Roundy’s executive says investors haven’t decided on exit strategy

Last updated on May 13th, 2019 at 02:28 pm

Roundy’s executive says investors haven’t decided on exit strategy

In the past year, Roundy’s Inc. has purchased 30 Rainbow Foods stores in Minnesota, acquired 14 Kohl’s Food Stores in Wisconsin and moved its corporate headquarters from Pewaukee to downtown Milwaukee.
The changes for the privately owned firm continued when the company recently announced it will move its distribution center from Wauwatosa to a new 1 million-square-foot facility to be built at the Pabst Farms development site in Oconomowoc.
That’s remarkable change and growth, considering Robert Mariano has only been the chief executive officer of Roundy’s since 2002.
Mariano recently discussed the company’s operation of Pick ‘N Save stores and its rise to the top of the southeastern Wisconsin grocery market during an interview with Small Business Times reporter Elizabeth Geldermann. The following are excerpts from that interview.

SBT: What was the main reason you moved the company’s headquarters out of Pewaukee to downtown Milwaukee?
Mariano: First, we had three different offices. So, this allowed us to bring everybody together so they could work more effectively together.
And secondly, really, was to bring Roundy’s back to where it started. Roundy’s began its history just a little ways from here in the Third Ward, so we wanted to come back home and also access people career-wise. We try to attract young people into our business, and they are looking for a little different lifestyle than suburbia. We are still close to the suburbs and folks can live downtown and walk to work, walk to where their entertainment is and so forth, and so we thought it was the right blend.

SBT: To clarify once and for all, were you approached by Milwaukee Mayor John Norquist or any of his people to move downtown, or did you approach him?
Mariano: I approached him. If there were incentives, whether they are educational, training, that type of thing, clearly we are going to apply for those and ask for those, but that’s not the reason why. I think what’s more important is the value of getting people together in the right environment. I think you can just look around and appreciate that the work environment here is extremely superior. And the performance will follow from our people.

SBT: You have climbed the ranks since starting as a part-time deli clerk at Dominick’s Finer Foods in Chicago. Now, you’re the CEO of Roundy’s. Looking back on your amazing journey, how did it happen?
Mariano: I always looked for opportunities to have additional responsibility. I guess I’m naturally curious. I’m never satisfied. And so I tend to stay very focused on trying to do everything I’m supposed to do, as well as I can, but then always looking to do more. And so I grew.
I got Mr. D. – there was a Mr. Dominick – and was fortunate enough to work for him. He was a great mentor and gave me a great opportunity to grow and develop at a company that was growing as well. And you really learned the business, you learned the customers, you learned all your fellow employees. You learned what it was about.
I have to say that until 1985, that’s really when kind of I had in my own mindset that I would like to run a company and started to focus on that. If given the opportunity, I wanted to understand what I needed to do to prepare myself to be in the position to be considered for running the firm. And so I embarked on a personal development regimen, as well as continued to grow my experience within the company.

SBT: Roundy’s annual revenues have climbed steadily since 1999. What has been the key ingredient to the company’s success?
Mariano: The additional acquisitions of retail assets, plus the strong market share of Pick ‘N Save stores. And then the other help to that, really, has been the demise of several competitors within the marketplace.

SBT: To that point, what has distinguished Roundy’s as THE brand in this market? What does it have going for it?
Mariano: I think even before we got here, in June of 2002, they had a clear vision of what they wanted Pick ‘N Save to be. Primarily, Pick ‘N Save (stores) were operated by independent operators over the years.
They looked at serving their customer every day, giving them great value, running good clean stores, and they were very energetic and very aggressive with their customers. At the same time, the larger companies weren’t here (referring to the Great Atlantic & Pacific Tea Co., which operated the Kohl’s Food Stores).
The good news was the independents were here, they lived in their communities, they knew the customers, they knew what was going on, they were plugged in. And that’s invaluable when you’re in our business.
But when you’re in a big company and somebody else is on the East Coast or not here everyday and not listening and not hearing from the customers and the employees, it’s different. And I think that’s the touch they lost. They lost the vision. They lost the leadership here.
Pick ‘n Save had that and continues to have that strong vision and leadership at the retail level. Other than Woodman’s and some other independents, that’s really not the case anymore here.
When the Kohl family had Kohl’s, they were leaders. They were leaders in this community, and they were leaders in their industry. I remember growing up in the business, Kohl’s Food Stores were innovative, progressive; they were doing some of the newest things. Not just newest and greatest, I mean in terms of what the customer was looking for. But when the Kohl’s family and that energy left, I think that’s part of what left the business as well. And it wasn’t replaced.

SBT: The Chicago Sun Times reported earlier this year that Roundy’s was interested in acquiring Dominick’s. You denied the report. Were there ever any discussions about acquiring Dominick’s?
Mariano: Chicago is not on the horizon. We will keep paying attention to the upper Midwest, and we’ll see where it takes us.

SBT: What was so attractive about the 30 Rainbow Food Stores you bought from Fleming Cos. Inc., and how is that acquisition going?
Mariano: Good store locations and good store size. And they were under-managed once Fleming got a hold of it. And that is the problem. You have wholesalers thinking that they are going to be in this business, and when people get in different businesses, they start getting their eye off the ball and they don’t realize what business they really are in. But from our perspective, we saw good stores, good-sized stores, a good workforce, good market … The St. Paul/Minneapolis market is a growing population.

SBT: What did Rainbow have in the market share?
Mariano: I think the last published was like, a 22% share. So they had a reasonably decent share. I mean, it eroded near the end, but we have restored it very nicely over the past couple of weeks. It is coming along fine. It is not something we expect to turn around in 60 days. That is not how you do that. It is going to take good hard work, and it is going to take some time. But it is headed in the right direction and we are very pleased so far.

SBT: Are the Rainbow stores unionized? If so, will you inherit a wage structure?
Mariano: Everything up there is unionized. We did inherit a wage structure. We could have rejected the contract and gone back to the people and said you are not going to get your seniority, you are not going to keep your vacation. Legally, we had the right to do it, but we didn’t think it was right. We wanted the people to pay attention to the customers and not think they just got screwed out of four weeks vacation.

SBT: As it relates to the Madison market, there are some people in the union who would say you are treating that market differently than the approach you took in Minneapolis. What is the difference?
Mariano: The difference in Madison was we had to close the stores to get done what we needed to get done, and also the way we structured the deal. We took just the assets.
In Minneapolis/St. Paul, those union agreements called for us to recognize them. So we had an obligation, and we accepted the obligation. There were different terms in the acquisitions, and we lived by both. Now, in Madison we have hired several of the former Kohl’s employees – some cases at the same rate of pay, some cases different. There is a different mix up there.
So, if you look at each acquisition independently, the union or non-union is not the focal point of the decision. If you look at our example, we have done both. So I don’t think one can come to the conclusion that we are either this way or that way. That’s just not so. We’ve done both.

SBT: Have you been remaining neutral in the arguments that are going on in Madison? Would you be happy with whatever decision the employees decide about unionization?
Mariano: As I have stated before, it is the people’s decision. It isn’t us. I can’t choose for you to be a union member. All I can do is educate you on what you are choosing to do. That’s all I can do. After that, it is your choice. You are an independent worker, you decide what you want to do, and we will deal with the outcome. But I cannot sign a card for you. That is your right and your prerogative under our labor laws in this country.
We have stores in the Milwaukee market that are not union. When we bought the Gold’s Pick ‘N Save stores, they were unionized. The people accepted our healthcare plan, they wanted our 401k. That’s what the people decided to do.
There’s no doubt people will construe it as being non-union because we are doing the same thing in Madison. There’s another side to that where people will say, "He’s just a smokescreen to keep the union out." Well, no.

SBT: How do you think the southeastern Wisconsin grocery market will look five years from now?
Mariano: It is logical to assume you will see Woodman’s in the Milwaukee market. I think it is logical to see super centers, both Wal-Mart and possibly Target. I think it is very likely to assume you’ll see neighborhood stores that Wal-Mart builds in the Milwaukee market.

SBT: Will Roundy’s growth be fueled more by acquisitions of other chains, as opposed to building new stores?
Mariano: I think probably now we will still do some acquisitions, probably more growth, more organic growth as we build new stores. We don’t have an eye on anything in terms of the state. We’ve got at least five stores planned next years.

SBT: Roundy’s is owned by Willis Stein & Partners, an investment company in Chicago, which appointed you president and CEO. Some critics, including organized labor, have suggested that the investment company bought Roundy’s to build it up and ultimately to sell it off and reap an investment reward. Does this investment company have an exit strategy?

Mariano: You can think about all of the possible exits, and we don’t have a precise strategy in terms of what we will do, simply because we don’t know what the market will be in four or five years.
With that said, the things we are doing, I have to say are fundamentally sound, business-wise. So we are not stretching prices to improve profit so we look better at exit. We are really not making short-term decisions just to puff up the balance sheet or the operating statement so that if and when there’s a deal, it looks better than it really is.
We are in the process of building a very sound business and continuing to grow it. Exits might be acquired by strategy, public offering – you can imagine all of the possibilities – and to tell you that we have a very specific one, we just don’t. I am more focused on what we need to do now and today, because the customers are looking to us now.

SBT: Is it a forgone conclusion that ultimately there will be an exit, though?
Mariano: For me I don’t, because I would like to be here for another 10 to15 years. My goal was not to come here and make a lot of money and then go back to Illinois and have a good time. This is what I enjoy doing, and I want to continue to do it.
I probably see myself as that part-time deli clerk that started in this business a long time ago, because that is what I think about and how I think about this business. So yes, there will be an exit. Does it have to materially change how this company looks? No, it doesn’t, and as chairman I have to work hard to make sure it’s the way it goes. We are creating something here that I think is pretty special.

Robert Mariano
AGE: 53
EDUCATION: University of Illinois-Chicago, bachelor’s degree in biology with minors in chemistry and mathematics; University of Chicago, master’s in business.
FAMILY: Wife, Lynn; and four children: Rob, 24; Terry, 22; Christina, 17; and Jennifer, 14.
CITY OF RESIDENCE: Lake Forest, Ill.
HOBBIES: "Really, I work. That is what I do. Other than if they go to church or temple, or whatever, there is no other place people really go as frequently as the grocery store. So I always kind of look at it as you are always on duty. But I read if I get quiet time. Right now, I am reading The Da Vinci Code."

Dec. 12, 2003 Small Business Times, Milwaukeee

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