Summary
Until recently Supervalu has been a very good grocery wholesaler. All grocery wholesalers have been struggling to survive the onslaught from Wal Mart Superstores, Target Superstores, Costco, Sam's Club, etc. In a bold move several years ago Supervalu decided to transform itself into a retail grocery chain through a series of expensive acquisitions. It now appears that that strategy is unraveling.
Analysis
I have never met a grocery wholesaler who didn't think they could operate grocery stores better than their mostly independent local chains who they often financed and had to clean up after when they went belly up. Supervalu was in danger of going the way of Fleming Foods after the K Mart debacle but decided to buy their way into the big leagues of national chain grocers by buying the bulk of the Albertson's portfolio out of bankruptcy.
The problem with this strategy was that no wholesaler had ever made a successful conversion to retailer and only a few of the very best grocery operators in the country have proven their ability to withstand the competition from the strongest national competitor in history, namely Wal Mart. Kroger is the rare exception and sadly Supervalu is no Kroger.
This situation should be on everyone's "watch list"! Anyone who is concerned with grocery anchored strip centers, national chain grocery stores or simply investing in property containing one of Supervalu's operating companies should be concerned, very concerned..
