“Our market research indicated that customers were shopping multiple supermarkets each week because there was no one store that fulfilled their grocery needs,” says James Hyland, vice president of investor relations and corporate communications for Roundy’s Inc. “They were looking for high-quality perishables including organics, great hot foods and conventional grocery assortment, too. This presented the opportunity for Mariano’s to create an experience where we could consolidate trips for our customers by giving everything they needed under one roof.”
And the market demographics and competitive landscape made it ideal for Mariano’s entry: The Chicago market is the third-largest U.S. metropolitan market, with above-average demographics supporting greater spending on higher-margin quality and healthy offerings.
Mariano’s main competitors include organic retailer Whole Foods Market, Windy City mainstay Jewel-Osco, discounters such as Aldi, and big-box players such as Walmart, Target and Costco.
Insiders posit that Mariano’s has been a big hit thus far due to the pedigree of its chairman and CEO—who was employed by rival Dominick’s (which, parent company Safeway announced in October, will exit Chicago by 2014) for almost 30 years and served as that grocer’s CEO until Safeway Inc. purchased the chain 15 years ago.
Based on its PR focus and statements to stockholders, Roundy’s is clearly putting its eggs in the Mariano’s basket, despite the fact that the fresh-market chain makes up less than 8% of the company’s total stores. Roundy’s holdings consist of 162 midrange grocery stores in Illinois, Wisconsin and Minnesota, including Pick’n Save, Rainbow, Copps and Metro Market.
Mariano’s has 12 locations across the Chicago area, with a 13th slated to open in suburban Wheaton by year’s end and five more on tap for 2014. Roundy’s is bullish on its fresh-market prospects, stating recently that it may ultimately surpass its projected goal of 30 Mariano’s in the Chicago market. So far, there have been no announced plans to branch out into other markets.
Experts have speculated that Roundy’s may purchase select Dominick’s locations being sold off to gain greater traction in the Chicago market. It’s also rumored that it may spin off Mariano’s by selling it or holding a secondary public offering to prevent the strong-performing chain from being weighed down by its underperforming sister chains.
Roundy’s, which enjoyed $3.9 billion in revenue in 2012, has a current market cap of approximately $378.5 million. While its stock price (as of mid-October) has remained close to the $8.50 it fetched on its IPO opening day back in February 2012, Roundy’s second-quarter financial results posted in June showed that the company’s net sales decreased 1.7% (to $980.3 million) and net income dropped 28.6% from the previous quarter.
The good news from that report is that average weekly net sales per store for all Mariano’s locations for the quarter were slightly more than $1 million. Compare that to the approximately $385,000 national average in median weekly sales per supermarket, based on 2011 Food Marketing Institute data.
A Winning Concept
Mariano’s formula for success involves promoting the convenience of one-stop-shopping with the pampering milieu you’d expect from a visit to Nordstrom.
“We’re not a ‘discount’ grocery store. We’re not a ‘specialty’ grocery store. We’re something altogether unique,” says Hyland. “We exceed shoppers’ expectations for price and selection. We place a premium on not just customer service, but the customer experience. We make a gourmet statement in a relaxed and welcoming environment. We want our customers to feel empowered to try new foods and to experiment and be creative in the kitchen without worrying that their wallet will take a hit.”