Ukrop’s may be awaiting a better suitor
MARK GORMUS/TIMES-DISPATCH
Among other values, Ukrop’s has staked its reputation in the Richmond area on customer service.
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
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Reader Reactions
When Ukrops sells there will be much to regret. The corporate chains like Publix, HT, Safeway care nothing about the local community, just profit. If Ukrops closes then we will be forced to buy food produced “god knows where”, and forget about prepared foods on the quick. Get as much of Ukrops while you can for it will be sad days ahead
Ukrops was smart to not fall for the first offer. I sure hope they don’t cave in to equity buyers, because with that, they come in, “grab their money,“ and run leaving the merchant in shambles.
Simmons mattress was owned by equity buyers, left the mattress company for dead, and made off with zillions of dollars in profit while Simmons filed for bankruptcy. The same thing happened with Bombay, LinensNThings, and other businesses. These businesses also ended up filing for bankruptcy.
Time is on Ukrops side. They can wait and find the best buyer, as they are still a very viable grocer.
Publix may be a better fit than any of the other mentioned stores—Harris Teeter, Wegmens, Giant.
Could Safeway come back?? They were a major player up to 1993. Just a thought.
Harris Tetter maybe. However, they don’t want all the stores and that may pose a problem.
Giant i don’t think so. They were in Richmond many years ago as was safeway and pulled out. They had a store on Hull Street for years. However, since Izzy Cohen’s family sold them after his death its been down hill ever since. No consistance and the help, is demoralized.
Now Farm Fresh could be a ossibility. Still I’d like to see Publix since they have deep roots in the South and their business model is similar. The Ukrops have the luxary of time at this point.
Bet on H-T coming back as winning bidder. My guess is Ukrops will successfully use the private equity deal failure to try and bid-up H-Ts initial bid. Publix? No. No geographic synergy. Giant? Outside chance, closest stores are in Charlottesville west and Fredericksburg north. Farm Fresh out of Norfolk? Could be, that would be an interesting play. My rankings: #1 H-T #2 Farm Fresh #3 Giant #4 Unknown, out of market guy.
Ukrops needs to find a retailer that wants to adopt it’s values, not the other way around…
While the death of this deal may be bad for Ukrops, it is a boon for the RTD,so they can have something to write about for the next 6 months.
These are all good comments…..the problem with Ukrops is that they are fighting against the business rule of “grow or die.“ This Sunday business might be an issue of “values,“ but in the grocery business it is just plain nuts. Add to that the change in the local demographics that results in fewer “loyal Ukrop customers” and you have a declining franchise value.
It is certainly nice of the RTD to put a positive spin on what is bad news for the Urkops chain. One of the reasons that this deal fell apart was that the equity firm could not establish financing. This means that the big lenders, having reviewed the deal, believe that Ukrops at their asking price is not a good buy. Had the lenders believed that it was a well run company in growth mode, money would likely not have been an issue. Ukrops remains the best 1970’s grocery store in Richmond. It’s failure to effectively manage change has led to its inability to unload its-self to another buyer. If Ukrops does sell, it will be at less than its previous asking price. A better alternative is to take a hard look at the chain and do the clean up before its sold, i.e. get rid of all the outlying stores, close Joe’s Market and open on Sundays. Update the stock and get rid of the house brands, focus on consumer value and not Richmond tradition. In a couple of years under new management, see what the market will be willing to pay. Nobody wants to by a “project” and right now that term best describes Ukrops.
The article pointed out that this was no fire sale and that the Ukrops can have time to select a buyer that best fits with their vision and will—I hope—protect the interests of their workers. A friend of mines step father recently sold a similar small chain of food stores in the Binghamton NY area to Weiss Markets. Again, it was the proper timing to find the right buyer who would uphold the core values of the firm and those of the employees.
I stated previously in a post that Publix Markets would be a good fit for Ukrops—far better than Wegmens or Harris Tetter. While Publix is open on Sundays and sells “demon alcohol” its selection, employee policies and customer service are excellent. As a former property owner in Florida I had several Publix to chose from and almost never went to Winn-Dixie or Albertsons.
One story worth mention here and that concerns my mother’s experience in Publix. We were shopping and she took an item off a temporary display shelf to read the label. The shelf gave way and while not injured was badly shaken up. Publix personnel responded “en mass” and for weeks later she received regualr phone calls to check up on her along with free groceries. It was almost overkill. In contrast, last year at Kroger on Brook Road mom was hit by a malfunctioning automatic door leaving the store. Not only did staff do nothing their corporate offices were rude insisting nothing was wrong. We both said had it happened at Ukrops it such an incident would have been handled in a simialr manner as Publix.
“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.
All I know is, whenever I shop at Kroger on Sundays, that place is mobbed. Clearly some people must prefer to shop on Sundays.
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