Following the death of Wegmans' visionary founder, what are the odds of Tesco making a bid for the family-run US estate? Chloe Smith reports
If America is the birthplace of the colossal one-stop hypermarket, Robert Wegman is the man who conceived it. He died in April, aged 87, leaving an empire of 69 Wegmans Food Markets spread along the East Coast in New York, Pennsylvania, New Jersey, Virginia and Maryland, which he built up from the grocery business started by his father and uncle in 1916.
The business remains family-run: Robert&'s son Danny is CEO and Robert&'s granddaughter Colleen is president. But will the death of the patriarch herald a new direction for the business? More importantly, could it be in Tesco&'s sights now that the supermarket juggernaut has confirmed plans to enter the US market in 2007?
There is no simple answer. Wegmans is a private company that likes its privacy. After intense speculation last year that Tesco could be considering a bid, Wegmans spoke out in December, saying: &"Our response continues to be that the entire Wegmans family is strongly committed to remaining privately held and family-owned.&"
Tesco refused to comment, confirming only that it plans a chain of convenience stores in the US modelled on the Express format in the UK.
Gregory Hodge, retail analyst at Planet Retail, says that Tesco probably lacks the stomach for such a major investment this early on. &"Wegmans&' value would go well beyond Tesco&'s anticipated capital expenditure of £250m,&" he reasons, adding that Tesco is opening convenience stores, while Wegmans is a hypermarket operator.
&"Wegmans is an unlikely target,&" he says. &"Its location on the East Coast is also in stark contrast to Tesco&'s pending entry on the West Coast.&"
However, entering the US market with c-stores alone is &"highly unusual&", says Hodge. &"Having adopted a multi-format strategy in all its other international markets, it is conceivable that Tesco could open hypermarkets in the US in future.&"
&"Never say never,&" is all Tesco spokeswoman Sally Powell will say. But Wegmans is certainly an appealing prospect. It is one of the US&'s biggest privately owned companies, generating sales of $3.8bn last year.
For nine years, it has ranked among Fortune&'s 100 best companies to work for and was number one in 2005. Robert Wegman said the achievement was &"the culmination of my life&'s work&".
Its prosperity is in part down to Robert Wegman&'s commitment to innovation. In 1949, he converted the stores to self-service, which enabled him in 1953 to offer his 350 employees a pay rise (wages are still top-end). Wegmans was one of the first supermarkets to introduce laser scanning at checkouts, in 1974. Other developments include introducing pharmacies in-store (1974), private-label products (1979) and a loyalty card scheme, called Shoppers Club (1990).
The upshot of all this innovation is an estate of enormous stores that resemble marketplaces, meandering from one specialist department to another. Indeed, the largest stores, at 140,000 sq ft, contain bakeries, butchers and delicatessens, as well as sushi counters, patisseries, herbal remedies, natural foods and mega-restaurants. And that&'s just the food. Wegmans also boasts child play centres, photo labs and cookery classes.
Experts believe that Wegmans is likely to continue its slow, careful growth. Whether it does so under the guidance of the family, or Tesco, remains to be seen. n
If America is the birthplace of the colossal one-stop hypermarket, Robert Wegman is the man who conceived it. He died in April, aged 87, leaving an empire of 69 Wegmans Food Markets spread along the East Coast in New York, Pennsylvania, New Jersey, Virginia and Maryland, which he built up from the grocery business started by his father and uncle in 1916.
The business remains family-run: Robert&'s son Danny is CEO and Robert&'s granddaughter Colleen is president. But will the death of the patriarch herald a new direction for the business? More importantly, could it be in Tesco&'s sights now that the supermarket juggernaut has confirmed plans to enter the US market in 2007?
There is no simple answer. Wegmans is a private company that likes its privacy. After intense speculation last year that Tesco could be considering a bid, Wegmans spoke out in December, saying: &"Our response continues to be that the entire Wegmans family is strongly committed to remaining privately held and family-owned.&"
Tesco refused to comment, confirming only that it plans a chain of convenience stores in the US modelled on the Express format in the UK.
Gregory Hodge, retail analyst at Planet Retail, says that Tesco probably lacks the stomach for such a major investment this early on. &"Wegmans&' value would go well beyond Tesco&'s anticipated capital expenditure of £250m,&" he reasons, adding that Tesco is opening convenience stores, while Wegmans is a hypermarket operator.
&"Wegmans is an unlikely target,&" he says. &"Its location on the East Coast is also in stark contrast to Tesco&'s pending entry on the West Coast.&"
However, entering the US market with c-stores alone is &"highly unusual&", says Hodge. &"Having adopted a multi-format strategy in all its other international markets, it is conceivable that Tesco could open hypermarkets in the US in future.&"
&"Never say never,&" is all Tesco spokeswoman Sally Powell will say. But Wegmans is certainly an appealing prospect. It is one of the US&'s biggest privately owned companies, generating sales of $3.8bn last year.
For nine years, it has ranked among Fortune&'s 100 best companies to work for and was number one in 2005. Robert Wegman said the achievement was &"the culmination of my life&'s work&".
Its prosperity is in part down to Robert Wegman&'s commitment to innovation. In 1949, he converted the stores to self-service, which enabled him in 1953 to offer his 350 employees a pay rise (wages are still top-end). Wegmans was one of the first supermarkets to introduce laser scanning at checkouts, in 1974. Other developments include introducing pharmacies in-store (1974), private-label products (1979) and a loyalty card scheme, called Shoppers Club (1990).
The upshot of all this innovation is an estate of enormous stores that resemble marketplaces, meandering from one specialist department to another. Indeed, the largest stores, at 140,000 sq ft, contain bakeries, butchers and delicatessens, as well as sushi counters, patisseries, herbal remedies, natural foods and mega-restaurants. And that&'s just the food. Wegmans also boasts child play centres, photo labs and cookery classes.
Experts believe that Wegmans is likely to continue its slow, careful growth. Whether it does so under the guidance of the family, or Tesco, remains to be seen. n
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