Wegmans targets North Carolina for expansion
A successful foray into the Tar Heel State — already targeted by The Kroger Co., Publix Inc. and others — would serve as a jumping off point for Wegmans into other areas of the southeast, said Burt Flickinger, a retail analyst and managing director of the Strategic Resource Group.
“There is still a huge opportunity,” he said. “Wegmans could double the current size of its corporate sales just by filling out the region between Virginia, the Carolinas, into Tennessee and Georgia and north Florida.”
Bankruptcies by a number of grocers serving that area of the country have opened the door for Wegmans and others.
Wegmans has confirmed that it is “considering multiple sites” in the Raleigh-Durham area but declined to share further details.
“Until there are firm deals for each site, we are unable to share the locations or other details,” Wegmans’ spokeswoman Jo Natale said in a written statement. “North Carolina is seeing continued growth, and we have been able to identify multiple sites in the Raleigh/Durham area that met all of our criteria.”
The target
The Raleigh-Durham area, commonly known as the Research Triangle, is a growing area of the state and home to the University of North Carolina at Chapel Hill, North Carolina State University and Duke University. There are about 2 million people living there, according to 2014 census records. The median annual household income is about $56,600, about $5,000 more than the Rochester metro area.
But Wegmans isn’t the only grocer that has spotted an opportunity in North Carolina.
Kroger already runs 160 stores in the state. Publix has 14 stores and plans to open another 20 stores there through 2017.
Publix also is working on 10 stores in Virginia. Meanwhile, Wegmans has scheduled to open its 10th store in that state on Sunday in Short Pump, about 15 miles northwest of Richmond.
Kroger reported sales of $109.8 billion last year. Publix did $32.4 billion. Wegmans had annual sales of $7.9 billion, the highest sales volume per store of the three. Publix has roughly 1,120 stores. Kroger operates nearly 2,800.
“It’s taken Wegmans 100 years just to get to about 90 stores,” said David Livingston, an industry analyst with DJL Research. “They don’t build them every three miles and in a short period of time. They are slow and methodical. Never in a hurry.”
He said Publix and Wegmans combined efforts would push out a number of under-performing grocers in North Carolina.
“They will use Publix as muscle to help drive out all the ineffectual competitors in North Carolina,” he said. “Food Lion, Lowes, Piggly Wiggly, Bi-Lo, The Fresh Market, and Earth Fare are just taking up space and appear to be low hanging fruit to be picked.”
Wegmans often receives praise for the quantity and quality of its products. Some stores carry as many as 70,000 items. However, it does struggle against some competitors when it comes to prices, Flickinger said.
Expansion into other areas would place added pressure on Wegmans to increase its philanthropic efforts in those communities to keep up with its competitors.
“If that model continues, then Wegmans will be more vulnerable to companies like Kroger and ShopRite,” Flickinger said. “When Wegmans goes toe-to-toe with Tops or toe-to-toe with Price Chopper or toe-to-toe with Stop and Shop in New England, Wegmans compares very favorably with very low prices.”
Further south?
Wegmans first announced in January that it would open in Cary, North Carolina, just outside of Raleigh.
It has since filed paperwork to pursue a second store in that area, and is working to open new stores in Virginia, Maryland, New Jersey, Massachusetts, Pennsylvania and Brooklyn, New York. Wegmans also is in the midst of a major renovation project of its Perinton store, expected to be completed in early 2017.
It has yet to publicly reveal any other plans for local store renovations or new expansion efforts in other states. But the demand in other areas of the country is apparent with roughly 4,000 requests coming in last year from those wanting a new store in their communities. South Dakota and Mississippi were the only states that didn’t make such a request.
The Wegmans move into North Carolina comes after people started a Facebook group called “Bring Wegmans to the NC Triangle Area — please.” The page now has 811 members.
There also are many New York transplants living in the South, particularly in Publix’s home state of Florida. Those areas are seemingly fertile ground for a new store.
Then again, the family-run company doesn’t have to grow for the sake of growing. Publix is employee owned, Krogers and others have to answer to investors on Wall Street.
Livingston said Wegmans would likely add a few stores each year along its current footprint, taking personnel from its existing stores and moving them into leadership roles at the new site.
Rochester native Todd Strassner Sr. started as a meat clerk in 1981 with the company. He will be store manager of the Short Pump store.
Still, any plans by Wegmans to move further south would take several years — possibly decades — to complete and require additional training, staff and infrastructure.
Each new store employs anywhere from 500 to 550 people. Those stores typically range anywhere between 100,000 and 140,000 square feet.
Flickinger said Wegmans could have sales of about $20 billion by 2025 and “not stretch itself at all.”
“Wegmans — like the Union generals in the Civil War — doesn’t have to conquer every major market in the South,” he said.”(Wegmans could) have a meaningful share in any given market with only three to five stores.”
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