Save our supermarkets: two regional chains cope with economic change

By De Arment, Alaric

Publication: Drug Store News

Date: Monday, August 10 2009


RICHMOND, Va. -- Since its founding in 1937, Ukrop's hasn't had toplay by anyone's rules but its own.

Although Sunday is the busiest shopping day of the week, customers looking to buy groceries at one of the supermarket pharmacy chain's stores on that day encounter locked doors. Those shopping for alcohol won't find a drop in its aisles. The company's uncommon business practices stem from the strong religious convictions of the Ukrop family, which has been able to apply those convictions thanks to the chain's long-standing majority share of the Richmond, Va., market. But now,the environment is changing, and sticking to its roots hasn't helped the 72-year-old company adapt.

Ukrop's lost its top place in the Richmond market last year to Food Lion, operated by Belgium-based Delhaize Group, which does sell alcohol and remains open on Sundays. Last month, reports emerged in area media that Ukrop's would be sold, and analysts familiar with the matter have named Harris Teeter as the most likely buyer. Ukrop's operates 28 stores in Virginia, including 25 in the Richmond area and one each in Williamsburg, Fredericksburg and Roanoke.

"Having Food Lion expanding rapidly and being closed on Sunday, you're not really servicing your clientele," supermarket industry consultant Jeremy Diamond told Drug Store News. "In a sense, you're forcing your clientele to go somewhere else."

So far, Ukrop's has remained silent, and repeated calls to the company seeking comment were not returned. In a July 15 letter to employees, CEO Bobby Ukrop called the reports "speculation" and "rumors."

"Anything I say at this point would just add fuel to the fire," Ukrop wrote. "For example, I could say that, yes, other companies are interested in buying Ukrop's. But, the truth is that there have always been companies interested in buying us, so there's nothing new here."

The letter didn't confirm plans to sell, but it contained no denial of earlier reports in a food industry trade publication that Ukrop's had issued a prospectus.

Across the country, a regional chain of similar age to Ukrop's also is in trouble, but largely because of circumstances outside of its control.

Bashas' Family of Stores--77 years old and based in Chandler, Ariz.--announced in mid-July that it would file for Chapter 11 bankruptcy protection, closing 10 Bashas' and Food City stores on July 21 and obtaining a $45 million loan to continue operations.

Whereas the owners of Ukrop's apparently preferred selling the chain over compromising their beliefs, Bashas' must contend with an Arizona economy that has taken one of the worst beatings of any state in the economic crisis, as well as tight credit markets and attacks on the company by labor unions.

Despite different circumstances, both chains have found themselves victims of changing economic conditions that reflect broader economic trends. For Bashas', this means a deflated bubble economy, while for Ukrop's, it means a dwindling number of customers who value tradition over finishing the week's grocery shopping when it is most convenient.