Spartan Appears To Be On Strong Growth Path

April 19, 2002
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GRAND RAPIDS — Since its debut as a public company in August 2000, Spartan Stores has significantly expanded its retail presence in Michigan and Ohio.

The company, then 82 years old, already was the nation’s ninth largest food distributor when it announced its plan to acquire Toledo-based Seaway Food Town Inc.

The acquisition was finalized Aug. 1 of that year, Seaway Food Town’s common stock was delisted from the Nasdaq, and Spartan Stores launched on the Nasdaq two days later.

Spartan used the reverse merger method because it was a more cost effective and efficient way of going public, avoiding substantial underwriting fees, said Jeanne Norcross, director of corporate communications.

By the end of 2000, Spartan had more than doubled the number of retail stores under its ownership, and its focus had shifted from distribution to a combination of retail and distribution.

The company’s business orientation changed as well, from a buy-side orientation to a sell-side orientation more in line with retail operations. The company transformed its distribution operations from a traditional “push through” model to a “pull through” model — that is: buying what its retail stores sell, rather than buying merchandise on which it can get the best deals and pushing it through retail outlets to customers. 

At the time, Jim Meyer, Spartan Stores’ president and CEO, said the Seaway merger represented “a major step forward” in expanding retail operations, which he said were key to the company’s long-term profitability and growth.

With the acquisition of Food Town, Spartan added 46 supermarkets and 25 deep discount drug stores known as The Pharm, representing a 29 percent share of the retail food market in northwest Ohio.

In March of last year, Spartan also acquired Traverse City-based Prevo’s Family Markets, a 10-store retail grocery chain in western and northern Michigan with annual sales of $100 million.

Since Prevo’s already was an existing wholesale customer of Spartan, the company projected the Prevo’s acquisition would translate to a net gain of about $50 million in annual revenues.

With the acquisition of both Food Town and Prevo’s, Spartan grew its retail ownership from 47 to 127 stores. 

According to the company, the acquisitions boosted the company’s purchasing power, gave it substantial presence in a new market and deepened its penetration in existing markets.

In addition to Food Town and Prevo’s, the Spartan family of stores includes Great Day Food Centers, Glen’s Markets, Family Fare Supermarkets and Ashcraft’s Markets.

Spokesmen told the Business Journal that Spartan also distributes private-label national brand products to more than 350 independent grocery stores and serves as a wholesale distributor to 6,600 convenience stores.

Net sales increased 16 percent to $3.5 billion in 2001. Retail sales for the year were 115 percent higher than 2000 retail sales and increased to 33 percent of total sales in 2001, compared with 18 percent in 2000. 

Since going public, Spartan Stores has sharpened its focus.

As a publicly traded company, it has a responsibility to return value to its shareholder, Norcross said.

“That means we have had to look for more ways to operate efficiently, and position our company to be competitive in the marketplace,” she said.

“We are much more focused on being competitive and as profitable as possible.

“Our shareholders expect a return on their investments. We are even more disciplined, with focus on competitiveness and profitability.”

The continuing transformation of the company led to the elimination of some administrative positions this year.

Norcross said Spartan associates understand those kinds of steps are necessary for the company to be a viable competitor.

“On balance, I believe our associates also share our long-term objective of becoming a major grocery retailer in the Great Lakes region, operating an efficient network of ‘neighborhood’ grocery stores,” she added.

This year Spartan Stores offered its associates a stock purchase program.

The company also has added incentive plans to align the interest of associates, management and shareholders and encourage their participation in the company’s growth, Norcross said.

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