Valu Food still working to emerge from Chapter 11

Chain slightly delayed in readying plan for Bankruptcy Court

Grocery industry

May 08, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Valu Food is still on track to emerge from Chapter 11 bankruptcy this year, though later than originally projected, the chain's president, Louis Denrich, said yesterday.

In January, Denrich told a group of grocery suppliers that his struggling, 10-store chain expected to submit a reorganization plan to U.S. Bankruptcy Court by spring. The locally owned grocer, the sixth-largest in the Baltimore area, filed for Chapter 11 protection in November, with an estimated $3.5 million owed to its 20 largest creditors.

Since then, the company has closed seven underperforming stores -- four supermarkets and three specialty grocery stores --and has just finished selling the last of those locations' equipment.

The chain is attempting to reposition itself by improving its array of fresh produce and prepared meals.

Denrich said yesterday that it has taken longer than expected to assess the new marketing plan, a necessary step before he can submit a plan to the court and creditors.

"If we can't do it this spring, we're hoping to in the next two or three months," Denrich said. "We're testing our marketing plan."

He said he has been encouraged by the increased sales that have followed the changes. Increases in December, January, February and March, compared with last year, have ranged from 1 percent to 4 percent, he said.

"That is the foundation of the entire turnaround, as well as the turnaround from bankruptcy," Denrich said.

The chain has expanded and improved produce in all its stores, upgraded the quality of beef, seafood and delicatessen meats, teamed up with a manufacturer of prepared foods and expanded "quick meals" from various departments, he said. New signage will come next.

"The customer should be getting the impression of a newer, brighter, more convenience-minded Valu Food," with a greater emphasis on customer service, Denrich said.

Denrich said he still hopes to emerge from bankruptcy strong enough to get financing to remodel older stores and even start expanding the chain again.

As an independent grocer, Denrich will face a tough challenge in rebuilding the company, industry experts have said, especially with the intense competition from larger chains moving into or expanding in the area.

"It's extremely competitive," said Jeff Metzger, publisher of Columbia-based trade journal Food World. "If you're coming from a position of weakness, you've got to demonstrate to your customers you've got something different to offer."

Denrich "had the right idea when he said he's going to re-engineer or retool the company to be more perishable-oriented," Metzer said. "To this point, we have not seen those physical changes executed. It's going to take a re-engineering of the company's store presentation to get them back to previous levels."

The competition has been fierce recently, with more than a dozen new supermarkets opening near Valu Food stores, Denrich said. He said he hopes his chain will be able to compete on price and be more flexible than larger chains.

Pub Date: 5/08/99

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