What We Know About the New Owner of Kroger's C-stores
CINCINNATI — News came this week that EG Group of the United Kingdom was entering the United States by way of a $2.15-billion deal for The Kroger Co.'s convenience store portfolio.
Under terms of the agreement, EG Group will continue to operate the 700-plus stores under their current banners — which include Turkey Hill, Loaf 'N Jug, Kwik Shop, Tom Thumb and Quik Stop. It will also establish a North American headquarters in Cincinnati, Kroger's hometown.
EG Group is not acquiring Kroger's supermarket fuel centers or its Turkey Hill dairy, as CSNews Online previously reported.
The company, also known as Euro Garages, carries a large portfolio across the pond, but what does it mean for the U.S. c-store business? Maybe not much, according to at least one analyst.
"While reference to establishing a North American headquarters in Ohio would seem to indicate plans for bigger things, potentially additional M&A, we hesitate to describe this as a material shift in the competitive landscape given lack of deep knowledge on EG's fuel/in-store strategy," said Christopher Mandeville, equity analyst at Jeffries.
He added the retailer takes a branded and national quick-service restaurant approach to foodservice, and does not appear to offer anything proprietary or differentiated.
"Moreover, this is the company's first venture into the states; a lot can go wrong if EG hasn't done its homework and doesn't understand U.S. culture/shopping habits," he explained.
According to the company, Euro Garages was founded in 2001 by brothers Mohsin and Zuber Issa with the acquisition of a single petrol filling station in Bury, Greater Manchester.
Since then, Euro Garages has established itself as one of Europe's leading petrol forecourt and convenience retailers, it added.
It has relationships with national and global retail and convenience brands, including Starbucks, KFC, Texaco, Spar, Carrefour, Burger King and Esso.
"We are committed to providing excellent customer service, good value products and a wide range of facilities, and customers have come to expect high standards from all of our forecourts and retail sites. Passion for quality, convenience and customer service is at the heart of Euro Garages," the company states on its website.
"Our vision is to collaboratively engage and work with leading retail brand partners to be able to deliver a world class fuel, convenience, food and drink offer that exceeds the expectations of the modern consumer," it added.
EG Group on the Move
In late November, EG Group's affiliate EG Deutschland GmbH entered into a strategic partnership with ExxonMobil to expand the Esso brand in Germany.
Under the agreement, ExxonMobil is selling its approximately 1,000 Esso-branded service stations to EG Group and converting its business to the branded wholesaler model already in place in other European markets and North America. The company will continue selling ExxonMobil-supplied Synergy fuels and Mobil-branded lubricants at the Esso-branded stations.
The partnership is initially for 20 years. The two companies have already successfully established a branded wholesaler model in the U.K. and France, and recently signed a similar agreement in Italy.
The transaction will bring EG Group's station count to 3,500 stations across Europe.
And just last month, EG Group and ExxonMobil in the Benelux — the union of Belgium, the Netherlands and Luxembourg — said they will convert several hundred stations in the Benelux to the ESSO brand this year. The first station is currently under conversion in Rotterdam.
Currently, EG Group has a network of more than 650 Texaco and Firezone stations in the Benelux. EG Group expects to start with the conversion during the first quarter with the vast majority completed before the end of the year.
Lessons from Tesco?
A successful retail business in Europe doesn't necessarily spell success in the U.S. In 2006, United Kingdom-based retailer Tesco plc entered the market, with initial hopes to open at least 100 stores during its first year of operations in southern California. The retailer operated its Fresh & Easy Neighborhood Market banner in areas California, Arizona and Nevada but struggled to make a profit.
After roughly six years, Tesco decided to sell the 199-store chain in 2013. A year earlier, the retailer's CEO Philip Clarke said Fresh & Easy was not expected to break even until its 2013-2014 calendar year. At the same time, he said Tesco was pulling back from expanding the U.S. chain and shifting its focus to improving its locations in the U.K., as CSNews Online previously reported.
In September 2013, Tesco reached an agreement to sell the Fresh & Easy Neighborhood Market chain to investment firm The Yucaipa Cos. LLC. The deal marked Tesco's exit from the U.S.
Fresh & Easy filed for Chapter 11 bankruptcy protection two years later and began winding down operations in October 2015.