SCHWEGMANN

David Merrefield

Is the Schwegmann name destined to go the way of Albers, Alterman Bros., Bettendorf, Bohack, Cullum Cos., Henke & Pillot, Milgram Food Stores, J. Weingarten and Wetterau?

Let's hope that fate will intervene in some way to prevent the name of the first family of food retailing in Louisiana from joining the long roster of once-robust family companies that are now gone. But the outlook isn't great at the moment.

The name of Schwegmann is a proud one. The company was founded in 1869 by the great-grandfather of John F. Schwegmann who, until a couple of years ago, ran the company. It's not often that a business of any sort remains with its founding family for such a period.

At one time, Schwegmann stores were a thing to behold. One Schwegmann Giant Super Market, the behemoth on Old Gentilly Road in New Orleans, was a must-see destination some years ago. The store opened in the late 1950s and spread across what seemed like acres: 250,000 square feet. It was said to be the biggest supermarket in the country. It probably influenced the development of hypermarkets and, in turn, of supercenters. The store was virtually a town in itself with services including a barbershop, a liquor store, a dry cleaner, a cobbler and a host of others.

Schwegmann later augmented such urban locations with suburban stores and a strong market-share position developed. Schwegmann made a fateful decision four years ago: The chain bought 28 National Tea Stores from Loblaw Cos. The buyout was defensive, intended to keep that choice property out of the hands of competitors.

And competition in New Orleans is tough. Other chains, notably Winn-Dixie Stores, keep a tight lid on prices, so there was no way Schwegmann could increase margins to help pay down debt. What's worse, the Federal Trade Commission decreed that Schwegmann couldn't operate the majority of the stores it bought.

Things turned sour enough that the company was sold to an investment firm, Kohlberg & Co., two years ago. As is generally true of such investors, the sole purpose of ownership is to make money off assets, whether by running them or divesting them.

It appears as though Kohlberg decided in recent months to sell off the most lucrative stores, six suburban units, and A&P agreed to purchase them. Sale proceeds, coupled with a couple of other activities, would have created enough cash for Kohlberg to buy down a good portion of its debt. Other assets could have been sold on a highly profitable basis.

But John Schwegmann remained the leaseholder of four of the locations to be sold, and he forbade the sale. That obliged Kohlberg to take the now debt-mired Schwegmann into Chapter 11 late last month (SN, April 5, Page 1), with the hope the bankruptcy judge would order the sale. (Supervalu alone is owed $5.6 million.)

It's likely that the sale will be ordered, so it's also likely the Schwegmann name will soon vanish from the food-retailing scene. But the urban stores still hold promise. They are in an area apart from most competitors, and the cost of entry is so high none would appear. So maybe they will somehow survive, or a buyer willing to franchise the name will materialize.