Fleming Cos. and Supervalu Inc., both already Kmart suppliers, are vying for a deal to procure and distribute the whole Kmart Corp. enchilada — all the grocery and consumable merchandise for the Big Kmart and Super Kmart stores.
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In a rare grocery trade public relations moment, the two contenders are airing some of their bargaining chips in an effort to win Kmart’s primary supply contract. It could be worth an estimated $3.7 billion in annual revenues, but neither contender is revealing the terms of its bid.
Kmart now buys its groceries and other consumables from several wholesalers, but primarily from Dallas, Texas-based Fleming, with about $1.3 billion of the Kmart volume last year, and Minneapolis, Minn.-based Supervalu, with about $2.3 billion of this year’s projected Kmart volume, the companies said.
But Kmart plans to terminate the Fleming and Supervalu contracts June 30, after choosing “a single, integrated supply-chain partner,” Fleming and Supervalu said.
A Kmart decision is expected soon, according to Supervalu, which tags itself as the nation’s 10th largest grocery retailer and the No. 1 wholesale grocery supplier.
Fleming, which once held that leading wholesale grocer title, now has annual sales of about $15 billion, compared to Supervalu’s more than $20 billion.
On the wholesale side, Supervalu has been reporting $12 billion to $13 billion in annual sales, while Fleming has generated $10 billion to $11 billion. Both companies are also retail grocers operating chains under a variety of banners. The duo supply their own stores plus an array of other chains and independent stores.
Mike Wright, Supervalu chairman and chief executive, said in a publicity release: “We are working closely with Kmart in an effort to find the best short- and long-term solution that supports their initiatives. We stand ready to provide Kmart with Supervalu’s logistics expertise and our knowledge of the grocery retail channel while maximizing supply chain economics.”
Supervalu, Wright said, serves as primary supplier to about 3,250 supermarkets and 55 Cub Foods franchised locations, while serving as secondary supplier to about 2,400 stores, including 1,350 Kmart locations.
The company operates 1,168 stores, including licensed locations. Other banners include Shop ‘n Save, Shoppers Food Warehouse, Metro, Farm Fresh, Laneco, Scott’s Foods, Hornbachers and bigg’s supermarkets, 711 licensed Save-A-Lot limited-assortment stores and some others. Fleming also touted its capabilities and efforts in a release.
“We have offered a number of compelling reasons why a Fleming supply and logistics solution makes the most sense for Kmart,” said Mark Hansen, Fleming’s chairman and chief executive.
Fleming, which retails under the Food4Less and other banners, said it supplies about 3,000 supermarkets, including more than 800 North American stores under the global IGA cooperative banner, and about 3,000 convenience stores and nearly 1,000 supercenters, discount, limited assortment, drug, specialty, e-tailers and other businesses across the country.
By Worth Wren Jr., StoreAlliance.com staff writer
