BIRMINGHAM, Ala. — Newly separated and looking to start over again, Bruno's Supermarkets is returning home.
Lone Star Partners, the private-equity firm that owns the chain, said last week that it will separate Bruno's from its South Carolina-based sister chain Bi-Lo and re-establish it as an autonomous entity based here. The move reverses a process to unite Bruno's and Bi-Lo that began several years ago, when both chains were owned by Ahold, and was completed under Lone Star's watch two years ago.
Concurrently, Lone Star said it will close seven Food World and Food Max stores belonging to Bruno's, leaving it with 67 stores under the Bruno's, Food World and Food Max banners in Alabama and Northern Florida. Bi-Lo, based in Mauldin, S.C., will operate 230 stores, all under the Bi-Lo banner, in North Carolina, South Carolina, Georgia and Tennessee.
Sources described the split as one with potential benefits for both sides. Bi-Lo frees itself of a money-losing sister with disparate formats and can focus more intently on its ongoing turnaround. For Bruno's, a return to a local focus in areas where its brand name still carries meaning could be vital to its survival. There was also speculation last week that dividing the retailers would make the sale of either entity less complex, though officials of Bi-Lo and Bruno's last week declined to comment on that issue.
David West, a Lone Star investor and a member of the Bi-Lo/Bruno's board of directors, was named chief executive officer of Bruno's. Decisions about his team and about the level of investment those stores may receive will be made in coming months, Bill Todd, a spokesman for Bruno's, told SN last week. Bi-Lo will assist Bruno's with IT, accounting and merchandising until those functions are established at Bruno's, he said.
“We are looking intently at the Bruno's business, inside and out, and it's going to be a process that's going to take a couple of months at least,” Todd said. “We'll be sharing resources with Bi-Lo and seeing which of them we can parcel back into Bruno's. We'll also see what kind of investment is needed to give each store peak competitiveness at the local level and, hopefully, recapture any customers who have left us and retain the ones who stayed with us and go get new ones.”
Bruno's history suggests a turnaround won't be easy. Founded here by the Bruno family in 1930, the company lost six top executives in a plane crash in 1991. Bruno's subsequently passed through several different owners and a bout in U.S. Bankruptcy Court, shrinking by around 200 stores in the last dozen years, including a chunk spun off in 2005 to supplier C&S Wholesale Grocers and its ill-fated Southern Family Markets banner.
“Bruno's hasn't worked for any number of people who've run it, going all the way back to KKR [in 1995],” Neil Stern, a senior partner in Chicago consulting firm McMillan Doolittle, told SN in an article published last year. “It's been difficult for anyone to figure out.”
Though the move back to Birmingham will place Bruno's back into offices now partially occupied by C&S, Todd said a reconnection of Bruno's and Southern Family locations “is not on the table.”
Todd said Bruno's key strength is its brand name and reputation, particularly in Birmingham, where the Bruno's format is well regarded for quality food and service. “What has to happen is for Bruno's to carve out a loyalty niche and make itself more of a magnet for customers,” he said.
One Alabama-based source, who asked to remain anonymous, told SN that Bruno's stores are badly in need of reinvestment and are unlikely to appeal to a single buyer. Also, besides Publix, few retailers appear interested in expanding in the state.
“At one time, Bruno's was a very powerful name in grocery retailing in Alabama, but it's just been dying on the vine,” the source said. “The rumor is Lone Star has been trying to sell some already, but nobody's buying. I suspect they will wind up selling some of the good stores and closing others.”
Another source said the separation would “right a wrong” committed when Ahold announced plans to integrate the chains following its accounting scandal.
“As time has gone on, people who said they shouldn't have put the chains together have been proven right,” the source said. “Bi-Lo never put the emphasis on stores in Alabama and Florida. And I think if they assemble the right team, it could be a good thing for Bruno's.”
The move to separate the businesses appeared to have concrete value for Bi-Lo, which would be the sole recipient of the previously announced capital investments of approximately $160 million over the next 18 months. Joyce Smart, a spokeswoman for Bi-Lo, said that in addition to differences in geography, the Bruno's division also had disparate formats, with only one banner, FoodWorld, having a similar middle-market position to Bi-Lo.
“It put us in the position of running three different formats, three different strategies and three different kinds of ads,” Smart said. “This change will allow us to focus on our brand.”