SEVERAL REGIONAL supermarket chains fell victim to competitive pressures, came under new ownership or both in 2006.
In the Pacific Northwest, long-held fears about the arrival of Wal-Mart supercenters finally proved well founded, as two of the region's most respected independent chains filed for bankruptcy and another simply closed its doors.
Larry's Markets, Kirkland, Wash., and Brown & Cole Stores, Bellingham, Wash., both filed for Chapter 11 protection in 2006. Larry's sold its five stores to various other food and nonfood retailers, including one to upscale independent Metropolitan Markets and one to its wholesaler, Associated Grocers of Seattle.
Those sales occurred after plans fell through to sell Larry's to Michael Teel, the former president of San Francisco-based Raley's.
Brown & Cole, which operates 27 stores in the region, filed for Chapter 11 in November and said it expects to emerge within a year.
A third regional player, Tidyman's, simply ceased operating in June, after scaling back its operations to just eight stores from a high of 21 locations in 2003, and having to pay out more than $6 million in a sex-discrimination lawsuit.
“There was some logic to operating across a wide area when we had 21 locations, but we didn't see any long-term strategy today with just eight stores,” said Mike Davis, president, Tidyman's, in an interview with SN at the time.
The company, which had planned to expand using the Save-A-Lot banner, was 40% owned by its wholesaler, Minneapolis-based Supervalu.
Shortly before Larry's filed for Chapter 11 protection in March, SN had profiled the Seattle market, where operators and industry observers cautioned that the market was ripe for a shakeout as Wal-Mart and Winco increased their presence.
“It's not business as usual in Seattle anymore,” Ron Brake, chairman of Associated Grocers, told SN.
Craig Cole, president of Brown & Cole, also cited Wal-Mart's role in his company's bankruptcy, noting that the company was forced to close several stores near Wal-Marts and had been unable to sell them. He also cited cost disadvantages with Wal-Mart because of the level of benefits he provides for his workers compared with those provided by Wal-Mart.
“We plan on having a viable enterprise at the end of the Chapter 11 process, [but] rather than limp along, we wanted to move ahead and adjust now to the new realities of today's business climate,” he told SN.
Like Larry's, Brown & Cole was a customer of AG-Seattle, which said it was considering its own options for the future, including a possible sale or merger.
Elsewhere around the country, other regional independents also got swallowed up in 2006 — including Clemens Family Markets, Kulpsville, Pa., which was acquired by Ahold-owned Giant of Carlisle, Pa., and A&P, Montvale, N.J., which converted six of the Clemens locations to its SuperFresh banner.
Also, D&W Food Centers, an upscale independent based in Grand Rapids, Mich., was acquired by local wholesaler Spartan Stores, and Kings Super Markets, another upscale independent, based in Parsippany, N.J., was sold by its London-based parent to two private equity firms for $61.5 million.
Marsh Supermarkets, which had long been a powerful presence in its home market of Indianapolis, had put itself up for sale in late 2005 and found a buyer this year in Boca Raton, Fla.-based Sun Capital Partners, which paid $88 million in stock and assumed about $237 million in debt. The chain, which was publicly owned but controlled by family members, underwent a management upheaval before the sale, ejecting president David Marsh and other executives. It now faces a shareholder lawsuit alleging mismanagement under the former regime.
David Marsh then sued the company to collect severance pay, prompting a countersuit in which the company now alleges that the he spent corporate funds on himself and his family.
The company, which includes about 100 supermarkets and a chain of about 150 convenience stores, is now under the management of CEO Frank Lazaran, an industry veteran who held executive posts with Winn-Dixie, Randall's and Ralphs.