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How AWG Formed The Consortium That Landed Belle Foods

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Last updated on October 7th, 2014 at 09:26 am

by Kristen Cloud/staff writer

How did Associated Wholesale Grocers (AWG) manage to put together the consortium that will buy 43 Belle Foods stores across three states? David Smith, SVP and Gulf Coast Division manager for AWG, says it’s due to the determination of the co-op’s members.

Birmingham, Ala.-based Belle Foods filed for bankruptcy July 1. It was then that AWG began working, as Smith describes it, “every day, around the clock” to put together a proposal on behalf of some of its members who had expressed interest in the stores, located throughout Mississippi, Alabama and Georgia.

AWG's David Smith
David Smith

“Working in this environment, us being a cooperative with these members, they want to see each other be successful,” Smith told The Shelby Report on Wednesday. “It’s not greed. It’s a community where they support one another and they like to see our co-op, collectively, succeed. That’s what made it happen.”

AWG won the bid for the stores, which range in size from 26,500 s.f. to 61,140 s.f., on Tuesday. The $16.13 million offering for the Belle locations was the sole bid and involves 11 AWG members as well as Mitchell Grocery Corp. of Albertville, Ala. The sale is expected to be approved by a judge today, according to Smith.

“We’re scheduled to start taking possession of the stores just immediately following that,” he said. Smith notes that three of AWG’s divisions—Gulf Coast in Pearl River, La., Nashville in Goodlettsville, Tenn., and Memphis in Southaven, Miss.—will supply the AWG member stores.

Mitchell Grocery Corp. will supply the five stores it picks up. Mitchell Grocery is an AWG competitor. However, when none of AWG’s members were interested in the half-dozen stores up for grabs in northern Alabama, Mitchell Grocery teamed up with AWG for the bid.

“We didn’t have as many (members) in that area, and (our members) weren’t really interested in going into that area of Alabama,” Smith said. “It was a great fit for the Mitchell family…Yes, we do compete with them, but they also are friends and just good people, so it made sense for them to work with us.”

The stores that Mitchell Grocery will acquire are in Rainbow City, Scottsboro, Florence, Decatur, Alabaster and Muscle Shoals. The Rainbow City store will be purchased and then liquidated, according to reports.

Southern shakeup

The AWG deal will, no doubt, stir the proverbial grocery pot in the Southeast, particularly in Alabama and Georgia, where 41 of the 43 stores involved in the transaction are located.

While concrete numbers regarding permanent closures are not yet available, Smith estimates that approximately 35 stores will remain operational—though some will be closed for days, weeks or even months for inventory/equipment auditing, liquidation and/or remodels.

“There are things to be worked out, and some of the leases, in their current form, won’t work. It doesn’t make for a viable business model,” he said. “There are some of them that are kind of on the bubble. They are locations that really could remain in operation, so there are negotiations that are under way right now to try and get those types of things worked out…”

AWG and its members, Smith points out, aren’t in the business to simply “recycle” grocery stores or “experiment.”

“…If you can’t get things right to where it’s going to be a sustainable business, you’re far better off just not going in there and making an experiment out of it if you know that it won’t work. So we try to work those things out on the front end. That way, our members are able to do what it is they do: they go in there and make a great store and they set it apart from the competitors in a positive way; they end up growing the business and providing new jobs for the area and giving the consumers an option of where to shop.”

Smith says it could be mid-October before it’s known exactly how many of the stores will be shuttered.

In the meantime, he’s excited about how the deal came together and looks forward to seeing what the co-op’s members will do with the stores.

“It was a good complement to where our members already operate,” Smith said of the deal. “Instead of trying to buy the stores as one company…we looked at it as kind of a consortium where it made more sense to break it down into 11 different AWG members that are taking those stores—with their abilities to go in and differentiate those stores in a positive way in those markets…that’s what it’s going to take to make it work.”

Go here to see the list of the stores being bought by the AWG consortium, which includes AWG and the following AWG members: Food Champs LLC, Food Giant Supermarkets Inc., Greers, HAC Inc., Hometown Grocers, R&R Foods, Ramey Enterprises Inc., Rouses Enterprises Inc., Triple V and 4Wall LLC (Bill White).

Big name entering new state?

One group of stores that probably won’t close, other than for full-fledged remodels, includes six in coastal Alabama that are being purchased by Thibodaux, La.-based Rouses, which currently operates more than 40 stores in Louisiana and Mississippi. The Belle stores that family-owned Rouses, known for its work with local farmers and manufacturers in the Bayou, is set to acquire are in Gulf Shores, Spanish Fort, Mobile (2), Saraland and Theodore.

While Rouses has not confirmed any plans for Alabama, Smith says the markets along the Mississippi Gulf Coast where Rouses already operates have similar tastes to Mobile and Baldwin counties where the six stores are located.

“They pretty much eat the same as the rest of us along the Gulf Coast,” Smith said of the Greater Mobile population. “It’s very similar to the markets that we’re in. We’re very passionate about food here in south Louisiana and they are, too.

“While I can’t speak for the Rouse family…it appears that the Rouse family was very interested in these stores because they could take some of their South Louisiana recipes and things that they offer and take them into the Greater Mobile market and be very different than anything else that’s there in Mobile.

“Their strategy is…do all the improvements to the stores before they open them, so they’re going to do all of the remodeling work and make those to where, when they open up, the stores will be the way they want them—so they would be (more) representative of what you would see if you came over here and saw a new store that they had recently opened.”

Belle’s Bill White to stay in the business

Bill White, who along with his son Jeff owned and operated the Belle Foods chain, is looking for a fresh start with two Alabama stores—one in Hoover and another in Tuscaloosa.

Though the Belle stores were supplied by C&S Wholesale, White is now an AWG member.

“They’re going in to have a smaller family business…so they’re not getting out of the grocery store business,” Smith said. “They just don’t have Belle Foods.

“They’re wonderful people—everybody loves them in the community down here and they fell in love with being in Birmingham, Ala., so they’re going to stay there and start a business, and they’ll grow from there. We’re excited about that, and I know they’re excited to have kind of a new beginning. We love to see that.”

Bill White bought the 57-store chain, then called Southern Family Markets, in 2012 from C&S Wholesale. It rebranded the chain and ultimately operated stores under the Belle Foods, Piggly Wiggly and Food World banners.

When the company filed for Chapter 11 bankruptcy protection over the summer, Belle Foods cited more than $42 million in debt—mostly owed to C&S—and quickly closed a handful of stores and got approval from the courts to sell the remainder, which includes the stores being purchased by the AWG consortium.

Six of those original 57 stores slated for closure were purchased by AWG-member stores, which AWG already has started supplying.

“Our members were interested and went into some of those (GOB, going-out-of-business stores),” Smith said. “They are mainly in south Alabama, the Florida Panhandle, the Pensacola area and in Mobile County, Ala.”

News is the latest in stores’ storied history

The Belle stores that AWG and its members, as well as Mitchell Grocery Corp., are getting have a colorful history that goes back to 1933—long before the Whites purchased the chain last year.

The company started as Bruno’s in 1933 when Joe Bruno opened an 800-s.f. store in Birmingham. By 1959, the chain had grown to 10 stores, with the company later adding a low-price banner, Food World, in 1972. The business was experiencing great success when tragedy struck in 1991. Bruno’s corporate jet carrying Chairman Angelo Bruno, Vice Chairman Lee Bruno and other executives crashed near Rom, Ga., during an annual holiday trip to visit company stores.

Following several years of flat sales, Kohlberg Kravis Roberts & Co. (KKR) bought Bruno’s for $1.1 billion. Unable to pay down debt from the acquisition, however, Bruno’s filed for bankruptcy under owner KKR in 1998. It didn’t take long for Bruno’s to make a comeback, though, as it emerged from bankruptcy debt free in 2000 with 152 stores. The company spent $48 million on 29 store renovations and, later that year, bought a dozen southwest Alabama Delchamps stores from bankrupt Jitney Jungle Inc., part of a purchase of 19 stores for $11. 25 million.

Bruno’s had 184 stores in 2001 when it was purchased by Royal Ahold for $500 million. In 2003, Ahold began combining management of Bruno’s and larger southeastern grocery chain, Bi-Lo, at Bi-Lo’s Mauldin, S.C., office to save money. Ahold sold the then-178-store Bruno’s and Bi-Lo to Lone Star Funds for more than $560 million. In 2005, Lone Star sold 104 underperforming stores to C&S Wholesale, which set up the Southern Family Markets chain. Lone Star separated Bruno’s from Bi-Lo in 2007 and re-established the Bruno’s headquarters in Birmingham but, in 2009, Bruno’s filed for bankruptcy; as a result, 31 stores were acquired by Southern Family Markets.

Be sure to check out the November print edition of The Shelby Report of the Southeast for more of David Smith’s insights about the Belle Foods deal as well as about the continued growth of AWG’s Gulf Coast Division.





About the author

Kristen Cloud

Kristen was Editor at The Shelby Report.


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