St. Paul, MN. Supervalu Sues Wal-Mart Over Grocery Store Expansion
The largest grocer in North America, Wal-Mart, is being sued by the number 4 grocery chain, Supervalu, in what amounts to a nasty chain store food fight.
The epicenter is St. Paul, Minnesota, where a Cub grocery store is located in the same mall as a Wal-Mart discount store. The two stores have co-existed uneasily in the Midway Marketplace -- but now open hostilies have broken out -- because Wal-Mart has remodeled its store to create more room for an expanded food department.
The Cub chain has been around since 1968 -- founded six years after Wal-Mart. There are currently 78 stores branded as Cub Foods in Minnesota, Wisconsin, Illinois & Iowa. Three quarters of the Cub stores are located in the Minneapolis/St. Paul metro area. Cub, which stands for "Consumers United for Buying," became part of the Supervalu chain in 1980. Other Supervalu grocery logos include Albertsons, Jewel-Osco, Lucky, Save-A-Lot, Shaw's/Star Markets, Shop 'N Save, Farm Fresh and Hornbacher's. According to Supermarket News, the Minnesota-based Supervalu ranked 4th in 2010 in food and nonfood merchandise sales in North America, with 2,450 stores and sales of $41.3 billion. By comparison, Wal-Mart is ranked #1 in food and nonfood merchandise, with 4,624 stores in North America and sales of $262 billion -- more than six times the sales of Supervalu.
A Cub Foods store is suing the Wal-Mart store at the Midway Marketplace, charging that the giant retailer is violating its lease agreement, which requires that the retailer in Wal-Mart's space not use more than 7,500 s.f. for groceries. Wal-Mart responds by saying that it is not in violation of the lease because it only devotes 7,150 s.f. to groceries.
A Wal-Mart spokesman says when the company renovated its store in May, it did not change the square footage for groceries. But an independent analyst has indicated that the Wal-Mart groceries occupy far more space than Wal-Mart is admitting.
According to a story in the Pioneer Press newspaper, the analyst claims that Wal-Mart's food selling space is closer to 27,000 s.f. Several months ago, Supervalu insisted that Wal-Mart reduce the size of its grocery deparment -- but no changes were made.
Last month, the mall owner joined Supervalu in asking Wal-Mart to shrink its grocery section by dropping fresh baked goods, frozen meat, chicken, milk, ice cream, and other products that ate into the Cub merchandise offerings. It will do the mall owner no good to see Cub Foods go out of business.
Several days ago, Supervalu filed a lawsuit in Ramsey County District Court. Wal-Mart told the Pioneer Press, "We obviously believe we're operating within the terms of our lease." Although Wal-Mart says the size of its grocery section has remained the same, Wal-Mart put out a press release on May 3, 2010 when the remodeled store opened, which said: "According to store manager Greg Bauer, shoppers are most excited about the expanded grocery department, offering customers a wider selection of dairy and frozen foods. The store also added dedicated shelf space for an expanded variety of Hispanic, Asian and Somalian food products to meet the needs of the diverse community." Barely one month later, a Wal-Mart spokesman told the Pioneer press, "The size of the store hasn't changed, and the section of the store devoted to grocery hasn't changed."
What you can do: The legal sparks between Supervalu and Wal-Mart are not new. The Pioneer Press notes that in Coon Rapids, Minnesota, Wal-Mart sued Cub Food for trying to block construction of a Wal-Mart supercenter, and Cub Foods then countersued Wal-Mart.
"I would expect to see more grocers challenging these big-box stores in the future," grocery analyst David Livingston told the newspaper. "I'm just surprised it hasn't happened more often." But grocery chains across the country have openly opposed Wal-Mart, sometimes in court, sometimes behind the scenes.
The Midway trade area in St. Paul is now flooded with grocery stores, including a SuperTarget, Cub Foods, Wal-Mart, and the German chain Aldi. Such saturation will lead to dead stores and lost jobs.
Readers are urged to call the manager of the Wal-Mart store on University Boulevard, Greg Bauer, at (651) 644-0020 with the following message: "Mr. Bauer, it looks like you got caught in a little square footage fudging recently. When Wal-Mart celebrated your store's remodeling, your press release referred to an "expanded grocery department" with a "wider selection" of goods. Now your company is recanting that statement and denying the grocery department has expanded. Wal-Mart should stop playing numbers games and live by the limits of your lease. Even your landlord is unhappy with your defiance of the lease agreement.
Wal-Mart knew what the rules were when it first leased this space in the mall. Instead of spending money on lawyers to defend your contradictory statements, Wal-Mart should spend that money on remodeling your store to shrink your food section back to what its supposed to be. This kind of deceit does not engender trust in your customers, or goodwill in the community.
Either your press release was a lie, or the company is lying now. Either way, the longer this case drags out, the more credibility your company loses."