Ukrop's

Changes, Challenges Drove Decision To Sell Ukrop’s

(Gregory J. Gilligan And Louis Llovio, Richmond Times-Dispatch, December 20, 2009)

About a year ago, the Ukrop family decided that the time had come to put its family grocery business up for sale.  Ukrop's Super Markets Inc. was at a crossroads.  Competition was fierce in an industry with already razor-thin profit margins.  Ukrop's was battling an increasing number of retailers that also sell groceries, including Wal-Mart, Target and CVS. New competitors, such as Whole Foods and Trader Joe's, were squeezing sales. Shoppers new to the Richmond area were unfamiliar with Ukrop's, including its longstanding policy of being closed on Sundays and not selling beer or wine. They shopped elsewhere.

The chain tried expanding outside its core Richmond market, but with little success.  "Our model was not working. It wasn't sustainable," said James E. "Jim" Ukrop, chairman of the family-controlled First Market Bank and former chairman and CEO at the grocery chain.  The company faced more challenges in the future, said his younger brother, Robert S. "Bobby" Ukrop, the chain's chairman, president and CEO.  "Going forward, there were going to be some headwinds."  On top of all of that, the company had the added dynamics of being family-owned with some third-generation members not interested in continuing to operate or be a part of the business.  After more than 70 years in business, Ukrop's announced Thursday that it will sell 25 of its stores to a U.S. division of Dutch supermarket conglomerate Royal Ahold NV. The deal is expected to be completed in February.  Selling the company "is a conversation that has been around for a good while, but the family didn't come to an agreement on it until now," Jim said.  The accumulation of issues and future challenges helped the family craft its decision, Bobby said.

Since the decision was made about a year ago to consider a potential sale, the family sent packets of information on its business operations to a limited number of potential buyers, the brothers said in an interview the day after the Ahold deal was announced.  "We picked those companies that we wanted to send out information to," Jim said.  About five or six expressed serious interest, he said. "We liked a number of companies we talked to," Jim said.  Both brothers declined to identify the companies.  They had been approached by potential buyers many times over the past two decades, they said.  What was important to them was how the buyer would treat their employees.  Some potential buyers wanted to close stores, meaning layoffs. Another didn't want to keep all of the Ukrop's workers.  "The one thing that was very important to us was what the [buyer] wanted to do with our people and who was going to keep the most people," Jim said.

Ahold's Giant-Carlisle division, which is buying Ukrop's, understood those concerns the best, the brothers said. Selling to them was the best decision, they said.  Giant-Carlisle said it will keep all store employees. It is unknown what will happen to about 140 employees who work at the Ukrop's corporate offices in Henrico County.  Not included in the sale is Joe's Market on Libbie Avenue in Richmond's West End and the Ukrop's store in Fredericksburg.  The brothers hope to find buyers for the two stores. Some employees have shown some interest in buying the Joe's Market location, they said.

Family dynamics played a role in the decision.  "It's complicated when you have two families," Bobby said.  Some family members thought that a sale should have been considered several years ago.  Jim's two sons -- Scott and Ted -- are not in the grocery business.  Jim stepped away from the day-to-day operations of the chain more than a decade ago when he became chairman at First Market Bank, which is majority-owned by the Ukrop family and the grocery chain. The bank is preparing to merge with Union Bankshares Corp.  Only one of Bobby's four children, Jeff, works at Ukrop's, as do Bobby's two sons-in-law. His daughters had worked for the company.  Both sides of the family had to agree on a sale -- and they hadn't until a year ago, Bobby said.  "I would argue that 95 percent of the time, given the same information and same time, we make the same decision," Bobby said of him and his brother. "The other five percent we avoid."

And opening on Sundays, selling beer and wine or selling the business were issues they avoided.  One way to get out of the retail side of the business and still satisfy family members' interests was to create a separate operation under Bobby's leadership that would continue to make and sell the chain's signature lines of baked goods and prepared foods. Those products will be sold to Giant-Carlisle's stores here.  "Then everyone wins and you start a new chapter," Bobby said.  Waiting could have cost the family money.  The chain might have fetched a higher price had they sold it several years ago, the brothers acknowledged. But "we may have invested in the market and had a lot less now," Jim said. 

Over the years, the Ukrop's chain came to the realization that it was a niche grocer and could not be a major player.  That was never more true than when the chain tried to expand beyond its Richmond roots, where the chain had commanded the No. 1 market share for more than two decades.  The first foray into a new market -- Fredericksburg -- took years before that store started performing well.  Ukrop's opened two stores in Williamsburg but had to close one. The remaining store there, however, is one of the chain's top sales performers.  A store in Roanoke closed this year after performing poorly.  "Our brand didn't travel well," Jim said.  The chain remained profitable, both brothers said, but increasing competition and other challenges were hurting the bottom line.  "You have all of these people attacking you on your home front," Bobby said. "It was very challenging. We were not generating the amount of income we would like and we asked ourselves, 'What would it look like five years from now?'"

The family is selling the grocery chain for about $140 million.  But the entire sum is not going to the family, the brothers said.  They declined to say how much.  Much of the sale proceeds, they said, will go toward paying off liabilities, including debt, taxes, workers' compensation claims, obligations to employees and professional fees.  And the brothers want to give some of the money to employees, though they are still working out details to figure out a method that is fair, especially for the chain's career employees.  "There's not that much left after that," Jim said.

Ukrop’s Through The Years

May 1937: Joseph Ukrop and his wife, Jacquelin, open the first Ukrop’s Super Market store, on Hull Street in South Richmond. Ukrop, who had been the meat manager at an A&P store, persuaded his father to mortgage the family farm to open the store.
1963: James E. Ukrop, son of the founders, persuades his father to allow him to open a second store, on Midlothian Turnpike near Buford Road in Chesterfield County.
1972: Opens its first store north of the James River, in the Dumbarton Square shopping center in Henrico County. Robert S. Ukrop, the youngest son of the founders, is store manager.
1974: Jim Ukrop becomes president and chief executive officer. His father is chairman.
1975: Opens two stores in the same year—a first.
1976: Buys Dot’s Pastry Shop, a premier Richmond bakery.
1981: Ukrop’s opens a 20,000-square-foot bakery manufacturing facility at Southport.
1986: Becomes the Richmond-area market-share leader, surpassing Safeway.
1987: Introduces the Ukrop’s Valued Customer card, offering in-store electronic discounts.
1989: Opens 20,000-square-foot Central Kitchen in Chesterfield and begins offering its own line of chilled prepared foods. Opens a prototype store in the Westpark shopping center that features an in-store cafe and the chain’s first pharmacy.
1993: Creates Ukrop’s Dress Express, a uniform and corporate apparel business.
1994: Jim Ukrop is named vice chairman and retains the CEO title. His brother, Bobby, is named president and chief operating officer.
1996: Embarks on a $125 million expansion plan to be paid for by taking on debt—a first for the chain.
1997: Opens a store in Fredericksburg—its first outside of the Richmond area. Also announces First Market Bank, a venture with National Commerce Bancorp. to jointly own a bank with branches inside Ukrop’s stores.
1998: Jim Ukrop becomes the company’s chairman. Bobby becomes CEO and president.
2001: Opens Joe’s Market, a specialty food market on Libbie Avenue in Richmond.
2002: Co-founder Joseph Ukrop dies.
2005: Co-founder Jacquelin Ukrop dies.
2006: Relocates its corporate offices to Henrico from Chesterfield.
2007: Opens a store in Roanoke—its first there.
2008: Becomes a partner with the Uppy’s convenience store chain to offer fuelperks!, a discounted-gas program for shoppers.
2009: Closes one of its two stores in the Williamsburg area and its Roanoke store. Loses the No. 1 market-share ranking in the Richmond area to Food Lion. On Dec. 17, Ukrop’s announces the sale of 25 of its stores to Giant-Carlisle, a division of Ahold USA.

SOURCE: Ukrop’s Super Markets Inc.; Times-Dispatch resources

 

Ukrop’s Announces The Sale Of 25 Of Its Stores To Giant-Carlisle

(By Louis Llovio, 2010)

"I hope it doesn't change the way it's been," said Helen McIver, 70, who was shopping yesterday afternoon at a Ukrop's on Brook Road store in Henrico County. "If they lose their personal touch, I think they might lose their customers."  Word spread quickly to employees and shoppers yesterday that Ukrop's Super Markets Inc. is being sold to the U.S. division of the Dutch company Royal Ahold NV.  Managers were told of the deal at a 2 p.m. meeting yesterday. They, in turn, returned to their stores to tell workers and to show a video by the Ukrop brothers.  "I was upset," said Kai Kareng, 41, a sushi chef at the Brook Run Ukrop's who is a contractor and not a regular employee.  "I like Ukrop's a lot. We have holidays off. The customers are very, very nice."  David Urban, a professor of marketing and interim business school dean at Virginia Commonwealth University, said the Ukrop's deal continues a trend for the area.  "The departure of the Ukrop's brand is yet another milestone in an increasing homogenization of the Richmond retail market," Urban said. "The market is becoming defined less and less by homegrown retailers that made it big."  He cited said Thalhimers department store chain, catalog showroom retailer Best Products, consumer electronics giant Circuit City and home furnishings retailer Heilig-Myers as an example of homegrown companies that have disappeared.  Urban said the Ukrop's sale would be more significant to shoppers.

"The difference is that people who have shopped at Ukrop's for many years have stronger loyalty to the chain," he said. "People shop for groceries a lot more frequently. They get to know the employees in the store. They memorize the store layout so they can organize their shopping lists by aisle in the store. For many people, losing Ukrop's will be like losing an old friend."  While Ukrop's will keep its name for now, Ahold executives said that eventually will change.  But losing the grocer means more than just a name change.  "This is a bittersweet time for all of Richmond," said Nancy Thomas, president and CEO of the Retail Merchants Association. "I hope over the next few weeks people reflect on what Ukrop's meant to the area.

Thomas said she remembers the first time she went to a Ukrop's store in the late 1970s. She had just moved to Richmond to attend VCU.  "I didn't want the guy to take my groceries out," she said last night. "I didn't understand that. And then, he wouldn't take a tip."  She said that much of what differentiated Ukrop's was its customer service.  Many shoppers around the area said yesterday that they shopped at Ukrop's because of the customer service.  "I'll continue if they don't basically change the way they operate -- their customer service, taking your groceries out to the car, their courteous clerks, the foods that they carry, the prepared foods, the bakery. That's why I shop at Ukrop's," said Shirley Boyer, who was at the chain's store on Midlothian Turnpike across from Chesterfield Towne Center in Chesterfield County.

The new owners believe they can deliver the same level of service to customers.  "We hope it's perceived as good news in Richmond," Jochem van de Laarschot, Ahold's vice president of corporate communications, said yesterday afternoon from the Netherlands. "We're absolutely optimistic that we can meet the expectations of customers in Richmond and Virginia."  Some around the area worried that the sale could interfere with how much the company gives.  From 1990 to 2007, Ukrop's contributed more than $30 million through annual campaigns, capital gifts, sponsorships, donations and product discounts to nonprofit organizations.  "There's always that fear that the new company won't do as much," said Kim Scheeler, president and CEO of the Greater Richmond Chamber. "I guess we'll have to keep our eyes and ears open and encourage them to be involved. I'm going to be anxious to meet them."  Robert S. "Bobby" Ukrop, the grocery chain's chairman, president and CEO, said he and his family would remain active in the area.  "We're not going anywhere; we're still going to be involved," he said.

Gregory H. Wingfield, president and CEO of the Greater Richmond Partnership, said last night that there was one positive to the family selling the grocery chain.  "I think what's intriguing is that we'll have another international company represented here which has the possibility of growing its footprint here," he said.  But for many shoppers, including himself, the changing of the guard at Ukrop's will take some getting used to.  "I think we're going to see the public mourning the loss of the name because it has become so ingrained in the Richmond area."

 

Ukrop’s Future: Sundays, Alcohol Sales & Name Changes In 2 Years

(By Gregory Gilligan, Louis Llovio And Emily Dooley, Richmond Times Dispatch, Dec 18, 2009)

Ukrop’s customers may not see immediate changes after the purchase of the supermarket chain by a division of Dutch firm Royal Ahold, but selling alcohol and opening on Sundays are in the future, company sources said.  And while the name will also go away in about two years, Ukrop’s prepared foods will still be available and under the Ukrop’s brand even after the $140 million deal closes, which is expected in the first quarter of 2010.   Without specifying a timetable, the sources said the company would begin opening Sundays while being operated as Ukrop’s, but would not sell beer and wine until after name change.

During a news conference this afternoon, a visibly choked up Bobby Ukrop, the chain’s CEO, and his brother Jim, the former CEO, explained that the company decided to sell because it was at a competitive disadvantage with much larger grocers.  Bobby Ukrop praised Giant-Carlisle, the Ahold USA division that is the future operator of Ukrop’s, and said “they are a lot like us, similar values, similar culture.“  “Leaving the grocery retail business was a difficult decision for our family,“ he said. “We concluded that now is the right time.“

Ukrop said Giant-Carlisle, which operates 152 stores in the mid-Atlantic including the well-known Giant group, has the buying power that Ukrop’s does not. The Ukrop’s chain has watched its share of the local grocery dollars slip from No. 1 in the past year after being the market leader since 1986.  “Our size limits our ability to succeed today in the increasingly competitive market,“ James “Jim” Ukrop said. He said the new owners “will take what’s best about Ukrop’s….and also provide the necessary resources to compete and grow.“

Under the deal, Giant-Carlisle will buy 24 stores in Richmond, one in Williamsburg and inventory, lease agreements and equipment. Employees at those stores will be hired by the new company, officials said.  “We hope it’s perceived as good news in Richmond,“ Ahold Vice President of Corporate Communications Jochem van de Laarschot said from the Netherlands. “We’re absolutely optimistic that we can meet the expectations of customers in Richmond and Virginia.”  Joe’s Market in Richmond’s West End and a store in Fredericksburg are not part of the deal. Ukrop’s is working with affected employees to help them find employment, Jim Ukrop said.

A Giant-Carlisle executive said the company will continue to operate the stores as Ukrop’s for a period of time and “will make changes that we believe will add value,“ but in his remarks did not immediately address the Sunday openings and alcohol sales. During the announcement, Bobby Ukrop said he would be the CEO of the new venture that would continue providing Ukrop’s baked goods and prepared foods to the new owners. In an interview published Dec. 6 in the Times-Dispatch, the brothers declined to address a possible sale but said they would continue to be involved with the community.  “Whatever the future holds, we will take very seriously our presence in the community,” said Jim, 72. “And whatever happens in the future, I think I know Bobby and I will be looking at it from a point of view of what is the best for those folks that work for us and their futures and for the community. Period.”

His younger brother quickly added: “We are going to live here the rest of our lives. We are not going anywhere. The ebbs and flows of any business or organization may change. . . . We have been in a variety of businesses, so while some approaches might change, we are still going to be around.”  The brother said the company has contributed more than $30 million through annual campaigns, capital gifts, sponsorships, donations and product discounts to nonprofit organizations from 1990 to 2007.  The Ukrops family is a major benefactor of the University of Richmond, and Jim Ukrop is chairman of the CenterStage Foundation, the performing-arts venue in downtown Richmond that opened in September.

Ukrop’s had modest beginnings. In 1937, Joseph Ukrop and his wife, Jacquelin, opened the first Ukrop’s Super Market store, on Hull Street in South Richmond. It wasn’t until 1963 that Jim convinced his father to allow him to open a second store on Midlothian Turnpike near Buford Road.  The company’s first store north of the James River didn’t open until 1972, in the Dumbarton Square shopping center at Staples Mill and Dumbarton roads in Henrico County. Bobby Ukrop became the manager of that store. But growth came quickly for the company in through the early 1980s, and it surpassed Safeway as the market-share leader in 1986.  Giant-Carlisle’s history began in 1923 when David Javitch opened a small meat market in Carlisle, Pa., the company said. He later expanded was a pioneer of the concept of dry goods and perishables being sold under the same roof. The company described itself as the market leader in most of the regions where it operates.

Worldwide, Ahold operates supermarkets in the United States and 10 European countries. The firm has 6,500 stores, with 3,500 owned and 3,000 operated through joint ventures. Nearly 142,000 work for the company.  First Market Bank, which is mostly owned by the Ukrops family and the super markets, is schedule to merge with Union Bankshares Corp. during the first quarter.  “Ukrop’s has informed us that there will be no impact on our in-store bank operation in connection with this sale,“ said David J. Fairchild, First Market’s Chief Executive Officer. “First Market Bank currently has branches inside 23 Ukrop’s locations. As a result, this agreement will not impact the ongoing operations of the First Market branches within the supermarkets.“