Mergers, tech companies, and private equity ownership are reshaping the grocery retail sector, as a continued wave of consolidation threatens smaller chains and their employees. At stake are jobs, unions, and rural stores that are sometimes the only grocery option for miles.
Amazon’s acquisition of Whole Foods signaled a change in how groceries can be bought and distributed, and led Walmart to expand its online grocery sales. But the tech giant isn’t the only company challenging the grocery status quo. Lidl and Aldi, both German grocery chains, have been rapidly expanding across the United States, often undercutting domestic retailers. Dollar General, a discount store, has brought in more grocery options, and its rock-bottom prices challenge even Walmart’s offerings.
Another aspect of the consolidation sweeping the sector is the rising role of private equity firms in managing struggling grocery chains. According to the New York Times, “Many failing supermarkets are owned by private equity firms that have loaded the companies up with debt” — debt that the grocers often can’t recover from.
The parent company of Winn-Dixie and Bi-Lo filed for Chapter 11 bankruptcy this year, despite the fact that Lone Star, a private equity firm, “has cashed out $980 million in dividends” on the company. Tops Market filed for bankruptcy last month, burdened by debt it had undertaken when it was owned by private equity firm Morgan Stanley Investment Management. Fairway, an iconic New York grocer, is now owned by the private equity firm Blackstone and is undergoing a transformation that has yet to yield a clear turnaround.
As chains go bankrupt or downsize, many employees lose their jobs, including those represented by unions. Tops Market has 12,000 unionized employees. Marsh Supermarkets, a regional grocer backed by private equity, laid off 1,500 employees last year. Fairway’s 3,500 employees are mostly unionized, and the fate of their jobs remains unclear. The future of unions that represent grocery workers is uncertain as non-union employers like Amazon and Walmart become more powerful.
Supermarket consolidation is reaching the Hispanic grocery sector, as well. In a deal announced Sunday, the U.S. arm of Mexico’s Grupo Comercial Chedraui will buy Texas-based and private equity-owned Fiesta Mart. The deal, which values Fiesta Mart at $300 million, is the latest in a series of buy-ups in the Hispanic grocery sector that mirror consolidation elsewhere in grocery.
“Last year, food wholesaler and retailer Supervalu Inc. bought Associated Grocers of Florida Inc. and Unified Grocers Inc. to give the Minneapolis company greater access to Hispanic and Caribbean markets,” reports the Wall Street Journal. “Albertsons invested in the Texas-based El Rancho Supermercado chain in November, and private equity giant KKR & Co. oversaw the tie-up between the Cardenas Markets and Mi Pueblo supermarkets last summer.”