- Bi-Lo LLC and Tops Friendly Markets are preparing to file for bankruptcy, according to Bloomberg, citing unnamed sources. Both companies have struggled with an increasingly competitive market that now includes discounters, big-box stores and online competitors like Amazon. The grocers could enter Chapter 11 as early as this month.
- Bi-Lo LLC, a subsidiary of Southeastern Grocers that controls more than 700 grocery stores in seven states, plans to close nearly 200 stores, according to Bloomberg. The chain, which was purchased by Lone Star Funds in 2005, has nearly $1 billion in debt, with notes set to mature next year and in 2019. The company has been in talks with creditors over a debt-for-equity swap.
- Tops Friendly Markets operates 173 stores in the northeast. According to a Reuters report from last year, the company has $723 million in debt.
The current retail market is growing increasingly unfriendly towards traditional grocers. With consumers moving online, making quick store trips and seeking out fresher and more unique products, these large grocers geared towards legacy national brands and stock-up shops are quickly becoming dinosaurs.
Which is not to say they aren't moving quickly to stay relevant. Food Lion is in the midst of an extensive remodeling push that's paying off for owner Ahold Delhaize. Kroger, the country's largest conventional grocer, is embracing digital technology and consumer data in its push to stay top-of-mind with consumers.
Southeastern Grocers has remodeled select stores, too, and boosted its fresh and prepared foods selections. Last year it updated its private label line to a three-tiered offering that includes value, everyday and premium selections.
The company has also converted some Bi-Lo and Winn-Dixie stores to either its value banner, Harveys, or its Hispanic chain, Fresco Y Mas — both of which serve increasingly valuable consumer segments.
But the company is hampered by private equity owner Lone Star Capital, which has paid itself north of $800 million, according to a Bloomberg report, while neglecting to invest significant capital in the retail chain. The result: Bi-Lo operates a lot of vanilla stores that have struggled to stand out against stronger competitors. In Florida, Winn-Dixie has long played second fiddle to Publix, and with new blood like Sprouts Farmers Market and Aldi moving in, it's becoming increasingly irrelevant.
Likewise, Tops is under a large debt load and has struggled with tough competition in the northeast. Like Bi-Lo, it recently revamped its private label offerings and is making updates to its stores. But the retailer is still having a hard time standing out against Wegmans, Walmart and other chains that are beating it on price and innovation.
Conventional grocers face a tough road. In addition to investing more in their stores, they now have to establish an e-commerce presence to keep up with the likes of Amazon and Walmart. It’s tough to spend so much capital in such a competitive, low-margin industry, and the only solace, it seems, is that they have less and less of a choice in the matter.