Marketing Foreign Ownership in Food Retailing Naaman Seigle and Charles R. Handy (202) 447-6363 and Rhode Island were combined into a he slogan "Take Stock in America," "Southern New England" category. Tintended to publicize U.S. Savings Responses showed that: Bonds, has become the goal for the increas­ • In the nine States, 44,000 farmers sold ing number of foreign firms investing in the $260 million worth of products directly to U.S. food system. The U.S. Government consumers. This volume represented about has traditionally maintained a neutral pol­ 2 percent of total farm sales, varying from icy toward direct foreign investment. This less than I percent in Colorado and Tennes­ neutrality was recently reaffirmed by the see to almost 11 percent in the three South­ Department of Commerce in congressional ern New England States. hearings. Foreign investment in the U.S. • Leading products sold directly to con­ has doubled in the last 5 years, but the sumers were nursery and floral products, amount of foreign investment is still only apples, peaches, strawberries, sweet corn, about one-fourth as great as U.S. invest­ and tomatoes. ment in foreign firms. • As compared with the previous year's Foreign investment in U.S. agricultural survey, about 5 percent more farmers-75 land has received the most publicity and percent-had total farm sales of less than generated the most concern up to present $20,000annually. The 25 percent of farmers time. However, data collected under the with total annual farm sales of $20,000 and Agricultural Foreign Investment Disclosure over accounted for 80 percent of direct Act of 1978 reveal that as of February I, sales. About 65 percent of the direct 1980, foreign entities and individuals owned marketing farmers were part-time with ad­ slightly less than 0.5 percent of all U.S. ditional non-farm sources of income. agricultural land, almost half of which is • Almost one-half of the farmers pro­ classified as forest lands. A greater degree duced livestock, and over one-third pro­ of foreign investment has occurred in food duced field crops. Poultry and vegetables manufacturing and retailing. were produced by one-fourth of the respon­ These 23 firms accounted for nearly 11 per­ dents. Fresh fruits, dairy products, floral cent of total grocery store sales. Over half Growing Foreign Investment and nursery products, honey, syrup, and of these firms were acquired since 1978. In 1974, foreign firms controlled about 4 forest products were produced by less than percent of sales and over 6 percent of the one-fifth of the farmers. Parent flrms total assets of U.S. food manufacturing. By At least 15 foreign firms own food stores • Nearly 64 percent of direct marketing the end of 1979 foreign investment in food farming operations, in the nine States, were in the United States. These parent firms are manufacturing had reached $2.56 billion­ located in five European countries plus located near cities with a population less about 5 percent of sales and approximately than 10,000. The population of the nearest Canada. West Germany is the leading source 8 percent of the total assets of U.S. food city for another 22 percent of these opera­ of foreign investment, with six parent firms. manufacturing. These West German companies control eight tions was between 10,000 and 50,000. In the last few years, a growing number • On future plans, 38 percent of the U.S. affiliates and account for 60 percent of European firms have added U.S. food farmers said they would continue direct of total foreign investment in the grocery retailers to their shopping lists. Canada's marketing at the same level, 28 percent store industry. The United Kingdom is the Lobaw Companys' 1956 acquisition of Na­ planned to increase direct marketings, next largest source with three parent firms tional Tea represented the only significant about 15 percent planned to decrease oper­ that account for 23 percent of foreign invest­ foreign investment in U.S. food retailing ations, and 20 percent were undecided. ■ �ent in the United States. Ten percent of prior to 1970. In 1972, Lobaw also acquired direct foreign investment originates from Peter J. Schmidt, a small chain of grocery Canada, and the remaining 9 percent is dis­ stores based in Buffalo, New York. There tributed among Belguim, Netherlands, and To receive a more detailed copy of this were six foreign-owned food retailers in report write: France. 1 f Steinberg, a Montreal based 1975. As of April 1980, foreign firms wholly retailer, completes its announced intention or partially owned 23 U.S. grocery firms. to acquire Smitty's Super Value (a local Direct Marketing chain of 19 stores based in Phoenix, Ariz.), Room 260-D GHI the Canadian share of foreign investment 500 12th Street S.W. will increase slightly. Washington, D.C. 20250 Most acquiring firms are large retailers in their home countries. The two exceptions 14 National Food Review Marketing Foreign Investments in U.S. Food Retailing, April, 1980 US Company Date of major Extent of Share of total Foreign Investor investment or foreign 1979 U.S. Grocery and country Name acquisition ownership1 sales store sales1 Percent Mil. dollars Percent Tengelman Group The Great Atlantic and 1978 45 6,6842 3.8 \/Vest Germany Pacific Tea Co. Cavenham, Ltd. Grand Union Co. 1973 100 3,8743 2.2 UK Colonial Stores, Inc. 1978 100 J. Weingarten, Inc. 1980 97 Theo Albrecht GroupfTHS Albertson's, Inc. 1979 9 2,8174 1.6 West Germany Pronto Markets, Inc. 1979 100 Lobaw Companies, Ltd. National Tea, Co. 1956 84 1,7635 1.0 (George Weston, Ltd.) Peter J. Schmitt Co., Inc. 1965 100 Canada Applebaum's Food Markets 1979 100 Delhazie Feres, & Cie, "Le Lion" Foodtown Stores, Inc. 1974 52 8276 .5 Belgium Alterman Food, Inc. 1980 100 Rewe Handelgeseilschaft, OHG Furr's Inc. 1979 100 5507 .3 West Germany Wertkaug Mann Co. Fed-Mart Corp 1975 68 5488 .3 (Hugo Mann Group) West Germany Ahold, NV Bi Lo, Inc. 1977 100 5407 .3 Netherlands British-American Tobacco, Co., Kohl's Food Stores, Inc. 1972 100 4509 .3 Ltd. (BATUS) UK Franz Haniel & Cie, Gmbh Scrivner, Inc. 1977 100 54810 .3 West Germany Pacific Gamble Robinson Co. 1976 9 Promodes, SA The Red Food Stores, Inc. 1979 100 20611 .1 France Aldi, Gmbh Benner Tea Co. 1979 100 15012 .08 West Germany Silverwood Industries, ltd. Hop-In Food Stores, Inc. 1980 33 6013 .03 Canada Fairview Ltd. 1980 100 Societe Docks de France Lil' Champs Food Stores, Inc. 1977 35 2314 .01 France Albert GubayfThree Guys 3 Guys, Inc. 1980 100 Not UK available15 Total Investment 18,990 10.7 1 Direct or indirect ownership of voting securities-April, 1980. 2Fiscal yeal ended Feb. sales $600,000,000 10Does not include wholesale sales. 11June 3, 1978-June 2. 1979. 4 12 13 14 23, 1980. 31ncludes J. Weingarten sales reported to June 30, 1979 $566,118,000. 1n- Industry estimate Hop-ln sales-Jan. 1, 1979-Dec.31, 1979 = $48,633,462. Excludes eludes estimated 1979 sales of Pronto Markets, Inc. 5Excludes Schmitt's wholesale and gasoline and pinball machines commission. 15opened January, 1980. Park Edge sales. 6Excludes Alterman's wholesale operations. ?Estimated sales. 8Food Sources: U.S. Department of Commerce; Supermarket News; Progressive Grocer; Chain store sales only as of September 2, 1979. 9Food store sales only, estimated total company Store Age; Food Marketing Institute; Annual Reports. Winter 1981 15 Marketing are British American Tobacco Company, exception-277 of Safeway's 2,425 super­ Foreign Investment Incentives and Franz Haniel, West Germany, a fuel markets in operation at the end of 1979 were Many firms turn to the large U.S. food and shipping firm. To date, foreign invest­ located in Canada, 114 in Europe, and 63 in retailing market because of restrictive regu­ ment into food retailing has been achieved Australia. Jewel Food Stores also has sub­ lations in their home country. In West Ger­ through horizontal market extension mergers stantial food retailing operations in Mexico. many, laws restrict new supermarket open­ by other retailing firms, rather than through ings and place controls on their operations. conglomerate mergers. Performance of U.S. Subsidiaries Large retail firms are required to obtain Because most foreign investments have approval from neighborhood residents and U.S. Subsidiaries occurred since 1978, it is still too early to merchants before constructing large super­ The 23 U.S. food retailers acquired by assess changes in performance of U.S. affil­ markets. Similar laws affect retailers in foreign firms vary widely is size from over iates under their new ownership. In general, France and other European countries. $6 billion in sales to less than $20 million. foreign owners have retained the existing Foreign investors have been attracted to Four companies (18 percent) reported 1979 management and operating procedures of successful mid-size regional and local sales of over $1 billion. Three (A&P, Grand their new purchases. A dramatic exception chains. A favorable exchange rate and under­ Union, and Albertson's) rank in the top 10 is Aldi Benner, of West Germany, who in­ valued common stock, priced at or below U.S. grocery store firms, while the fourth troduced the limited assortment "box book value, makes food retail firms attrac­ (National Tea) ranks among the top 20. stores" in this country, patterned after their tive ventures for foreign investors. At the Another five companies (23 percent) are successful European operations. Under same time, some U.S. retailers have been large regional chains with sales between Tengelmann's (West Germany) ownership, receptive to foreign investment as a source $500 million and $1 billion.