A number of headwinds are slamming into independent grocers, including competition from Amazon, a proliferation of “Dollar Store”-type discount retailers, and increased cost cutting by major grocery chains. Independent stores and small regional chains are getting eaten up by acquisitions from larger names, or just going out of business. Heather Haddon and Lillian Rizzo write:
Bankers who handle food-retail deals say the squeeze is creating more acquisition opportunities for big grocers, particularly as smaller family run companies face an older generation of leaders stepping back.
“The U.S. is clearly in another wave of grocery store consolidation,” said Mike Fordney, managing director of the Food, Consumer and Retail Group at BMO Harris Bank, whose clients include many family-run grocers in the Midwest.
Grocers have weathered previous rounds of bankruptcies over the past decade, but executives say the headwinds are stronger this year. Already, Marsh Supermarkets LLC and Central Grocers Inc. have sought bankruptcy protection in 2017.
Other food retailers, such as Gordy’s Market and Brennan’s Market in Wisconsin, have closed locations or sold stores to bigger chains to cut losses. Several grocers have been added to distressed-asset watch lists that circulate among investment bankers and lawyers, according to people familiar with the matter.
S&P Global Market Intelligence found a food-retailer default within a year was 30% more likely given the increased competition after Amazon.com Inc.’s announced it was buyingWhole Foods Market Inc. Moody’s Investors Service said regional chains with high debt are at risk. Moody’s has downgraded debt owned by four smaller food-retail chains in the past year.
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