Rainbow Foods Closing 2 More Stores in Minneapolis as Chain Struggles

Friday, 10 Jan 2014 01:03 PM

By Michael Mullins

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Rainbow Foods is closing an additional two stores in the Twin Cities, bringing the total number of closures over the past year to five, as a slumping economy and increased competition have reduced the total number of stores to 27.

Rainbow Foods is operated by Roundy's Supermarkets, a Milwaukee, Wis.-based chain that has 166 stores and 99 pharmacies across the Midwest.

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"The economic downturn over the last few years, coupled with an increased competitive footprint from the likes of Wal-Mart and others, has made it hard to control costs and remain competitive in the geographies where we have closed stores," James Hyland, Roundy’s vice president of investor relations and corporate communications, said in a statement, the Star Tribune reported.

"Sales are declining. Market share is declining. They are making a good business decision," Milwaukee-based supermarket analyst David Livingston added.

John Dean, a Twin Cities-based supermarket analyst, told the Star Tribune that Rainbow Foods' problem can largely be traced back to Wal-Mart and Target's presence in the region and their promotion of grocery items. Rainbow Foods to drop from second most popular grocer to fourth in recent years.

"The Twin Cities is in the midst of a food fight," University of St. Thomas Marketing Professor David Brennan told CBS Minnesota, "and it has been for five or six years."

"We’ve had Whole Foods come in, we’ve had Trader Joe’s, we’ve got Aldi’s and so on and so forth," Brennan added. "[Rainbow Foods is] being eaten away by the true discounters like Aldi’s, as an example, and at the high end by Kowalski’s and Lunds and Byerly’s, so they’re kind of caught in between."

When Roundy’s acquired Rainbow Foods in 2003, the company's initial intention was to sell the supermarket chain. However, it was unable to find a buyer, Dean told the Star Tribune.

"Roundy’s bought them to sell them, and they haven’t been able to. They are past their timeline," Dean said. "The focus just hasn’t been on Minnesota … Their focus is on Chicago."

Roundy’s upscale grocery chain Mariano’s is reportedly doing better than Rainbow Foods.

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