Valu Food set to exit Chapter 11 this spring

Chain's president outlines plans to renovate, expand

Supermarkets

January 22, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Independent grocer Valu Food is poised to emerge from Chapter 11 bankruptcy by spring and later in the year plans to start remodeling stores and looking for new sites, the chain's president said yesterday.

Louis Denrich, in comments to the 265-member Baltimore/Washington Grocery Manufacturers Representatives Inc., sought to reassure many of his suppliers of the chain's viability.

The locally owned chain is the sixth-largest in the Baltimore region with 10 supermarkets. It filed for Chapter 11 protection in November, with an estimated $3.5 million owed to its 20 largest creditors.

The bankruptcy has allowed the chain to get out of leases and close seven under-performing stores -- four supermarkets and three specialty grocery outlets -- with minimum liability, Denrich said.

"Many have written off Valu Food and say we will not make it," Denrich said. "Valu Food will survive. It is a matter of when we emerge, not if." He predicted that by spring, the struggling company would be transformed into a strong and profitable enterprise.

Once out of bankruptcy, he plans to seek new financing, possibly by taking his company public.

That would enable the chain to upgrade some stores -- at costs that could range from $100,000 to $2 million a store -- and begin looking at expanding in the area, Denrich said. The chain has stores in Baltimore City and in Baltimore, Howard, Cecil, Anne Arundel and Harford counties.

Denrich blamed the financial problems -- and declining or flat sales -- on consolidation as well as on unprecedented new competition in the grocery industry.

The latter has come not only from larger supermarket chains, such as Food Lion, but from drugstores, mass discounters and even gas station convenience shops. At the same time, consumers are eating out more.

"We are incredibly over-stored in every area of the market we serve," he said. "The supermarket industry is no longer a growth industry."

But there's still a place for smaller, independent chains with a niche, Denrich said. For Valu Food, he said, the future entails competing on price and improving the variety and quality of perishables such as produce and prepared foods.

This spring, the company expects to start evaluating which stores are candidates for remodeling or expansion. This year or early next year, the chain plans to upgrade decor and equipment and institute a loyalty marketing program to reward regular shoppers. New stores would likely open in 2000.

"Lou's really got an uphill fight," said Dave Callahan, editor of Food World, the trade journal based in Columbia. "I can't think of many examples of supermarkets coming out of Chapter 11 and really creating this turnaround they're looking for.

"However, I also believe he's done all the right things of late, by closing the locations he's closed and stopping the bleeding. He still does have some good locations that can work."

Pub Date: 1/22/99

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