Bristol Farms, the upscale 13-store grocery chain in Southern California, was sold last week by parent Supervalu Inc. to local management and an investor group.
"We look forward to returning to local and independent ownership with the opportunity to reinforce our commitment to our local vendors," Kevin Davis, Bristol Farms' chief executive, told the Los Angeles Times.
Founded in 1982 by two meatpackers, the chain was named after a street in West Los Angeles with "Farms" added to denote an emphasis on fresh products. Annual revenues are more than $200 million.
"They thought grocers should sell their products the same customized way that specialty butcher shops did, instead of pre-set packages wrapped in foam trays," Mr. Davis said. "So they threw some sawdust on the floor, opened up a big meat counter with the beef hanging in the back and started stocking local produce."
With most locations in Los Angeles County, the chain has earned a reputation for its organic products and seasonal edible gifts, supported by in-house catering serving everything from gourmet pastries to full holiday meals.
In buying Bristol Farms in 2004, Albertsons hoped the upscale concept would give it "the ability to operate smaller-format stores in wealthier neighborhoods and differentiate themselves not based on price but on quality and service," said Lloyd Greif, president of Greif & Co., a Los Angeles investment bank that arranged the 2004 deal and the latest one. Facing a debt crisis and heightened competition, Albertsons was sold in 2006 and broken into three pieces with Supervalu acquiring more than 1,100 stores, including the 270 Albertsons and Bristol Farms markets in Southern California.
Market observers said Supervalu faced similar challenges with new competition in the food space from Wal-Mart, Target and Costco.
Bristol Farms "became a corporate orphan," said Mr. Greif. "It didn't fit in with the strategy to compete for customers on price."
Suzanne Long, of the New York-based consulting firm SSA & Co., also said synergies weren't realized. "Everything was managed separately, because Supervalu didn't want to interfere with something that was working," she said. Bristol Farms itself began facing greater competition from Whole Foods in the organic space.
Bristol Farms' same-store sales fell five to seven percent at the height of the recession but have rebounded along with overall luxury spending.
"We've been positive in sales since spring, and that's only increasing in the second half of our fiscal year," said Mr. Davis. "We're finding that people are doing their holiday gift shopping in stores like ours. Food is a luxury, and it's not an expensive luxury."
The move comes as Supervalu has struggled with declining comps over the last two years and has been selling off some of its other locations. A Supervalu spokesman said the sale allows both companies to operate more efficiently and effectively.
Discussion Questions: What are the pros and cons of Bristol Farms returning to independent ownership? What lessons, if any, does this offer regarding larger retailers acquiring smaller niche ones?
- Supervalu Announces Sale of Bristol Farms Division - Supervalu Inc./MarketWatch
- Sale of Bristol Farms Announced; Stores to Continue to Operate With Independent Ownership Under Current Bristol Farms Management - Bristol Farms/ PRNewswire via COMTEX/Trading Markets
- Bristol Farms markets sold - Los Angeles Times
- Supervalu sells boutique grocery chain Bristol Farms - Minneapolis Star Tribune