Ukrops for sale?

[storewanderer]

The http://www.morningnewsbeat.com website has posted an excerpt from a news publication that Ukrops may be for sale. What happened here? I thought this was a very strong regional chain, yet one fact in the article shows that they have lost share to Food Lion (?????? !!!!!!) in their home market and they are not doing well in some other market that they expanded into.

The article also adds that when rumors surfaced a few years prior about this chain being sold off, family members quickly called the bluff on those rumors. However, that is not happening this time.

[krogerclerk]

Harris-Teeter is the most likely suitor, as Ukrop's and HT have a gentlemen's non -compete clause which has resulted in HT skipping over the Richmond market to expand into the Washington DC region. The founding families of both chains have a long established friendship.

Ukrop's is closed on Sunday's which gives Food Lion, Walmart and Kroger an edge over them. The chain does not sale beer or wine, harkening back to the Bible Belt origins of the chain. This likely is a negative for Ukrops expansion into the Roanoke Valley which is dominated by Kroger, Food Lion, and Walmart.

[storewanderer]

From everything I heard in the past about this chain, it is too bad that they may be going away. I wonder where they went wrong. I have to think something really went ary for Food Lion to pick up share, or their position was a lot weaker than I thought it was.

I suppose it could be a combination of small factors that built into larger factors.

I read that they expanded into some other town and they are not doing well, but one bad store shouldn't have such an impact. I wonder if they keep some stores open that need to be closed. It seems that got Bashas into trouble.

[krogerclerk]

Food Lion operates over 60 stores in the Richmond-Petersburg metro to Ukrop's 25.
I suspect Food Lion hasn't experienced a major gain in volume, but rather Ukrop's is experiencing sales losses to Walmart Supercenter, Food Lion and Kroger. Kroger has been expanding its Richmond presence and all three competitors handily undercut Ukrop's pricing, though the chain is definitely the quality fresh food operation for the region. The Roanoke, VA store is struggling, they had opened 2 Williamsburg stores, with one location failing while the remaining is relatively successful. The Fredericksburg store puts the chain in the fringes of the DC metro.

Ukrop's is supplied by SuperValu, and the expansion to Williamsburg puts them in competition with SuperValu owned Farm Fresh, which itself had expanded to the Richmond region prior to SuperValu ownership. Harris-Teeter has already expanded to the DC region, while SuperValu owns Shoppers Foods in the region. While Ukrop's targets a more affluent customer than the SuperValu owned chains, they have created overlap into a very different market from Richmond.

I suspect the chain has been struggling since the death of the founding family members, like happens to many family owned regional supermarkets. They have remained in areas of Richmond that the chains have never entered or have exited, so most of those locations are the successful ones. The stores that are located near competition seem to be the ones that are losing the most volume.
I suspect many customers feeling the pinch of the recession may be economizing by shifting to Walmart, Kroger and Food Lion. The expansions into the neighboring markets are probably a victim of bad timing, had they happened a few years earlier they may have been more successful. The founding generation was conservative, keeping the chain centered on Richmond, closed on Sunday's and no alcohol sales. The current generation didn't alter merchandising or operations for the stores located beyond the Richmond market.

[krogerclerk]

Judging from the comments from readers of the Richmond Times Dispatch, it appears that Ukrops has lost business to rivals due to Sunday closings, no alcohol and higher prices. Also the adoption of Food Club private label was also mentioned.
Most everyone acknowledges that Ukrops offers excellent customer service and fresh food quality, but many feel the chain has become somewhat elitist in its customer target and overly focused on being a community servant to the detriment of maintaining the basics of supermarket operations.

Also the article mentioned Ahold as a potential buyer, which would likely retain the Ukrops name while operating it under the umbrella of Giant-MD/Stop&Shop, especially given that Giant and Stop&Shop are union while Ukrops is not. Giant-MD expanded to Richmond in the 1960's but had retreated by the 1980's. Ahold would definitely change the way the chain is operated, reducing service and quality while expanding hours of operation and adding alcohol and reducing prices. But it's doubtful that Ahold is in the financial position to acquire a chain any more than SuperValu is. Harris-Teeter is still the most likely buyer, and the one that would retain many of the characteristics of Ukrops, but again expect Sunday openings and adding alcohol sales.

[Alpha8472]

Harris Teeter does seem like a good fit. People love Harris Teeter. Their stores are very nice looking and are very upscale. I have heard that the pricing is competitive with Safeway or possibly just a little bit higher. However, their stores offer a greater selection of food than Safeway.

Not being open on a Sunday is killing Ukrops. Most people do their shopping on Sundays. Alcohol sales bring in a tremendous amount of money. People who drink alcohol will simply shop at another store. Banning alcohol sales won't stop people from drinking. The policy is ancient and outdated.

A merger would most likely benefit customers.

[Alpha8472]

Harris Teeter has been outbid. A private equity firm is now in exclusive negotiations to acquire Ukrops.

I suspect that the private equity firm is none other than Cerberus. We all know what happened when Cerberus bought a bunch of those Albertsons stores.

http://supermarketnews.com/retail_finan ... rops_0818/

[krogerclerk]

Ukrops is going to close the Roanoke, VA store after about a year of operation. Kroger is the dominant grocer in the region with Walmart and Food Lion being the next major players. The city has really lacked an upscale supermarket since Harris-Teeter pulled out in 1999, selling the SW Virginia stores to Kroger in exchange for the Kroger's in the Triad NC market.

http://www.roanoke.com/news/roanoke/wb/219546

Roanoke is by no means booming or affluent, but has a large enough population and trade that a niche upmarket player could succeed with 2-3 stores. The Fresh Market has a store in Roanoke, but they don't qualify as a full-line grocery store since the focus is on fresh, gourmet and specialty groceries. Some of the new Kroger and ex-HT Kroger locations have a slightly upmarket bent, so paired with Fresh Market and KR's longer hours of operation, could have made Ukrops lack of alcohol, closing on Sunday, and other practices seem to provincial. Also, in Roanoke being associated with Richmond is almost as bad locally as being associated with Northern Virginia.

[klkla]

Ukrops is going to close the Roanoke, VA store after about a year of operation. Kroger is the dominant grocer in the region with Walmart and Food Lion being the next major players.

It's interesting how much better Kroger does in average store sales than Food Lion. They have about the same number of stores but Kroger as twice the market share! Are Kroger stores that much nicer there or are Food Lions that much worse?

Kroger 14 stores 40.7% of the market (2 year change -2%)
WalMart 4 stores 26.7% of the market (2 year change +1%
Food Lion 13 stores 19.1% of the market (2 year change -2.3%)

Interestingly Ukrops one store has 3.4% of the market which appears to have come at both Kroger and Food Lion's expense (while Food Lion has probably lost the some of it's traffic to WalMart, as well).

[krogerclerk]

Kroger operates more specialty departments and offers a larger variety of specialty grocery and non foods than Food Lion, while most Food Lions have a small Deli-Bakery department, very few have Floral or Seafood, Natural Foods, and none have Pharmacies. The largest Food Lions tend to be 35000 sq. feet with 25000-30000 s.f as the average while few Krogers under 30000 s.f. still operate. Given that the Mid-Atlantic KMA in Roanoke is considered to be one of the weakest Kroger divisions, this really shows how Food Lion serves more as a convenience store than a supermarket, a place to go to get milk and bread when you don't to fight the crowds in Walmart or Kroger.