Thursday, July 16, 2009
Ukrop's appears on hunt for buyer
Industry reports said the Richmond-based grocer was trying to sell the 28-store company.
The Roanoke Times | File June
Ukrop's Super Market, a family-owned company based in Richmond, opened a Roanoke location in 2007.
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A North Carolina-based food retailer that left the Roanoke and New River valleys 10 years ago is one of several food chains that apparently is eyeing Ukrop's Super Market for a potential purchase.
News that Richmond-based Ukrop's is seeking a buyer for its 28-store grocery company, which includes a location in Roanoke, sent ripples through the grocery industry Wednesday. Food World, a grocery trade publication, posted a story citing unnamed industry sources on its Web site detailing such plans.
The grocery chains that have responded to a prospectus issued by Ukrop's are Ahold, Harris Teeter and SuperValu, according to the article on Best-Met Publishing's Web site. Harris Teeter pulled out of Western Virginia in 1999 and sold some stores to Kroger, including local outlets.
It's unclear how a potential sale would affect the future of Roanoke's Ukrop's store at the Ivy Market retail center on Franklin Road. Large chains generally close underperforming stores in an acquisition, said David Livingston, a Wisconsin-based supermarket consultant.
The Roanoke Ukrop's has not met the retailer's expectations since it opened in 2007. In the past year, Ukrop's officials publicly have disclosed their struggles drawing shoppers and sales. All of the grocer's stores are closed on Sundays and do not sell alcohol.
Harris Teeter once had at least nine stores in Western Virginia, including two in Roanoke and one in Blacksburg. It sold these stores because they were not meeting the company's goals, according to past news reports.
Harris Teeter could re-enter the local market. Kroger does not have a non-compete clause with the North Carolina grocer, said Fenton Childers, a real estate manager for Kroger's mid-Atlantic region in Roanoke.
Harris Teeter spokeswoman Jennifer Thompson would not confirm or deny the grocer's interest in a Ukrop's purchase.
"It's against Harris Teeter's corporate policy to comment on rumors," she said Wednesday.
Harris Teeter would be a good match for Ukrop's because its market position is similar to that of the family-owned retailer that was founded in Richmond in 1937, said Jon Springer, associate editor at Supermarket News, a New York food retailing publication. Harris Teeter has stores in other parts of Virginia as well as locations in North Carolina and South Carolina.
"They kind of skipped over Richmond and went to the Carolinas and up to Northern Virginia in part because Ukrop's had their sweet spot covered in Richmond," Springer said. "Geographically, it would make sense. They're one that you would think of as a potential buyer."
Ukrop's did not respond to inquiries about whether or not it was seeking a buyer. But Bobby Ukrop sent a letter to Ukrop's employees on Wednesday addressing speculation surrounding a potential sale and stating that he would not respond to rumors.
"Anything I say at this point would just add fuel to the fire," Ukrop stated in the letter. "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."
Still, if such an acquisition occurred, Livingston predicted that sales at former Ukrop's stores could drop 15 percent to 20 percent, which is common when large companies acquire small chains. Typically, a larger grocer does not connect to a community in the same way as its predecessor, including having the ability to cater its offerings to customers in a particular region, he said.
When a publicly held company takes over, "it's about making Wall Street happy, not the customer happy," he said.
The report of Ukrop's being for sale is not part of a trend in regional grocery acquisitions. These kinds of buyouts have happened for years, Livingston said.
But when the economy recovers, there could be more of them. Small companies may try to weather the recession, but once the credit markets open up and borrowing funds becomes easier, "they will throw in the towel and sell out," Livingston said.
In Roanoke, there's much riding on the success of Ukrop's. Through a tax incentives performance agreement, the city has promised IMD Investment Group, the developer of Ivy Market, the amount that the retail center generates in tax revenue up to $600,000 annually for 15 years.
Brian Townsend, assistant city manager, said Wednesday that the agreement allows for IMD, headed by Bland Painter, to bring in a new tenant to replace Ukrop's. The deal would fall through if this 58,000-square-foot grocery building sat vacant, he said.
If a potential grocery buyer kept the Roanoke Ukrop's open, it would be good news for some local shoppers if it were Harris Teeter.
While shopping at Ukrop's on Wednesday, Edwin Williams of Salem said he used to enjoy buying ground beef at Harris Teeter's stores in the Roanoke area.
Greg Land, who runs a locally based grocery delivery service, ShopFoodEx, is a Harris Teeter fan.
"They're on the same level as Ukrop's in regards to their specialty items, even better," said Land, adding that he'd still miss shopping at the Roanoke Ukrop's store if it shut its doors.
But Ally Bowersock said she thinks the Roanoke Valley has enough grocery stores and doesn't need a newcomer like Harris Teeter to the market.
"How many grocery stores do we need?" said the Roanoke County resident while shopping at Ukrop's on Wednesday. "I'd support Kohl's here [at Ivy Market], not a grocery store."
