BUFFALO, N.Y. — Tops Friendly Markets is finally standing on its own two feet again, but it won't be wandering too far.
The 71-store chain here recently completed decoupling from its former owner Ahold, where it was run as a part of Ahold's Carlisle, Pa.-based Giant banner. Having spent more than a year developing its own merchandising, financial and marketing functions at its headquarters here, Tops is now looking to capitalize on the advantages of local control.
“It took a little bit longer, and cost a little bit more than we thought it would,” Frank Curci, chief executive officer of Tops, told SN in an exclusive interview, “but we're pretty happy with the results.”
The resumption of local control comes more than eight years after Amsterdam-based Ahold merged the support functions of Tops and Giant, eliminating more than 225 jobs from Tops' headquarters. Curci at the time was president of Tops but he left in 2003 in the wake of an accounting scandal at Ahold.
The shared-services arrangement couldn't stop Tops from sliding. Suffering from a lack of investment in stores and from its position in slow-growing markets, Ahold shut or sold Tops' Cleveland-area stores and put the remaining stores up for sale in 2007.
Morgan Stanley Private Equity, with assistance from Curci, purchased Tops late that year for $310 million. Curci then began rebuilding the organization he'd once helped take apart.
“All we had at Buffalo then was an operating group to supervise the stores and execute the plans that came out of Carlisle. This was not a freestanding business. It was an operating division,” Curci explained. “So we had to re-create the whole infrastructure, and [information technology] was the biggest part of that, because you can't run merchandise or finance or any of those other things without a technology infrastructure.”
The work began in early 2008 with hopes of completing the job within a year. But to make certain of a smooth transition, Tops engaged Giant under contract until last month, when it finally cut all ties with its former sister chain.
RELEVANT TO SHOPPERS
According to Curci, local control allows Tops to offer more relevant product selections and store features that make sense for shoppers in western New York and distinguish Tops from its competitors. It is also a component in Tops' value proposition. Store managers in the meantime have been granted more freedom to respond to their customers, and that in turn is helping improve Tops' image.
“The reason we thought this company was so attractive was that we knew that if we acted as a local company that really understood what the customers wanted and needed every day, we could be very successful,” Curci said. “And being independent has forced us to act more locally. We have partnered with local businesses, we have more local products, we can decide our own pricing levels and we have our own marketing plan. We do our own ad. It's the local-ness that resonates with the customer base here. They see us as a company with a better understanding of what their day-to-day needs are.”
Curci said initiatives such as introducing store-within-a-store partnerships with Anchor Bar — the Buffalo restaurant credited for inventing the Buffalo chicken wing — and Tim Horton's for coffee and baked goods are the kinds of things that could not have been done if Tops was still being run out of central Pennsylvania.
Tops has begun to introduce these co-branded departments at stores as part of a renewal program calling for renovating two-thirds of the chain's stores in the next five years. Since announcing the plan in February, Tops has completed renovations at its Hamburg and Olean, N.Y., stores.
In addition to renovations, Tops is looking to add new stores. The plan calls for growing the store base by 10% per year. The chain sees opportunities to add new stores within its current geographical territory, which Curci described as anywhere west of Interstate 81 in New York. Acquisitions are also a possibility, he added.
“If there were opportunistic things that were available to us — single stores or small groups of stores that were available to us and fit well, we would have the ability and the appetite to do that,” Curci said.
Tops' competitors in western New York include Wegmans and Wal-Mart Supercenters. “We operate against some pretty good and well-defined competition,” Curci said, “but we like our position in the marketplace.”
The five-year plan calls for $30 million in annual capital spending to be generated by the business, he said.
The local association is already paying off as Tops has begun to improve sales, Curci said.
“In this business sales is king, so you're always looking to improve the sales growth, and we've done that. We're seeing positive customer-count trends, and they're spending more when they are there,” he said. “We have a chance to get back some of the customers we may have chased away as a centralized organization and we are getting them to spend more of their dollar with us.”