October 09, 1994|By Jay Hancock | Jay Hancock,Sun Staff Writer
Sainsbury, which earned the equivalent of $220 million on sales of $16.5 billion in fiscal 1994, won't control the Landover-based Giant when its current deal is final. But with three board seats, it is expected to exert considerable influence. And each of nearly a dozen retail analysts contacted last week expects that Sainsbury will gain control after Israel Cohen, Giant's 82-year-old chairman, CEO and dominant shareholder, retires or dies.
In several ways, the companies already are similar. Both are family controlled. Both operate larger stores that cater to well-off neighborhoods. Both have strong private-label programs.
Giant, most of whose 160 stores are in the Baltimore/Washington area, earned $95.23 million on sales of $3.57 billion in its most recent fiscal year.
Sainsbury is expected to push for changes at Giant similar to those it has implemented at Shaw's. The first might be expanding Giant'sin-house "Super G" label even more.
Shaw's house brand grew from scratch in 1991 to nearly 2,300 labels today, accounting for about 20 percent of sales, analysts said. In Sainsbury's home stores, own-label items make up half of sales.
The idea is that in-house control brings higher quality and lower costs.
"The own-label program is clearly a strong ingredient and a strong thread from Sainsbury," said Shaw's spokesman Bernard LTC Rogan. "We are able to present a product which is as good as a national brand at a lower price."
Sainsbury also is expected to spur Giant's growth. Giant plans to have as many as a dozen new stores in the Philadelphia/Wilmington areas by the end of 1997, but analysts suspect Sainsbury may try to boost the targets.
Like other European grocers, Sainsbury hasn't imported many managers from overseas for its U.S. operations. Foreign retailers have learned to use local talent and avoid simply transplanting overseas store concepts.
Perhaps the biggest U.S. opportunity for Europeans is the chance to build big chains and boost profits by consolidating administrative and distribution operations. Ahold, for example, this year folded the headquarters of its Tennessee Red Food Stores chain into its South Carolina Bi-Lo operation.
"The U.S. supermarket business is a highly fragmented and a highly regional business," said Debra J. Levin, who follows Ahold for Morgan Stanley & Co. in New York. "There are still tremendous gains to be made from consolidation."
Growth by U.S.-based supermarkets has been relatively limited in recent years. Weighed by heavy debt left from 1980s buyouts, many big operators haven't been able to make acquisitions or open new stores. That's not a problem Ahold and Sainsbury have.
Analysts see the day when Sainsbury blends Shaw's and Giant into an unbroken string of stores from Virginia to Maine. Giant now extends as far north as Delaware; Shaw's, as far south as Connecticut. And another Sainsbury investment in a nearby chain isn't out of question. Said Chairman David Sainsbury last week at a London press conference: "We are looking at a number of opportunities that come up in the U.S. and Europe."
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U.S.-EUROPE SUPERMARKET TIES
European parent, U.S. affiliate
Delhaize "Le Lion" SA, Belgium, Food Lion/Salisbury, N.C.
Tengelmann Group, Germany, A&P, Super Fresh/Montvale, N.J.
J. Sainsbury PLC, United Kingdom, Shaw's/East Bridgewater,Mass.;
Giant/Landover, Md.*
Royal Ahold NV, Holland, Giant/Carlisle, Pa.; Bi-Lo/Greenville, S.C.;
Red Food Stores/Chattanooga, Tenn.;
Edwards/Windsor Locks, Conn.;
Finast/Maple Heights, Ohio; Tops/Buffalo, N.Y.
*pending
