The Zallie Family announced that effective June 26, David Zallie has purchased all shares in the eight Zallie ShopRite stores that have been jointly owned by George J., Bruce and David since the passing of their father in 2011. Both George Jr. and Bruce Zallie confirmed their plans to retire after long careers that spanned nearly five decades. Zallie-Somerset, Inc. is the new entity under which all 11 Zallie-owned ShopRite stores will operate. The family business was founded in 1973 when George Zallie Sr., father of George J., Bruce and David, opened his first supermarket in Clementon, NJ as part of the Frankford-Quaker Cooperative.
“George and Bruce worked side-by-side with my dad to build a great company,” said David Zallie. “Bruce was very influential in the development of our store-made line of products in our appy, food service and bakery and seafood departments. His emphasis on quality and innovation in those areas was far ahead of the curve of other stores in the trading area. At the same time, my brother George worked diligently in overseeing many of our selling departments, bringing his merchandising and productivity standards to each department he oversaw. When George became director of operations for the company, he utilized all of the skills he learned up until that time to help lead the company. We have strong management teams in place at both Zallie Supermarkets, Inc. and Somerset Stores. I look forward to leveraging the talent within the two companies under the umbrella of Zallie-Somerset, Inc.,” David Zallie added. “We recognize that now is no time to let up. We anticipate making strategic capital investments in our stores that are aimed at enhancing the guest experience.”
Zallie Supermarkets, Inc. joined the retailer-owned cooperative Wakefern Food Corp. in 1980, the first Philadelphia-area retailer to join the Keasbey, NJ-based wholesaler. George Zallie Sr. went on to open ShopRite stores throughout South Jersey, and by 2007 the family supermarket business had grown to 10 stores. The 11th store was added when David Zallie opened the ShopRite of Lawnside in 2013. The Lawnside store and ShopRites in Gibbstown and Medford were operated by David and his Somerset Stores, LLC.
“I see lots of good opportunities going forward,” David Zallie said. He has been holding meetings, merging the teams from both companies, forming one united team. David will focus on the employees in the 11 stores, citing, “working on succession planning as some senior managers will be faced with retirement in the next few years. We want to make sure we are fully prepared for the transition from one generation to the next.” Zallie added that he will also expand the health and wellness/dietician program from his three stores to encompass all eleven stores.
“Having 10 of the 11 stores in a relatively tight geographic area of South Jersey gives us options to centralize tasks that are currently performed independently at each store. This will allow us to achieve higher levels of productivity and consistency in areas such as home shopping and team member training as well as the central production of our Zallie’s Fresh Kitchen offerings,” Zallie explained.
The headquarters will continue to be located at 1230 Blackwood Clementon Road in Clementon, NJ. The Voorhees office, home to Somerset Stores, LLC, will eventually close. In addition, the Stacy Zallie Foundation annual golf outing in memory of his niece will continue. Bruce and George, Jr’s children respectively – Giuliana, George, and Michael – will continue to work for the corporation. Giuliana will remain the director of marketing, Michael will continue to work in social media and George Jr. in product merchandising.
Stop & Shop, Albertsons, Kroger To Opt Out Of UFCW Pension Fund; New Plan To Be Created
Three of the country’s largest grocery chains – Kroger, Albertsons and Ahold Delhaize USA (Stop & Shop) – have reached tentative agreements with local divisions of United Food and Commercial Workers (UFCW) to opt out of the large labor organization’s National Pension Fund (National Fund).
Pending the approval of UFCW members who are part of the fund (expected around October 1), a new pension fund will be created.
Plans call for the UFCW locals to transition to a different operating model called a Variable Annuity-based Pension Plan (VAPP). Not all UFCW Locals have pension funds affiliated with the National Fund, which according to its website serves 81,000 active participants and 68,000 retired employees.
Unlike many other pension funds, the National Fund is not critically underfunded, however, the creation of the new VAPP plan is expected create additional security for its members going forward while also reducing the financial risk of the employer participants.
At Stop & Shop, five UFCW Locals are involved affecting 18,000 associates. The company said pending ratification of this agreement, Stop & Shop expects to pay the National Fund withdrawal liability of $649 million on a pre-tax basis to fulfill the company’s obligations for past service for associates and retirees in the National Fund. Stop & Shop will also make an $18 million contribution to a transition reserve for the new VAPP. On an after-tax basis, the withdrawal liability and contribution to the transition reserve will total approximately $500 million. The retailer said the withdrawal liability will be satisfied by installment payments to the National Plan over the next three years. Ahold Delhaize (ADUSA) will recognize a provision in these amounts, which will impact Q3 international financial reporting standards results. The provision will be excluded from both underlying operating profit and underlying earnings per share. While the majority of this obligation will be paid in 2020, the group’s full year 2020 free cash flow outlook, which is expected to be in excess of $1.74 billion, will not be impacted due to the strong level of free cash flow generated in Q1.
ADUSA’s other unionized brand, Landover, MD-based Giant Food, is not part of this agreement. Earlier this year, both Giant Food and Safeway’s Eastern division negotiated four-year contracts which also included the creation of a new VAPP-based pension plan not affiliated with the National Fund.
At Albertsons, nine UFCW Locals are impacted (including Acme) affecting approximately 5,100 associates. The company will pay about $286 million in withdrawal liability ($213 million after tax) to the National Plan and pre-fund a transition reserve in the new VAPP with a payment of $8 million to $9 million.
Albertsons said it will pay this amount in three or four installments over the next three years, any portion of which may be prepaid, in whole or in part.
The Boise, ID-based retailer and the local unions will establish the VAPP by October 31, 2020. Albertsons will make monthly employer contributions to the VAPP at the same monthly rate (or hourly equivalent rate) it had contributed to the National Fund. Accrued benefits will be subject to a variable annuity calculation and be adjusted to reflect net investment returns above or below a hurdle rate of return of 5.5 percent.
At Kroger, there are currently 20 UFCW Locals (40 separate contracts) affecting 33,000 associates that are part of the National Fund. The Cincinnati-based merchant said that, pending ratification of the tentative agreement, it expects to pay the National Fund withdrawal liability of $962 million, on a pre-tax basis, to fulfill obligations for past service for associates and retirees in the National Fund.
Kroger would also make a $27 million contribution to a transition reserve in the new variable annuity pension plan. On an after-tax basis, the withdrawal liability and contribution to the transition reserve total approximately $760 million. This withdrawal liability would be satisfied by installment payments to the National Fund over the next three years.
The tentative agreement also establishes a pension benefit formula for the Kroger organization’s contributions to the new plan through June 2028 – at which time it is subject to negotiations with the union. This effectively fixes the terms of the Kroger family of companies’ collectively bargained pension obligation with these 20 UFCW local unions for the next eight years, thereby addressing Kroger’s projected future pension costs and minimizing future exposure to market risk associated with the current plan.
“We view what has occurred here as taking a potential disaster and turning it into a positive for all those involved,” said John T. Niccollai, president of Little Falls, NJ-based UFCW Local 464A which has both Stop & Shop and Acme clerks and meatcutters impacted by this change.
‘Round The Trade
Lidl, which late last year began converting a handful of Long Island Best Markets (which it acquired in early 2019) to its own banner, will debut its discount format in East Meadow on July 29 and Patchogue on August 5. After that, the German limited assortment retailer will begin the reopening of Long Island units in Oakdale, East Northport and Lake Grove, which are currently closed and undergoing remodeling. Lidl’s Arlington, VA-based U.S. division also announced that three other former Best Market stores – in Franklin Square, Massapequa and in the Astoria section of Queens – would close shortly and begin the conversion process. Those three stores should reopen in early 2021.
Mike Witynski has been named CEO of Dollar Tree, replacing Gary Philbin, who is retiring. Witynski, who joined the Chesapeake, VA-based discounter in 2010 (we knew him from his tenure at Supervalu and Shaw’s) was most recently enterprise president of Dollar Tree. He also stepped in to head merchandising, store ops and supply chain for the retailer’s Family Dollar subsidiary, after the highly overrated Duncan MacNaughton departed as president last year. Mike’s a good man – we wish him the best of luck in heading one of the country’s fastest growing retailers.
One trend I’m noticing over the past two weeks is an increase in the number of out-of-stocks many retailers are again experiencing. After the panic buying and hoard mentality that prevailed in March and April which adversely affected all supply chains, I noticed a significant improvement from mid-May until late June. But in the first three weeks of July, I’ve witnessed declining service levels in some previous “hot spots” that had been in improving in such categories as soup, flour and canned vegetables (not including paper and frozens which have improved but have never been anywhere close to normal – except with a few large chains). Clearly, things are not back to normal and with COVID-19 spikes in other markets, primarily in the south, southwest and on the West Coast, supply chains are going to falter in spots. Of course, from the inside baseball industry view, this is just going to heighten the tension between retailers and suppliers. Some retailers are already poised to impose pandemic-related costs on their vendors, while some other smaller merchants, regional chains and wholesalers are prepared to penalize their suppliers for what they believe is improper allocation of product. We’ll have much more on this showdown in the next few months.
BJ’s Wholesale Club confirmed that it will open two New York stores, currently under construction, early next year. The new units will debut in Long Island City (Queens County) and Newburgh (Orange County). When those stores open, the Westborough, MA-based club operator will have 45 stores in the Empire State and 221 units in the 17 states where it operates.
This just in -Walmart will be closed on Thanksgiving Day this year. The big merchant said it would shutter on Turkey Day so that its associates can spend the holiday with their families, while also acknowledging how difficult this year has been for its employees. I would expect other retailers to follow. Additionally, it’s looking like “Black Friday” will be mainly an online event unless infection rates decline rapidly. Welcome to another item on the “new normal” checklist.
From the desk of death, we have two notable obituaries to report… recently passing on was legendary TV personality Hugh Downs. He began his small screen career in 1950 as a correspondent for the original “Today” show. He then joined “The Tonight Show” in 1957 as sidekick (think Ed McMahon) to host Jack Paar. When Paar left in 1962, Downs also departed, but to a bigger role – as host of the “Today” show, a post he held until 1972. He freelanced for a few years and then was offered the job to host ABC’s primetime news show, “20/20,” which he hosted (along with Barbara Walters) until his retirement in 1999. In addition to his news assignments, Downs hosted the underrated game show “Concentration” in the 1950s and 60s. His book “My 10,000 Hours On Television” aptly described Downs’ ubiquity (in fact, he held the Guinness Book record for most total hours on commercial television until it was broken by a much lesser talent – Regis Philbin). Hugh Downs was 99 when he died.
Finally, I am deeply saddened by the death of Wilkes-Barre, PA native David Finkelstein, 92, earlier this month. David was the former CEO of food broker Kluge, Finkelstein & Co. Not only was David one of the most successful businessmen in the food industry, there was no one person more responsible for the success of Best-Met Publishing Co. than he was. Shortly after my partner Dick Bestany and I acquired our sister publication, Food World in 1978, we visited many of the leading retailers, suppliers and brokers in the Baltimore-Washington market. One of those key players was David, who along with his business partner John Kluge (chief executive of Metromedia and one of the wealthiest people in the country) owned a huge building in Columbia, MD, not far from our office. We cordially chatted for about 30 minutes and he wished us well. As we were leaving, we asked David if he’d like to join us for a cocktail at Clyde’s Restaurant, a well-known watering hole across the street. David politely refused, noting “I’m not much of a drinker.” As we were literally out the door, David summoned us back. “Perhaps I’ll join you for just one quick drink.” And that’s how it began. As one drink became two, and three, and…David began to warm up. “You know, I really like you guys and I think you have a great opportunity that I’d like to be part of.” He said that if we could help publicize his firm, he’d pay us back in spades. “How so?” I asked skeptically. He looked me straight in the eye and in his blunt manner bellowed, “I’m the biggest food broker in the market and I’m gonna run a two-page ad spread with you guys every month. Not only will my ads help your revenue, but every other food broker in the market will follow the leader and increase their advertising with you.” He then pulled out a notepad and wrote a phone number on it. “You know whose number this is?” he barked. Clueless, I asked him whose number was it. “That’s Izzy Cohen’s (chairman and CEO of Giant Food) direct line. When I get home tonight, I’m gonna call him at home and tell him you’re gonna call him at 10:00 a.m. tomorrow. Don’t screw it up.” David then left abruptly; I looked at Dick and inquired, “Is this guy for real?” You can guess the rest of the story – Izzy did answer the phone that next morning and we built a trust with him that lasted until his death in 1994 and continues with Giant to this day. And David did buy that “double truck” ad every month for many years. Beyond the business relationship, the friendship bond we had was almost brotherly. There were so many good times, so many hilarious moments and so many unbelievable stories, many of which can’t be told that went well beyond even an “R” rating. David, may you rest in peace…