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White Rose Nears Purchase Of Grande Supermarkets

CEO says White Rose is in discussions with others, wants direct involvement with other independent supermarkets


October 18, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

New York, NY--- After more than six months in negotiations, New Jersey-based wholesaler White Rose is close to acquiring a majority stake in Grande Supermarkets, one of the largest locally owned businesses in Puerto Rico. Parent company Empresas Cordero Badillo is No. 6 among the island’s Top 300 locally owned companies.

The White Rose-Grande deal will most likely be the year’s most significant transaction in the food industry in Puerto Rico as it sets the stage for future consolidations in the retail food industry that may involve other independent supermarkets.

White Rose will inject a large amount of capital into Grande's operation to help it remain competitive. In turn, as a full-line wholesaler with sales of $1.4 billion a year, White Rose will be able to use the island as a base to expand its distribution operation to Latin America and the Caribbean, industry sources said.

After the purchase is signed, White Rose won’t be making the day-to-day supermarket operating decisions. "Our thing has always been to leave it up to the actual local operator, to let them really run their stores," said White Rose CEO Steve Bokser.Bokser is reluctant to be specific about White Rose’s plans for Puerto Rico.

"We are still investigating," he said, "sort of walking before we run. Obviously, we have been in negotiations with Grande and we've had discussions with other independents to form some type of a partnership arrangement to keep them in a competitive position."

Bokser would not disclose the specifics involved in the "partnership arrangements" he wants to establish with local independent supermarkets.

Unlike the White Rose deal with Grande, he said, those potential agreements don't involve an ownership position, [but allow White Rose to extend support services and financing for capital improvements and operational costs].

"Local retailers need an edge to be able to compete against these people [megastore chains] that are likely buying product cheaper," said Bokser. "How else are the other independent supermarkets are going to grow unless someone comes down with some financing to help them build locations, purchase new stores, and sign and guarantee leases. We envision a future in the Puerto Rico market when we are able to help all the independent retailers compete against the megastores."

Despite very recent sales growth in the local supermarket industry due to regulatory changes in the Nutritional Assistance Program (PAN) funds requiring 75% to be spent on food items (CB Oct. 11), and the fact that more people are eating at home in the sluggish economy, surviving in the retail food industry has become extremely tough as mega retailers such as Wal-Mart and Sam's Club have entered the market. Competition will not ease in the near future as food club wholesaler Costco opens its first two stores on the island next month.

White Rose helps independent supermarkets in New York that face similar issues compete."We give many of our independent supermarkets in New York full retail support," he said. White Rose's full support includes taking care of marketing, publishing weekly shoppers, advertising, payroll, legal services, and accounting, among other services. Those efforts eliminate a heavy capital burden on supermarkets.

White Rose provides these support services to both Met and Pioneer supermarket chains in New York. As a result, Met, with eight supermarkets, is ready to launch an expansion that includes the opening of 15 new stores, according to its President Mauricio Fernandez.

For White Rose’s local effort to succeed, independent supermarkets must unite in some way, Bokser advised. "Local retailers have to make some changes in order to be competitive. There have to be consolidations," he said. "They need to form a big buying group. They need [to be able] to pass on the savings resulting from buying huge quantities. To buy small quantities of an item to redistribute to [several] stores is very expensive."

Local independent supermarkets have been talking about consolidations for years, but nothing new has happened yet. Meanwhile, White Rose has been supplying products to Puerto Rico for more than 20 years. "One of the things that attracted us to Puerto Rico,"

Bokser added, "is that it’s a very similar type of customer base to what we serve in New York in terms of the Hispanic population."

The food wholesaler, which serves mostly the U.S. northeast market, has expanded its business in Puerto Rico. "Although Grande is our main customer, the business we are getting from the independents probably equals what we are getting from Grande," Bokser said.

But according to Bokser and Grande owner Atilano Cordero Badillo, their merger is not about the big fish eating the little fish, but about a different type of big fish helping the little fish swim freely in a competitive sea. Cordero Badillo contributes the local expertise while White Rose adds the muscle of cash and price edge--because of its high volume of distribution, White Rose can apparently supply products for less than the local distributors can offer.

"In our business today, [once support services and economies of scale are utilized,] the only thing that the retailer has to do is come in the morning, open the store and take care of the customers. Everything else is done," Bokser said.

This Caribbean Business article appears courtesy of Casiano Communications.
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