Sudden Bankruptcy Sinks Bruno's Efforts at Revival

JON SPRINGER

BIRMINGHAM, Ala. — A plan to modernize stores and revitalize a neglected brand — months in the works and only days away from an official launch — is now on indefinite hold for Bruno's Supermarkets here, which filed for protection under Chapter 11 of the U.S. Bankruptcy code this month.

“If you hold your index finger and thumb up in front of you and almost touch them, that's how close we were to launching a whole new brand revitalization for Bruno's. Literally days away,” said Peter Cohen, vice president of marketing and retail strategy for Palladeo, a Glendale, Calif., marketing firm engaged last year to execute a comprehensive identity makeover for the 66-store chain.

But the imminent launch was put on hold Jan. 27 with the sudden resignation of Kent Moore, Bruno's chief executive officer, and its status since the Feb. 5 filing for Chapter 11 bankruptcy protection appears uncertain at best, Cohen told SN last week.

“We had new television commercials all ready to shoot. We had storyboards made up and casting done. We had all the environmental design work ready to go, we had a prototype singled out for the new store concept,” Cohen added. “As to what happens now, it's anybody's guess.”

Palladeo was engaged by Bruno's last year to craft a comprehensive program of public relations, advertising and branding to help the 66-store chain reestablish itself as a regional operator after its owner, the Dallas-based private equity firm Lone Star Funds, de-coupled it from its South Carolina-based sister chain, Bi-Lo.

The separation, which was made official last June, was seen as a way to make Bi-Lo more attractive to would-be buyers, and at the same time give Bruno's a local perspective it needed to regain ground it had lost to competitors, sources said. A team headed by Moore, a former United Supermarkets CEO, was charged with reestablishing infrastructure at Bruno's and, according to Cohen, the banner “almost had the feel of a company in start-up mode.”

Moore, Bi-Lo said, “resigned to pursue other opportunities” in late January as a team of restructuring people from Alvarez & Marsal arrived. Jim Grady, a senior director with Alvarez & Marsal, was named the company's chief restructuring officer concurrent with the bankruptcy filing. SN was unable to contact Moore last week.

In court papers and other documents filed since the bankruptcy filing, Grady has indicated Bruno's “expects to continue our operations during the Chapter 11 process,” and that cash from its operations would provide adequate funding past the Feb. 5 filing date, including payments to suppliers.

The Birmingham News reported that a lawyer for Bruno's told a judge that it was too early to say whether Bruno's would restructure, sell off in pieces or liquidate. Reports also said the chain would file a motion seeking the closure of 10 stores, but such a request had not been made available by press time.

“It's very early in the bankruptcy process and any decision to close stores will have to be approved by the court,” Ed Trissel, a spokesman for Bruno's, said in a statement provided to SN. “We will continue to make decisions that we believe will assist us in our restructuring, which is designed to focus on Bruno's core strengths.”

Grady urged suppliers to remain with Bruno's under the terms they agreed to before the bankruptcy filing. “Our ability to purchase from you on reasonable terms and at competitive prices is critical,” Grady wrote.

Some suppliers as of last week had requested that goods shipped to Bruno's in the weeks prior to the filing be returned.

In its bankruptcy filing, the company said that frozen credit markets had made it impossible for Bruno's to pay for store improvements it needed to keep pace with newer competitors in its markets. Combined with a significant decline in consumer spending due to the economic slowdown, Bruno's had little choice but to seek protection from creditors, the company said.

“Despite what you hear, it's still pretty tough out there for supermarket operators,” Neil Stern, senior partner of McMillan Doolittle, Chicago, told SN. “Unit sales are down, and the increases are nominal at best for many retailers, and I'm sure Bruno's falls in that camp. I think what we're going to see this year are some of the guys who are cash-strapped or on the fringe being forced into bankruptcy, and Bruno's is just the first one.”

Bruno's, founded in 1934, at one time was its area's leading food retailer but in recent years has lost considerable ground to competitors, including Wal-Mart and Publix. It has endured a string of ownership handoffs and a prior bankruptcy, filed 11 years ago this month. Ahold bought Bruno's out of bankruptcy in 2001 and later combined it with Bi-Lo. Many of Bruno's weaker stores were sold to supplier C&S Wholesale Grocers when C&S took over distribution for the chains in 2004. Many of those stores, renamed under the Southern Family Markets banner, have since closed and/or converted to the Piggly Wiggly brand.

The rebranding plan for the remaining stores was to have begun at Bruno's discount-focused Food World banner, which operates 44 stores, said Cohen. The “More for Your Money” campaign was “an all-encompassing program, not just an advertising slogan,” according to Cohen.

In the bankruptcy petition, Palladeo was listed as being owed $681,789.