Hidden Billionaire Found With Food Fortune in California

The H Street Save Mart grocery store in downtown Modesto, California, is a throwback to a time before supermarkets enticed shoppers with sushi bars and wine tastings. Here, bare florescent lights reflect off scuffed linoleum floors and a Greek chicken wrap is marred by bits of cartilage. To get into the bathroom, shoppers have to seek out a clerk for a key.

This store and 225 similar locations operated by Modesto-based Save Mart Supermarkets have made Bob Piccinini, the company’s 71-year-old majority owner, a billionaire.

Since securing control of the company from his family in a 1985 leveraged buyout, Piccinini has expanded Save Mart by exploiting local zoning laws to thwart bigger competitors and acquiring hundreds of low-performing stores from adversaries.

“He had a big vision,” said Cecil Russell, Save Mart’s vice president of merchandising and marketing for 20 years and now chief executive officer of the Modesto Chamber of Commerce. “His vision was self-distribution and being more vertically integrated.”

Save Mart is the largest family-owned grocery chain in California, according to rankings by Supermarket News and the National Retail Federation’s Stores magazine. The company, which also operates under the S-Mart Foods, Lucky and FoodMaxx brands, had sales of about $4.5 billion in 2012, according to an estimate by Supermarket News. Piccinini owns at least 93 percent of the closely held company, according to a filing in his 2002 divorce in California Superior Court.

Hidden Billionaire

Piccinini’s stake in the company is valued at almost $1.1 billion, according to the Bloomberg Billionaires Index, based on the average enterprise value-to-earnings before interest, taxes, depreciation and amortization, and enterprise value-to-sales multiples of three publicly traded peers: Kroger Co. (KR), Safeway Inc. (SWY) and Harris Teeter Supermarkets Inc. (HTSI) Enterprise value is defined as market capitalization plus total debt minus cash.

GRAPHIC: Bloomberg Visual Data

GRAPHIC: Bloomberg Visual Data

Burt Flickinger, managing director of New York-based retail consultant Strategic Resource Group, says the company could fetch as much as $2.3 billion from potential buyers, depending on when California’s Central Valley economy expands and if the state can enroll more eligible participants in the CalFresh food stamp program.

“They’re doing a good job of defending their business and sustaining it against unprecedented levels of competition, as well as the toughest economic times that area has seen in decades,” Flickinger said in a telephone interview.

‘Real Threat’

Those tough times led the company to stop paying bonuses and giving raises to store managers, a practice they have since reversed, according to the president of the chain’s largest union local. As a result, the United Food and Commercial Workers Local 8, which represents 11,000 Save Mart workers, has requested to review the company’s books to decide whether to push for pay hikes that had been temporarily suspended.

“Save Mart’s costs rose while its sales fell, burdening it with a competitive disadvantage against the likes of Wal-Mart and Target,” Local 8 President Jacques Loveall said in an e-mail. Loveall said Piccinini’s billionaire status doesn’t factor into his decision to push for increased pay. “The billionaires in the Walton family are the real threat to those who work in the retail industry.”

Piccinini has never appeared on an international wealth ranking. Alicia Rockwell, a Save Mart spokeswoman, said he declined to comment about his net worth and for this story.

Supermarket Surge

Piccinini’s wealth has been aided by a surge in supermarket takeovers this year, including Kroger’s planned acquisition of Harris Teeter for $2.5 billion, which was announced last month.

The deal is one of 16 announced for North American food retailers this year for a total value of $10.1 billion, up from $702 million in 2012, according to data compiled by Bloomberg. The Russell 2000 Drug & Grocery Store Chains Index has gained more than 54 percent year-to-date, compared with a 24 percent increase in the Russell 2000 Index. (RTY)

The billionaire more than doubled Save Mart’s size in 2007, when he acquired 130 stores from Boise, Idaho-based Albertson’s LLC, along with two of the company’s distribution centers in Roseville and Vacaville. Before that, he created a trucking business and struck a partnership with Raley’s Inc. to produce private-label milk, yogurt and ice cream.

‘Wheeler Dealer’

Bob Reynolds, a Moraga, California, independent retail consultant, said Piccinini has little interest in the day-to-day intricacies of retailing and reinvesting in his supermarkets.

“He’s a wheeler dealer,” Reynolds said, whose experience includes a stint as director of corporate planning at Safeway when he worked at the chain from 1971 to 1985. “He’s more interested in the deal than he is in running grocery stores.”

Piccinini has limited himself to buying stores that come up for sale northern California instead of building new shops, Reynolds said.

“The archetype of staying fresh in the grocery business is to open new stores where there is growth, and Save Mart has done very little of that,” he said. “They buy opportunistically and run the assets until they’re worn out.”

Piccinini also has competed against Wal-Mart Stores Inc. (WMT) and Boise-based WinCo Foods Inc. by opposing the retailers before local planning boards and city councils, often under the guise of neighborhood groups, according to state court documents.

Wal-Mart Accusations

In the city of Selma, a Central Valley town south of Fresno, Wal-Mart accused Save Mart of being behind an anti-Wal-Mart group, Save Our Selma Coalition, in a 2005 filing requesting a subpoena. Bentonville, Arkansas-based Wal-Mart built its store anyway. In Tracy, California, WinCo accused Save Mart in 2007 of directing a lawsuit filed by neighborhood group Tracy First against the city for approving a new WinCo store, according to a state court document. WinCo also built its store.

Flickinger said Save Mart’s territory still only has one Wal-Mart supercenter for every 150,000 people, compared with one for every 45,000 in Alabama.

“It’s not for lack of trying either,” Flickinger said.

Save Mart was founded in Modesto in 1952 by Piccinini’s father, Mike, a high-school dropout, and his brother in law, Nick Tocco, according to a company website. Bob Piccinini, who attended and never graduated from three colleges, started in the family business as a clerk, then rose to vice president in 1971 when his father died. The twice-divorced father of four became president a decade later before buying out his family in 1985.

Numbers Guy

With little patience for the details of merchandising, Piccinini has a natural talent for numbers and finances, said Russell, the former executive who worked at the company for 23 years before retiring as vice president of strategic development in 2010. The billionaire likes to tell the story of signing a store lease on the hood of his car.

“At our executive meetings, Bob was a very intuitive individual,” said Russell, who also attended high school with Piccinini in Manteca, another Central Valley town northwest of Modesto. “He always heard what you said and didn’t say, and he was pretty demanding of us. But it was not a heavy handed approach.”

Piccinini also rejected loyalty programs that give consumers discounts while allowing the stores to peer into their purchasing history.

“Bob would say our loyalty program was how we rewarded our customer every day,” said Russell. “He was concerned about the intrusion into personal data.”

Sports Junkie

Instead, he focuses on promoting private label brands made by his suppliers or by outside manufacturers, which have bigger profit margins than national brands. Save Mart sold $828 million of in-house brands in 2011, 18 percent of its annual sales, according to an estimate by Private Label Buyer Magazine.

Away from the food business, Piccinini has a reputation as a sports nut. He’s owned stakes in four minor league baseball teams in Sacramento, Fresno, Stockton, and Modesto, as well as pieces of the San Diego Padres and Arizona Diamondbacks Major League Baseball clubs. He’s now a minority owner of the Golden State Warriors basketball team in Oakland.

Save Mart has sponsored a popular Nascar race at the Sonoma Raceway since 1992, where Piccinini has driven around in a 3,000-pound, 520-horsepower, 12-foot-6-inch shopping cart he commissioned.

He’s also known as a merciless gin rummy player, and hosts regular Tuesday night games, Russell said.

“Don’t ever play cards with him because you’ll lose,” said Russell. “You could lose your house.”

To contact the reporters on this story: Seth Lubove in Los Angeles at slubove@bloomberg.net; Zohair Siraj in New York at zsiraj1@bloomberg.net

To contact the editor responsible for this story: Matthew G. Miller at mmiller144@bloomberg.net

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