Ukrop’s on the Block
Ukrop’s is one of the
regional grocery chains in the U.S. that operate stores other retailers
want to see. If reports are correct, those other merchants better make
travel arrangements to get to Richmond, Virginia quickly because Ukrop’s
is up for sale.
According to the Food
World trade publication, Ukrop’s has issued a prospectus to potential
buyers including Ahold, Harris Teeter and Supervalu. The chain operates
28 stores in Virginia with 25 in the capital city region. The other stores
are located in Fredericksburg, Roanoke and Williamsburg.
Jeff Metzger, publisher
of Food World, wrote that issuing a prospectus does not necessarily
guarantee a sale is imminent.
"There is no guarantee
that any bidder would pay the premium price that acquiring Ukrop’s would
likely demand. And even if that price were met, it wouldn’t be surprising
to see the deal be pulled by the Ukrop family which has a deep emotional
attachment to the community and to the company itself, which was founded
when Joe and Jacquelin Ukrop opened their first grocery store on Hull Street
in Richmond in 1937," Mr. Metzger wrote.
Ukrop’s recently saw its
share of the Richmond market slip from the top spot to number two. Among
the factors contributing to this is the chain’s policy of closing stores
on Sunday and it’s policy of not selling beer or wine.
Discussion Questions: What is your reaction
to a possible sale of Ukrop’s?
What does it say about the viability of grocery businesses like Ukrop’s
around the country?
Ukrop’s is one of the best retail grocery chains in the country. They have been innovators (if not mistaken, they were one of the first US chains to issue a loyalty card), and as well, they are great retailers of food. It would be a shame if they did sell the chain, because most likely a larger corporate entity would homogenize the Ukrop’s brand.
But it is a sign of the times. It is becoming increasingly more difficult to compete in this economic environment, and well-run regional chains that survive are becoming the exception, not the norm. This news, coming on the heels of the Bashas’ bankruptcy filing, is a sad reflection on what is happening in food retailing today. The sameness can become overwhelming.
For Ukrop’s sake, if they want to sell, I hope they are successful, and are able to get a huge number. For the customer’s sake, it would be great if they could figure out how to keep the chain, while distributing some cash to family members. All parties would then be winners.
Keeping your stores closed on Sunday and not carrying beverages your competitors offer may be a personal pleasure but it’s not a retailing treasure as the world in Virginia turns and expands. Ukrop’s has run a great race since 1937 but its legs seem to be weakening a bit as the economy tightens and price competition heightens. For a buyer to maintain Ukrop’s service, ambiance and reputation it would have to raise prices to cover the cost of the purchase…and Ukrop’s family magic would not be included. Let’s hope the rumor of a sale is just that.
I agree with Joel–Ukrop’s has been a great innovator in customer marketing, including experiments with Entry Point Communications’ Savings Spot kiosks, Modiv Media, EZ-PIC, SuperFridge, fuelperks!, UPromise, and Grocery Shopping Network, to name a few.
I hope that, whoever the new owners, they continue the tradition of experimentation and innovation.
How appropriate that this story shows up on the same morning as one about creating a Wow! customer experience!
If the new owner is committed to the customer experience and is willing to maintain the Ukrop’s culture–yet adds opening on Sunday and beer and wine sales to boost the financials–then Ukrop’s can stay Ukrop’s.
But that’s a big if–and not how things usually go in the world of mergers and acquisitions. I think that even buyers with the best of intentions at some point start to feel a good bit of pressure to improve the financials either sooner than planned or by healthier margins than planned–whether it’s to satisfy partners in the deal that the rest of us may not see, or to service the debt–and inevitably, it’s the customer experience that suffers.
Of course, that’s incredibly short-sighted, because that drives customers away in the long run and leads to more cost-cutting. And the whole thing becomes a vicious circle that can drive the combined enterprise out of business.
It’s also part of the story of the last 30 years–but that’s not for this discussion.
Bottom line: It has to be the right buyer. I hope Ukrop’s can find a way to make that happen or pull the deal, because I don’t think the marketplace needs another mediocre player.
The sale of Ukrop’s will be a great loss as yet another distinctive, thought- and trend-leading retailer potentially falls victim to consolidation and a price-focused consumer.
I am hoping that Harris-Teeter will be the victor in the bidding war that I’m sure will occur as this chain is placed for sale. They operate great stores focused on quality and service and will hopefully maintain the style that Ukrop’s shoppers have come to know and enjoy.
Time-starved consumers are demanding more and longer shopping opportunities and even ALDI is now open on Sunday and 24-hour stores are becoming the norm versus the exception.
I lived in Richmond for several years and Ukrop’s is very active in the community, sponsoring a 10K race and the Christmas parade. What I remember most was that they are closed on Sunday’s, don’t sell beer, and take groceries out to your car. They have very good prepared foods, and lots of people go there for lunch. It is very family-oriented.
If they would just bend the Sunday rule, I think they would be more competitive and get back to #1. It would be a shame to see them acquired.
Size matters and this goes to show just how much! Buying power of the large chains is a solid strength for them. Differentiation can only do so much. The price/value equilibrium is being reset by the consumer. What is important is that industry consolidation will produce a strong and viable future for Grocerant style concepts.
WOW, this news really floored me.
For the many years I lived in Richmond, I shopped at A&P/SuperFresh and Ukrop’s almost exclusively.
H-T would seem to be the obvious new owner, though others such as Supervalu, Fresh Market, Giant Eagle, Royal Ahold and their Martin’s banner, and even Publix, might be interested.
First Brunos, then Basha’s and now Ukrop’s.
The supermarket landscape is indeed changing and consolidating.
I think we all agree that Ukrop’s is top notch. They are one of the premier grocery retailers anywhere. Whoever buys them will ruin them. Expect to see 20-30% declines in sales after they are sold. Safeway, Ahold, and Supervalu have pretty much destroyed any chain they have bought. It would be scary if a large, publicly-held grocer bought them because then they would reduce labor, change the product mix, and piss off the employees and customers. It’s rare that another company would be able to maintain them as they are. Sobey’s seemed to do OK with Thrifty out in western Canada.
For whatever reason, Ukrop’s made some really boneheaded decisions over the past few years, like expanding and leapfrogging beyond Richmond. Perhaps selling is the right thing to do if they cannot continue to be well-managed.
Let’s not lament what the “always price conscious” shopper is doing to the supermarket industry. The success of Whole Foods is certainly not the result of low pricing. The long term success of Wegmans is not the result of low, low prices.
Times and tastes change and any retailer that doesn’t recognize that should go out of business. Ukrop’s may be involved in the community, but Ukrop’s says “Go to the competition!” to that shopper who does their major weekly purchase on Sunday. Similarly, Ukrop’s chases away the customer who might want to purchase wine for their dinner or beer for their barbecue. And, be assured, very few people are going to make two stops, when they can go down the street and buy everything they need for that dinner or barbecue, including the wine or beer, from one store.
While Ukrop’s has been a jewel of the industry in the past, they have made a very conscience effort to ignore their customer’s needs and they are living the consequence.
First, about the non-sale of beer and Sunday closing: Most people in the area understand that reflected family religious beliefs and felt that this sticking to principles would follow through in other aspects of operations.
When other area retailers complained about lack of entry level employees, they had waiting lists for high school students. They had an outstanding training program.
Although I’m not familiar with Ukrop’s, it sounds a lot like the Randalls Supermarket story of the late 90’s here in Texas. Randalls was a small Texas chain whose president, Randall Onstead, nurtured into a superstar chain. Randalls had fantastic stores that offered many hard to find items and exceptional customer service. Did I pay a premium to shop there? Yes. Was it worth it? Yes.
Through acquisition of other small supermarket chains, Randalls grew to around 116 stores. Then along came Safeway which purchased the chain in 1999. Almost immediately the stores lost that personal feeling. They no longer carried many of the hard to find products that I had become accustomed to and, as far as the superior service – gone. Bottom line, Randalls lost the personal touch of Randall Onstead, et al.
I disagree with the observation that closing on Sunday and not selling alcohol caused Ukrop’s decline of market share. Chick-fil-A is famous for their family orientation and Sunday closure. They are doing well. All premium brands are taking a bit of a hit right now. Those that can stay the course and emphasis the value of that premium experience will survive and thrive after this recession subsides. Maybe the Ukrop family has just had enough. Generational businesses are tough. Maybe the current leadership doesn’t have the gumption to get through these tough times that Joe and Jacquelin had.
The fact is we live in a more competitive world than ever before. Not only is there a proliferation of competitive retailers but internet merchants are adding to the fray with increasingly valuable service options. Unfortunately, the days of loyalty to your local merchant are gone and if Ukrop’s shoppers want beer, wine and shopping on Sunday, that demand must be met or that customer is lost to a more convenient experience. A focus on the past is not a route to the future.
Because loyalty is a thing of the past, there is no reason that any of the other national chains could not learn the Richmond market, buy the stores and retain Ukrop’s strengths all while better providing what shoppers want, when they want it.