Valu Food Inc. says it wants to become a major supermarket player in the Baltimore area and, as part of its plan, will buy three new stores and shift to a local supplier.
For $4.5 million, Valu Food will buy three supermarkets from Santoni's Inc. It will also move $40 million in business from its Pennsylvania supplier to Baltimore-based B. Green & Co., Valu Food announced yesterday.
"Our strategy is obviously to be a dominant supermarket factor in the region, and right now our growth is going to be concentrated around the Baltimore area," said Louis Denrich, Valu Food president. Value Food now has 12 area stores.
With financing from Chase Bank of Maryland and its new supplier, Valu Food will purchase lease rights, leasehold improvements and inventory of the Santoni's stores in Perry Hall, Bel Air and Elkton. No real estate is involved in the deal.
The Elkton store will change hands Nov. 10 and the other two, shortly after Christmas.
The deal should raise Valu Food annual revenues from $160 million to $200 million, according to Mr. Denrich, who predicted the new stores would become profitable within six months. All 200 employees of the three stores will keep their jobs under the new management, without cuts in salary or benefits, unless they prefer to transfer to other Santoni's stores, said Robert N. Santoni, president and owner of Santoni's. Both of the food store chains are non-union operations.
Mr. Santoni, whose chain will be halved to three stores after the purchase, said he intends to remain in business but will concentrate the growth of his chain in Baltimore or nearby. Santoni's is retaining its stores in Highlandtown, Edgewood and Dundalk.
Mr. Santoni said the three stores he's selling to Valu Food "weren't publicly or privately for sale," but, "They [Valu Food] made me an offer I couldn't refuse. They brought so much to the table that it was too good to let go. They gave us everything that we wanted -- including shifting their wholesale business from their supplier to ours," Mr. Santoni said.
As part of a long-term contract negotiated between Santoni's and its supplier, B. Green & Co., the purchaser of any Santoni's store must be supplied by B. Green.
But in buying the three Santoni's stores, Valu Food went a step further and transferred all of its wholesale business to B. Green from Wetterau Inc., the Reading, Pa., wholesaler that had been Valu Food's supplier for five years.
Mr. Denrich said Valu Food, which purchases dry grocery products, dairy and frozen foods from its wholesaler, has no major complaints with Wetterau. But he said Valu Food should gain more advertising subsidies by working with a local supplier.
"With the local folks, we're not treated like stepchildren," he said.
All three of the new Valu Food stores are in suburban strip shopping centers and each will undergo $200,000 in renovations, Mr. Denrich said. Although Valu Food has no store in Perry Hall, it already has one store in the Elkton market and one in Harford County in Aberdeen.
Jeffrey Metzger, publisher of Food World, the Columbia-based trade journal of the local supermarket industry, said that once the new stores are added, Valu Food will rise from the seventh-largest chain in the Baltimore area to the sixth-largest.
Giant is the largest chain in the area; Super Fresh is second and Basics is third.