Alpesh Amin and Don Harer: Cleanup in 11: Central Grocers Inc. and the SVT Grocery Chain – TMA
Alpesh Amin and Don Harer wrote an article that was featured in the Turnaround Management Association‘s website titled “Cleanup in 11: Central Grocers Inc. and the SVT Grocery Chain.”
In February 2017, Strack and Van Til Supermarkets (SVT) retained the authors’ firm to address liquidity challenges and performance issues. Little did anyone appreciate at the time the severity of the issues the grocery store chain faced or that this case would become such a complex and multifaceted bankruptcy.
With nearly $1 billion in annual revenue, SVT operated 36 large supermarkets in the Chicagoland and Northwest Indiana areas under the well-known Strack & Van Til, Ultra Foods, and Town & Country banners. Founded in 1930, SVT successfully operated as an independent family-owned business until 1998, when Central Grocers Inc. (CGI) purchased a majority equity interest. At the time of the acquisition, Central was a cooperative supplier to the Chicagoland area. Fueled in part by sales to SVT, Central grew in the years that followed to become the seventh-largest grocery co-op in the United States and the primary supplier to more than 550 member grocery stores in Illinois and Indiana.
The turnaround firm’s retention was initially limited to the subsidiary SVT, and the scope of the engagement was straightforward—to assist with liquidity, analyze/advise on store operations, and analyze/assist with any restructuring efforts. With scant cash flow and operational reporting, the initial general perception was that a few SVT stores were dragging down the collective performance of the subsidiary. The SVT stores had lost foot traffic following earlier restructuring efforts, and sales were suffering. Even the independent SVT management team subscribed to the general assessment, acknowledging that “the problem is with us, not the parent.”
The turnaround firm analyzed store performance and implemented cash flow reporting. From the start, red flags hinted at deeper operational issues that were soon found to be severe and to stem from decisions made in 2015.