Giant Food Stores to buy 16 Philadelphia-area Genuardi's markets

(This article was originally published Jan. 6, 2012.)

In what amounts to its biggest expansion move ever in the Philadelphia market, Giant Food Stores on Thursday announced it had acquired 16 Genuardi's supermarkets from Safeway Inc. for $106 million.

The transfer of ownership to Giant of 16 of 27 Genuardi's stores in the region - coupled with the closing of three more stores and the hoped-for sale of the remaining eight - likely signals the end of the Genuardi's grocery name, which was among the region's most highly regarded before Safeway acquired the family-owned business in 2001.

The supermarkets being snapped up and converted by Giant, based in Carlisle, Pa., are scattered across Philadelphia's Pennsylvania suburbs and include locations in Wynnewood and St. Davids, giving the fast-expanding retailer a foothold on the coveted Main Line, where family incomes are high and land for new, large grocery stores is generally hard to find.

Safeway said it would close three other Genuardi's and sell all four in South Jersey and four in Southeastern Pennsylvania that are not among the group Giant plans to convert in the next six months.

The acquisition by Giant is contingent on approval by the Federal Trade Commission.

The move signals the dissolution of an ill-fated marriage begun about a decade ago, when Safeway, of California, bought out the Genuardi family for $530 million.

"The golden ring of this is now Giant gets into the Main Line with two very strong, well-located stores in Wynnewood and St. Davids," said Steven H. Gartner, president of Metro Commercial Real Estate.

By retreating from the Philadelphia-area market entirely, Safeway hopes to "focus our resources in those operating areas where we have a stronger presence," Steve Neibergall, president of the retailer's Eastern division, said in a statement.

Giant, meanwhile, is adding to its seemingly unstoppable momentum over the last few years as it challenges market leaders Shop Rite and Acme with acquisitions and new stores of its own across the highly competitive region. Its last bold move was in 2006, when it acquired 14 Clemens supermarkets.

A division of the Netherlands' Ahold U.S.A., Giant Carlisle has been elbowing its way into the Philadelphia market by trying to lure customers with low prices, clean stores, and a vast selection of merchandise. Its success is all the more remarkable given how that model has caused grief for peers Acme Markets, Pathmark, and Super Fresh even as the struggling economy has sent middle- and working-class shoppers in search of lower-cost grocers over the last three years.

"We're very excited," said Rick Herring, who became president of Giant Food Stores two years ago in an organizational overhaul to speed the company's growth.

Last year, Giant opened its first store in Philadelphia, built from scratch on Grant Avenue in the Far Northeast. It has worked its way toward the heart of the metro region after years of planting stores in the outer suburbs, where land acquisition was less challenging.

"Philadelphia and the counties around Philadelphia have been a very exciting place for us to do business," Herring said in an interview.

The company will likely shut down each of the Genuardi's stores for a week or two to install new equipment and make other upgrades before reopening them as Giant stores, he said.

"I think we're careful about the sites that we select," Herring said, "so that we're going into communities that are underserved by our successful formula."

That formula, according to Herring: "Quality, selection, and savings."

Despite its standing as one of the nation's largest supermarket corporations, and having had a profitable most-recent quarter, Safeway struggled to make inroads in Philadelphia after buying Genuardi's. It alienated the chain's highly loyal shoppers in the months after the purchase and never seemed to fully recover.

Safeway changed elements of the Genuardi's business model that, on the sales floor, diminished its niche as a gourmet-oriented, full-scale supermarket chain with outstanding customer service.

The company ended up subtracting from, rather than adding to, its Philadelphia store count, shedding a dozen of the 39 Genuardi's stores it originally bought.

Safeway spokesman Greg TenEyck said the publicly traded corporation would not share details about its decision to divest its Philadelphia holdings or why it did not pursue the kind of expansion strategy being implemented by Giant, which has 180 stores in Pennsylvania, Maryland, Virginia, and West Virginia.

"That's not something we're going to discuss - what went wrong, what went right," TenEyck said.

Shoppers in those towns where Giant intends to set up business can expect to be pleased with the change, given the grocer's glowing reputation.

Randi Grimes of Penn Valley said she would not mind the switch.

"I'm really excited," Grimes, a mother of three, said as she filled her SUV with groceries at the Wynnewood Genuardi's on Thursday. "Giant has a lot more prepared foods and a lot more organic options."

Stores converting to Giant are in Jamison, Newtown (Bucks County), Langhorne, Chalfont, West Chester, East Marlborough, St. Davids, Springfield (Delaware County), Wynnewood, Flourtown, Huntingdon Valley, Spring House, King of Prussia, Maple Glen, Roslyn, and North Wales. Those being shut are in Exton and Royersford and at 1930 W. Main St. in Norristown. The rest are for sale.

Sold to Giant

2395 York Rd., Jamison

2890 S. Eagle Rd., Newtown

168 N. Flowers Mill Rd., Langhorne

4275 County Line Road, Chalfont

1375 Boot Rd., West Chester

830 E. Baltimore Pk., East Marlborough

550 E. Lancaster Ave., St. Davids

950 Baltimore Pike, Springfield

50 E. Wynnewood Rd., Wynnewood

1844 Bethlehem Pike, Flourtown

737 Huntingdon Pike, Huntingdon Valley

1121 Bethlehem Pike, Spring House

310 S. Henderson Rd., King of Prussia

1925 Norristown Rd., Maple Glen

2350 Susquehanna Rd., Roslyn

467 Suymneytown Pike, North Wales

Closing

260 Eagleview Blvd., Exton

70 Buckwalter Rd., Royersford

1930 W. Main St., Norristown

For Sale

3121 Fire Rd., Egg Harbor Township, N.J.

710 Route 73, South Marlton, N.J.

1632 N. Kings Highway, Cherry Hill, N.J.

912 W. Bay Ave., Barnegat, N.J.

73 Old Dublin Pike, Doylestown

25 W. Germantown Pike, Norristown

2850 Audubon Village Dr., Audubon (Pa.)

200 Ridge Pike, Conshohocken

Contact staff writer Maria Panaritis at 215-854-2431 or mpanaritis@phillynews.com or @panaritism on Twitter.

Ashley Nguyen of Philly.com contributed to this article.