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Dominick’s Grocery Stores Leaving Chicago Market: Closings or Fragmented Selling of Stores Underway

Fri October 11 2013 6:07 am
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Safeway Inc., the West Coast-based grocery giant that bought Dominick’s 15 years ago for $1.8 billion, announced Thursday that it plans to exit the Chicago market by early next year after market saturation in the continuously competitive Chicago grocery store market as taken in its toll on the profitability of the store. Dominick’s was founded on the west side of Chicago in 1918.

In the 1990s in north Arlington Heights-Prospect Heights area, there were once two Dominick’s within two miles of each other — one at 1241 North Rand Road and one at 325 East Palatine Road. The Prospect Heights Dominick’s closed in 2001. The 87,000 square-foot building is currently being built out at a cost of about $4.4 million to become host of a new Ultra Foods grocer — a new grocer to the northwest suburbs. Now comes news that ALL Dominick’s stores are closing in Chicagoland.

Buffalo Grove and Palatine both have two Dominick’s stores in their village limits.

Bob Mariano, current CEO of Roundy’s and founder of Mariano’s Fresh Market, developed the Dominick’s Fresh Stores in 1996 with carry-out food, specialty bakeries, delis, floral shops and in-store dining. Dominick’s grew with the introduction of “Fresh Stores”, but in 1998 after the takeover of over 100 stores by Safeway, Dominick’s stores started to phase out some of the Fresh Store concepts. Dominick’s was also faced with a scandal involving expired food in February 2011. Food and grocery blogger Jill Cataldo reported that a reader found out that some plastic-tasting meatballs that were just eaten had expired in 2007. The meatballs were purchased at the Carpentersville, Dominick’s location. Cataldo, who met with the reader and her friend, discovered hundreds of expired food items. They filled three shopping carts with 425 expired food items in two hours, and took a picture of the three shopping carts. Eventually, Dominick’s lost market share to Jewel-Osco. Prior to the Dominick’s scandal, Bob Mariano left Dominick’s and became the CEO of Roundy’s. The first Mariano’s Fresh Market store opened in July, 2010 in Arlington Heights. Mariano’s Fresh Market and a number of independents became strong competitors, and Dominick’s reduced their market presence currently to only 72 stores. Dominick’s market share fell from about 30 percent in the late 1990s to under 10 percent by 2012.

Safeway operates about 1,400 stores in the U.S. and 223 in Western Canada. Thursday, as they announced the sell-off of Dominick’s, Safeway reported third-quarter net income fell from $157 million last year to $65.8 million this year. The Dominick’s unit lost $13.7 million before taxes, so far this year

Jewel-Osco, the Chicago market share leader at about 30 percent, has been sold three times in the last 13 years. The current owners are Cerberus Capital Management and a group of real estate firms — Chicago’s Klaff Realty LP, New York-based Kimco Realty Corp., Philadelphia’s Lubert-Adler Partners LP and Schottenstein Real Estate Group in Columbus, Ohio. Locally, they immediately started remodeling the Vail Street Market Jewel-Osco at 122 North Vail Avenue in Arlington Heights. Jewel-Osco has also eliminated self-checkout and the Preferred Card. Internally, the new owners say they are doing away with blanket-policy marketing and will base coupon policies on local stores — treating each store as if it is their only store. Some experts think this might cause confusion across markets.

The news brings the question: what will move in to the Dominick’s store at 325 East Palatine Road? Will Arlington Heights have a Mariano’s North and a Mariano’s south? The Mariano’s on Northwest Highway still draws huge crowds, even after the Palatine store opened on North Hicks Road. Mariano’s moved in to a closed Dominick’s at Barrington Road and Golf Road. The store opened in August 2012.

Four Dominick’s stores have already been sold to the Cerberus group, and will open as Jewel-Osco stores soon in the City of Chicago. A Jewel-Osco, Trader Joe’s, Harvest Fresh, Aldi’s and a new Ultra foods opening soon at the former Dominick’s location in Prospect Heights already saturate the area of Uptown Arlington Heights near the Arlington Heights Road-Palatine Road-Rand Road triangle. That’s not likely to scare large grocers away.

The closest Whole Foods Market stores to Arlington Heights are in Kildeer, near Deer Park, and in Schaumburg, just south of Woodfield. Will Mariano’s and Whole Foods be the main contenders for the strategic Arlington Heights Dominick’s location? While Mariano’s has been a winner from the start, there are a lot of people that would love to see a Whole Foods Market in Arlington Heights.

UPDATE PHOTO: Dominick’s with shelves empty on December 23, 2013 at the Arlington Heights store at Palatine Road and Arlington Heights Road.

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