s pineapple bread far too often and Chicagoans like me do not like to accept substitutes. So if Roundy’s manages to create excitement with new trends as well as cater to our local favorites, it stands a very good chance of success, especially in neighborhoods like Edgewater/Uptown that only have Jewel or Dominick’s.
One word: Fairway.
In New York, which is also saturated, Fairway hit the ball out of the park with just the formula suggested for Roundy’s–highlighting fresh and prepared food. I once interviewed Fairway founder Joe Fidele, who later went on to a career at Fresh Direct. His opinion was that there was lots of room for new grocery chains, especially those that realized people want less space devoted to cardboard boxes, and more to gorgeous produce and appetizing deli items.
Chicago really needs a progressive supermarket operator. Jewel and Safeway do not have 2010 store formats. Bob Mariano has been obsessed trying to get Safeway to sell Roundy’s the stores, so he can get back in his home town. However, he has had a difficult time convincing them to sell. So this is his next step and if he can get a few stores up and running, he may put a scare into Safeway and they may reconsider selling to him. However, I see nothing in the Rainbow stores or Copps stores that would even come close to what Wegmans is doing. Why can’t Bob show us what he can do with the Rainbow and Copps stores before he takes on deep pockets companies like SuperValu and Safeway? We will be watching this project unfold with a close eye.
As a Chicagoan, let me say that the grocery market is under-developed. For a major city we lack any of the innovative grocery players equivalent to Wegmans, Central Market in Austin or other “experience” grocery stores. Dominick’s was on the right path prior to the Safeway acquisition and it’s obvious to customers that it has been stalled for a long time. Chicago is a sophisticated restaurant and food market, yet the grocery stores have evolved little since the 80s. If Roundy’s wants to turn that around, bring them in! If they can manage to do it more cheaply than Whole Foods I will be first in line at the check out.
Well, with what Safeway has done to Dominick’s, and all of the former Dominick’s people that have stayed on with Safeway, it might be slightly uncomfortable for Dominick’s/Safeway to know that Bob Mariano is returning to Chicago.
Bob has a bit of a challenge ahead of him, but he does have the upper hand over Safeway. He knows Chicagoans, he knows they loved Dominick’s pre Safeway, and he knows the products they want on the shelves. Everything from Jay’s potato chips, S. Rosens Breads, Vienna Beef Hot Dogs, and everything else Chicago…Bob Mariano knows what us Chicagoans eat and what we like.
Safeway, on the other hand, is still trying to push its private labels on Chicagoans. Although their Lifestyle concept is unique, it isn’t something drawn up and designed by a Chicago or a Midwestern company. What Safeway is doing in the Lifestyle stores at Dominick’s is the same as what Safeway is doing at Randall’s, Genaurdi’s, and Safeway stores on the West Coast. It isn’t Midwestern unique, nor does it have a progressive Chicago design style such as the original Fresh Stores rolled out by Bob Mariano. The original Fresh Stores and Omni Superstores at Dominick’s were constant testing grounds in the 1990s for new rollouts and product tests. Safeway seems to only be testing and pushing out its private label brands.
At Bob’s disadvantage though is the lack of brand equity in rolling out a new chain in Chicago. Dominick’s historic photos, traditions and management were very unique and evolved through the years and all played a part in the modern pre Safeway Dominick’s. Bob has a challenge in creating an environment that Chicagoans can relate to and give them a reason to go his stores over Jewel and Dominick’s.
As far as food service, it will be interesting to see if Bob Mariano can create cafes that are meal destinations. Case in point, last Friday at lunch, I visited a D&W Fresh Market in Grand Rapids, MI and you could barely find a seat in the in store cafe. It must have had 100 people enjoying their lunches right inside the grocery store. On the other hand, when Dominick’s rolled out the Fresh Stores in the 1990s in the former Omni stores…the cafes sat empty and most were removed when Safeway took over. Even the Dominick’s and Jewel stores that currently have food service–I can only think of one cafe that is successful…and that is the Dominick’s in Bannockburn, IL. If Bob can create a destination for food not only in the grocery sense such as D&W Fresh Market, he will make the new concept store very successful and create a meal destination similar to Whole Foods.
I predict a huge success. Bob will not let this fail. He is going to give it 110% because he is performing in front of his home crowd. Roundy’s has borrowed heavily and given the money back to the investors. From here on out it’s show time and time to have fun. The investors have nothing to lose and it’s full steam ahead with OPM (other people’s money).
The first site picked is an excellent location. I did a site analysis study near there for another client last year. The site is positioned in an area that is as trendy as Bob’s new haircut. Its an upscale gentrified area near the Gold Coast, along light rail, and DePaul University. Nearby are some very high volume and high sales per square foot food stores such as Whole Foods, Trader Joe’s, Treasure Island, Jewel and Dominick’s. The competition is not just doing well, but fantastic. Dominick’s already has a double decker store up the street busting at the seams. Trader Joe’s told me their nearby store, which is on the second floor of a parking garage, was their #2 store in the Midwest region. The bottom line is, based on the over performance of all the competitors this is an under-stored market. You can’t ask for better.
This is perfect timing because Safeway is still confused about the future of Dominick’s, they are closing stores, and they are dragging out their remodels at a very slow pace. The remodels Safeway is doing with Dominick’s are increasing sales but are still far behind the levels that Mr. Mariano was achieving. He knows they are an easy mark right now. SuperValu will be bogged down with Jewel as they go through the acquisition learning curve. When do sales go up after a chain is acquired? They don’t and Roundy’s knows this is the time to strike while SuperValu is distracted.
We learned at Roundy’s that the best recipe for success is to go after the highest sales per square foot stores of the weakest competitors. A&P/Kohls, Fleming, Fresh Brands and now, Jewel have left Wisconsin, sold out or filed for bankruptcy in utter defeat and humiliation. I predict their store development will be focused in areas where Jewel and Dominick’s are over performing. Also several developers are doing retail projects in the Loop.
Some might be concerned about having only 11 stores. I’m going to disagree with Mark Lilien for the first time in my life. Trader Joe’s, Whole Foods, Sunset, Potash, and Treasure Island only have a handful of stores and they all do quite well. Plus, I predict it won’t be long before Safeway throws in the towel and hands over to Bob some very nice remodeled and upgraded stores for a fraction of what Bob sold them to Safeway for.
I’m with Livingston on the number of stores not being significant. Chicago and collar communities are loaded with very successful 2-5 store operators who appeal to the demographic they understand and serve. One more point to add to the litany on Mariano: he also knows the other side of the battle he is entering. Roundy’s is not the first invader from beyond the cheddar curtain, and Mariano successfully defended his flatland turf when he was at Dominick’s. And the tag team with Jewel was almost impervious for decades. In their present conditions, Dominick’s and Jewel should not be relevant competition for Roundy’s, if they do it right.
There is a tremendous opportunity in Chicagoland for the right entry. What happened to Dominick’s was and is a shame, despite the slight comeback. Although the comment about 13 stores is right–not a lot for a market the size of Chicago–if done correctly, the 13 stores could be just the start. While brand equity is important, it seems to be less so today as the market shifts towards the fresh/organic area. Too bad the Dominick’s brand is not available as the combination of that brand and the Roundy’s approach would be a formidable competitor.
Y’all listening to the flute of the piper? How many chains have tried to take their concept to another area and failed? Safeway, sound a tune. Bob was at Dominick’s a long time ago. His in-store restaurants flopped. He sold at the right time. Time has passed and Roundy’s hath not the resources to conquer Chicago, lacking a significant acquisition to obtain significant economies of scale.
There’s nothing like competition to bring on better products and service. That being said, my feeling is we may be coming to a critical mass. “Neighborhood” markets are nice but in the end, no matter the size of the store, price, quality and service will dictate the day. BTW, Trader Joe’s, Whole Foods and even the young Wild Oats took at least twenty years to get where they are–this will be a tough road for Mr. Mariano.
Topgun questions why Roundy’s is going to Chicago instead of fixing its Copps and Rainbow divisions. There is an old saying – “different horses for different courses.” Chicago is Bob Mariano’s turf and that is where he feels most comfortable competing. Copps has been hopelessly beaten in rural Wisconsin by Wal-Mart and Skogen’s Festival. Copps has gone through multiple acquisitions resulting in poor morale. The Copps family was the Wegmans of Wisconsin and it’s unfortunate they sold out.
The management styles of the Copps family and Mr. Mariano are just too far apart and the employees just never were able to adjust. Skogen’s is one of those companies that overemphasises taking care of their employees. To Roundy’s, Copps was just a stepchild.
As for Rainbow, they bought the stores cheap — real cheap. They are never going to do well and Roundy’s knows it. They are just too outclassed by Cub, Lunds-Byerlies, and an onslaught of competition in the Twin Cities. It’s Cub and Lunds home court and Roundy’s is the outsider looking in. Roundy’s will keep them in neutral until they start big losing money.
Chicago will be different. It’s Mariano’s home court. For Safeway and Supervalu, they don’t have a very good track record of running retail away from their home base. Safeway says sales at Dominicks have fallen from $55 million per week to $35 million per week since taking over. Where has Supervalu been successful running retail outside of the Twin Cities? Even the Cub stores in Chicago never really caught on and were performing poorly.
What makes anyone think they can do better with Jewel? Albertsons couldn’t make a go of them and were forced to sell them off to Supervalu. Supervalu will probably do even worse and I’m quite certain Roundy’s is counting on it.
Roundy’s doesn’t have to be everywhere in Chicago. The suburbs will do, with a theme like that of the Fresh stores of the old Dominick’s.
Times and shoppers have changed and Roundy’s needs new approaches to revive the Fresh store format.
Or, does price and merchandising win over a ‘fresh’ concept that shoppers demand? Hmmmmmm
Bob took all of the worthwhile management with him to Milwaukee. Safeway is great for California but a dying group in Chicago–witness all of the store closings and declining same store sales. Safeway is trying to bring California to Chicago. And Chicago is rejecting it.
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Don’t anyone tell Whole Foods, Wild Oats, or Trader Joe’s that a “lack of brand equity” or “advertising economies of scale” should have prevented them from entering new markets with small numbers of stores. Also, please keep these truths from Wal-Mart, which began this way.
We’re not as “neighborhoody” here in Sacramentoland as they are in Chicagoland, but our supermarkets tend to position themselves as neighborhood stores rather than impersonal links in a chain. It’s that way and even more so in Chicagoland, where geographical divisions are even drawn to delineate baseball loyalties. Very neighborhoody. In fact, you could call Chicagoland “Neighborhoodland.”
Chicagoland, and Everyland, are always ready for a new grocery store chain. The “ready” magnets are change, newness, something better and contemporary. Demographics and lifestyles keep revising. They need to be accommodated “to their own standards.” Robert Mariano is as qualified as anyone to attempt a push in the Chicagoland market, but does he have both a 2012 vision and the big, big bucks to slug it out with Safeway and SuperValu? Let the game begin.
With only 13 locations planned, it won’t be easy for Roundy’s to market itself in Chicago. Advertising economies of scale aren’t possible for 13 locations in a market that huge. Roundy’s will need to be creative to affordably reach the likely shoppers for each location.
As a foodie and a Chicagoan, I say bring it on! The supermarkets in the city are less than stellar and daily I find myself pining for the uniqueness and differentiation I write about everyday at grocers such as Wegmans, HEB and others creating great shopping experiences for their customers. If Roundy’s is set to make an imprint in Chicago, I’m ready for it. And the location for the first store is great–tons of young people, lots of new developments and a Dominick’s not far away that was once less than mediocre but is seeing signs of life with the new Lifestyle efforts.
Bob has one other thing going for him that has largely gone unmentioned: he has the “cream of the crop” of the old-school Dominick’s merchants. As Safeway slowly squeezed the “Dominick’s” out of Dominick’s, department heads that had served the Chicago market for years slowly started to drift north. He has a team in place that knows what Chicago wants and can definitely deliver the goods!
In the past, when grocers crossed the state line they weren’t very successful. Twice Jewel has come into Wisconsin and twice they have failed. The now defunct Kohl’s Food Stores tried its hand in Chicago a few decades ago and left a few of its distinctive arched buildings, but not much more than that as a memory.
Despite the history, I think they do have slightly better than even odds at success this time around. The new concept is clean and trendy and if there is anything Chicago likes it is the cool factor. It will be interesting to hear what the new name will be. Also, by locating the stores in high population density areas, they could almost be successful by accident.
A State Street location however they may face some challenges as far as logistics go. I’m not nearly as familiar with the loop as I once was, but the immediate area was definitely more business than residential. How are customers going to schlepp it all home? Will they offer free parking, parcel pick up, or free delivery? I’m sure numerous condos have sprung up in the periphery, but shopping for groceries in the loop sounds like a logistical nightmare.
To add to BobX’s comment about Roundy’s pirating the best executives from Dominick’s, well you ain’t seen nothin’ yet. I would bet that once more stores are announced, Roundy’s will be able to recruit the very best store directors and department managers that once made Dominick’s great. Safeway tied their hands and Roundy’s is going to set them free, leaving Dominick’s with second stringers to do the fighting. I think some of these execs have struggled in Wisconsin as evidenced by negative same store sales with Roundy’s–some as a result of cannibalization and some from new competition. Put this group back on their home turf and we will see some excitement. I think this group has a chip on their shoulder and is ready to deal out a bit of punishment to Dominick’s. Roundy’s is privately held which will allow them to react fast to market changes. Dominick’s and Jewel are no longer masters of their territory but rather slaves to a large, sterile out-of-state corporation where decisions are not made until they go through layers of bureaucracy.
I think Roundy’s has a very good chance of success. Though we Chicagoans are mostly brand loyal, a lot of people are unhappy with their grocery store. How Jewel maintains its market share with its run-down stores in the city amazes me. Whole Paycheck is just that–too expensive. Many people, myself included, don’t like Trader Joe’s emphasis on private label brands and limited assortment. And though in general I am happy with the new Lifestyle Dominick’s near my condo, it runs out of S. Rosen’s pineapple bread far too often and Chicagoans like me do not like to accept substitutes. So if Roundy’s manages to create excitement with new trends as well as cater to our local favorites, it stands a very good chance of success, especially in neighborhoods like Edgewater/Uptown that only have Jewel or Dominick’s.
One word: Fairway.
In New York, which is also saturated, Fairway hit the ball out of the park with just the formula suggested for Roundy’s–highlighting fresh and prepared food. I once interviewed Fairway founder Joe Fidele, who later went on to a career at Fresh Direct. His opinion was that there was lots of room for new grocery chains, especially those that realized people want less space devoted to cardboard boxes, and more to gorgeous produce and appetizing deli items.
Chicago really needs a progressive supermarket operator. Jewel and Safeway do not have 2010 store formats. Bob Mariano has been obsessed trying to get Safeway to sell Roundy’s the stores, so he can get back in his home town. However, he has had a difficult time convincing them to sell. So this is his next step and if he can get a few stores up and running, he may put a scare into Safeway and they may reconsider selling to him. However, I see nothing in the Rainbow stores or Copps stores that would even come close to what Wegmans is doing. Why can’t Bob show us what he can do with the Rainbow and Copps stores before he takes on deep pockets companies like SuperValu and Safeway? We will be watching this project unfold with a close eye.
As a Chicagoan, let me say that the grocery market is under-developed. For a major city we lack any of the innovative grocery players equivalent to Wegmans, Central Market in Austin or other “experience” grocery stores. Dominick’s was on the right path prior to the Safeway acquisition and it’s obvious to customers that it has been stalled for a long time. Chicago is a sophisticated restaurant and food market, yet the grocery stores have evolved little since the 80s. If Roundy’s wants to turn that around, bring them in! If they can manage to do it more cheaply than Whole Foods I will be first in line at the check out.
Well, with what Safeway has done to Dominick’s, and all of the former Dominick’s people that have stayed on with Safeway, it might be slightly uncomfortable for Dominick’s/Safeway to know that Bob Mariano is returning to Chicago.
Bob has a bit of a challenge ahead of him, but he does have the upper hand over Safeway. He knows Chicagoans, he knows they loved Dominick’s pre Safeway, and he knows the products they want on the shelves. Everything from Jay’s potato chips, S. Rosens Breads, Vienna Beef Hot Dogs, and everything else Chicago…Bob Mariano knows what us Chicagoans eat and what we like.
Safeway, on the other hand, is still trying to push its private labels on Chicagoans. Although their Lifestyle concept is unique, it isn’t something drawn up and designed by a Chicago or a Midwestern company. What Safeway is doing in the Lifestyle stores at Dominick’s is the same as what Safeway is doing at Randall’s, Genaurdi’s, and Safeway stores on the West Coast. It isn’t Midwestern unique, nor does it have a progressive Chicago design style such as the original Fresh Stores rolled out by Bob Mariano. The original Fresh Stores and Omni Superstores at Dominick’s were constant testing grounds in the 1990s for new rollouts and product tests. Safeway seems to only be testing and pushing out its private label brands.
At Bob’s disadvantage though is the lack of brand equity in rolling out a new chain in Chicago. Dominick’s historic photos, traditions and management were very unique and evolved through the years and all played a part in the modern pre Safeway Dominick’s. Bob has a challenge in creating an environment that Chicagoans can relate to and give them a reason to go his stores over Jewel and Dominick’s.
As far as food service, it will be interesting to see if Bob Mariano can create cafes that are meal destinations. Case in point, last Friday at lunch, I visited a D&W Fresh Market in Grand Rapids, MI and you could barely find a seat in the in store cafe. It must have had 100 people enjoying their lunches right inside the grocery store. On the other hand, when Dominick’s rolled out the Fresh Stores in the 1990s in the former Omni stores…the cafes sat empty and most were removed when Safeway took over. Even the Dominick’s and Jewel stores that currently have food service–I can only think of one cafe that is successful…and that is the Dominick’s in Bannockburn, IL. If Bob can create a destination for food not only in the grocery sense such as D&W Fresh Market, he will make the new concept store very successful and create a meal destination similar to Whole Foods.
I predict a huge success. Bob will not let this fail. He is going to give it 110% because he is performing in front of his home crowd. Roundy’s has borrowed heavily and given the money back to the investors. From here on out it’s show time and time to have fun. The investors have nothing to lose and it’s full steam ahead with OPM (other people’s money).
The first site picked is an excellent location. I did a site analysis study near there for another client last year. The site is positioned in an area that is as trendy as Bob’s new haircut. Its an upscale gentrified area near the Gold Coast, along light rail, and DePaul University. Nearby are some very high volume and high sales per square foot food stores such as Whole Foods, Trader Joe’s, Treasure Island, Jewel and Dominick’s. The competition is not just doing well, but fantastic. Dominick’s already has a double decker store up the street busting at the seams. Trader Joe’s told me their nearby store, which is on the second floor of a parking garage, was their #2 store in the Midwest region. The bottom line is, based on the over performance of all the competitors this is an under-stored market. You can’t ask for better.
This is perfect timing because Safeway is still confused about the future of Dominick’s, they are closing stores, and they are dragging out their remodels at a very slow pace. The remodels Safeway is doing with Dominick’s are increasing sales but are still far behind the levels that Mr. Mariano was achieving. He knows they are an easy mark right now. SuperValu will be bogged down with Jewel as they go through the acquisition learning curve. When do sales go up after a chain is acquired? They don’t and Roundy’s knows this is the time to strike while SuperValu is distracted.
We learned at Roundy’s that the best recipe for success is to go after the highest sales per square foot stores of the weakest competitors. A&P/Kohls, Fleming, Fresh Brands and now, Jewel have left Wisconsin, sold out or filed for bankruptcy in utter defeat and humiliation. I predict their store development will be focused in areas where Jewel and Dominick’s are over performing. Also several developers are doing retail projects in the Loop.
Some might be concerned about having only 11 stores. I’m going to disagree with Mark Lilien for the first time in my life. Trader Joe’s, Whole Foods, Sunset, Potash, and Treasure Island only have a handful of stores and they all do quite well. Plus, I predict it won’t be long before Safeway throws in the towel and hands over to Bob some very nice remodeled and upgraded stores for a fraction of what Bob sold them to Safeway for.
I’m with Livingston on the number of stores not being significant. Chicago and collar communities are loaded with very successful 2-5 store operators who appeal to the demographic they understand and serve. One more point to add to the litany on Mariano: he also knows the other side of the battle he is entering. Roundy’s is not the first invader from beyond the cheddar curtain, and Mariano successfully defended his flatland turf when he was at Dominick’s. And the tag team with Jewel was almost impervious for decades. In their present conditions, Dominick’s and Jewel should not be relevant competition for Roundy’s, if they do it right.
There is a tremendous opportunity in Chicagoland for the right entry. What happened to Dominick’s was and is a shame, despite the slight comeback. Although the comment about 13 stores is right–not a lot for a market the size of Chicago–if done correctly, the 13 stores could be just the start. While brand equity is important, it seems to be less so today as the market shifts towards the fresh/organic area. Too bad the Dominick’s brand is not available as the combination of that brand and the Roundy’s approach would be a formidable competitor.
Y’all listening to the flute of the piper? How many chains have tried to take their concept to another area and failed? Safeway, sound a tune. Bob was at Dominick’s a long time ago. His in-store restaurants flopped. He sold at the right time. Time has passed and Roundy’s hath not the resources to conquer Chicago, lacking a significant acquisition to obtain significant economies of scale.
There’s nothing like competition to bring on better products and service. That being said, my feeling is we may be coming to a critical mass. “Neighborhood” markets are nice but in the end, no matter the size of the store, price, quality and service will dictate the day. BTW, Trader Joe’s, Whole Foods and even the young Wild Oats took at least twenty years to get where they are–this will be a tough road for Mr. Mariano.
Topgun questions why Roundy’s is going to Chicago instead of fixing its Copps and Rainbow divisions. There is an old saying – “different horses for different courses.” Chicago is Bob Mariano’s turf and that is where he feels most comfortable competing. Copps has been hopelessly beaten in rural Wisconsin by Wal-Mart and Skogen’s Festival. Copps has gone through multiple acquisitions resulting in poor morale. The Copps family was the Wegmans of Wisconsin and it’s unfortunate they sold out.
The management styles of the Copps family and Mr. Mariano are just too far apart and the employees just never were able to adjust. Skogen’s is one of those companies that overemphasises taking care of their employees. To Roundy’s, Copps was just a stepchild.
As for Rainbow, they bought the stores cheap — real cheap. They are never going to do well and Roundy’s knows it. They are just too outclassed by Cub, Lunds-Byerlies, and an onslaught of competition in the Twin Cities. It’s Cub and Lunds home court and Roundy’s is the outsider looking in. Roundy’s will keep them in neutral until they start big losing money.
Chicago will be different. It’s Mariano’s home court. For Safeway and Supervalu, they don’t have a very good track record of running retail away from their home base. Safeway says sales at Dominicks have fallen from $55 million per week to $35 million per week since taking over. Where has Supervalu been successful running retail outside of the Twin Cities? Even the Cub stores in Chicago never really caught on and were performing poorly.
What makes anyone think they can do better with Jewel? Albertsons couldn’t make a go of them and were forced to sell them off to Supervalu. Supervalu will probably do even worse and I’m quite certain Roundy’s is counting on it.
Roundy’s doesn’t have to be everywhere in Chicago. The suburbs will do, with a theme like that of the Fresh stores of the old Dominick’s.
Times and shoppers have changed and Roundy’s needs new approaches to revive the Fresh store format.
Or, does price and merchandising win over a ‘fresh’ concept that shoppers demand? Hmmmmmm
Bob took all of the worthwhile management with him to Milwaukee. Safeway is great for California but a dying group in Chicago–witness all of the store closings and declining same store sales. Safeway is trying to bring California to Chicago. And Chicago is rejecting it.