Ukrop's may be awaiting a better suitor

Among other values, Ukrop's has staked its reputation in the Richmond area on customer service.

By: Louis Llovio | Richmond Times-Dispatch
Published: October 07, 2009

Ukrop's Super Markets Inc. could be holding off on consummating a deal to sell the family-owned grocer to find a buyer that shares its values, an industry expert said yesterday.

That assessment by David J. Livingston, president of DJL Research LLC, a Wisconsin-based supermarket consulting firm, comes after Supermarket News said a potential deal had fallen apart.

The industry publication posted a story on its Web site this week quoting an unnamed source saying that talks with a private-equity firm interested in buying the Henrico County-based chain failed over "contractual issues and an inability to get financing."

Robert S. Ukrop, chairman, president and CEO of the family-owned retailer, said yesterday that the company "does not comment on rumor and speculation."

Supermarket News reported in August that the equity firm had outbid North Carolina-based grocer Harris Teeter to buy Ukrop's.

The publication reported this week that those talks "broke down in part because Harris Teeter was not interested in buying all of Ukrop's store locations."

A spokeswoman for Harris Teeter said yesterday that the chain would not comment on whether it was talking with Ukrop's about a potential deal.

Speculation about a sale of Ukrop's began in July when Food World, another trade publication, said Ukrop's had issued a prospectus soliciting buyers.

Livingston believes Ukrop's is holding out until it finds a buyer that shares its principles.

"Just because there is an offer doesn't mean they have to take it," he said. "It could be that they aren't looking for the highest bidder, but the best bidder."

Ukrop's built its reputation and its business by following certain principles, including closing on Sundays and not selling beer and wine, he said. Those ideals are very important to the Ukrop family, he said.

"The Ukrops are smart enough to look for someone that has the same core values they have. That's what helped them build the company and what made them what they are," Livingston said

Operating by these principles, analysts have said, has hurt sales and affected the chain's market share in the region.

Opening stores for the entire week, for instance, could increase the company's annual revenue by $98 million, a New York research analyst has estimated.

David Urban, a professor of marketing and interim business school dean at Virginia Commonwealth University, said those aren't major factors for the chain's core customers.

"Personally, I do not think that the absence of alcohol and not being open on Sundays are major drivers for consumers who shop at Ukrop's," Urban said. "Selection, quality, service, employee attitude and even the company's concern for the local community are all more likely reasons."

That said, Urban said he was hard pressed to think of another grocer that shared Ukrop's value system.

And Livingston said he isn't sure if a buyer would be willing to close on Sundays and not sell beer and wine.

But whether or not Ukrop's finds a buyer with comparable standards, George Hoffer, a professor of economics at VCU, said the chain could benefit by holding off on a sale.

"I don't think there is a tremendous effect if they wait to sell," he said. "It's not a fire sale; therefore, time is not of the essence."

Contact Louis Llovio at (804) 649-6348 or LLLovio@timesdispatch.com.