Taking Stock

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Sad, Predictable Ending to Farm Fresh Saga

Dave Furman, a true gentleman, almost certainly knew what would become the fate of the company he founded with a single store on Military Highway in Norfolk in 1957, when he died four years ago at the age of 95.

Along with Gene Walters, who passed away in 2009, and Ron Dennis, retired and still very much alive, Furman formed Farm Fresh’s legacy. He (and Walters) helped grow the regional chain to more than 50 stores, expand its presence into North Carolina and engineer an acquisition in 1986 with its chief rival Giant Open Air Markets. Later, Dennis, a graduate of Bob Miller’s Albertsons University, created a different dynamic by adding new departments and offering innovative merchandising ideas. But the core competencies of Farm Fresh never changed – outstanding customer service, detailed employee training that yielded passionate and dedicated associates, and a commitment to charitable and community causes in the Hampton Roads market.

For more than 50 years, those standards remained in place. While Farm Fresh wasn’t the largest operator in Tidewater, nor was it the cheapest place to buy groceries, the company possessed such a strong will it consistently proved that its “whole” was greater than the sum of its parts.

Sadly, and I sincerely mean sadly, what’s been announced over the past month should never have happened. Ron Dennis, a man of candor and strong conviction, knew it shortly after Supervalu (which owned Farm Fresh since 2000) acquired more than 900 other grocery stores from Albertsons in 2006. The associates could sense the obvious signs of decline, too (no money for new stores or major store improvements; more control by corporate). Two years after SVU became a corporate chain retailer, Farm Fresh’s former successful regional chain mindset was no longer viable in its opinion.

Blame Jeff Noddle for this folly. He thought he could become both a dynamic wholesaler and retailer with his 2006 grand plan. Instead he became neither. As good a wholesaler as Noddle was throughout his Supervalu career, which began in 1976, his retail leadership skills could fit into a thimble – and a very small one at that. He wasn’t helped by the direction he was given by his chief merchant – Duncan Mac Naughton – a smart, well-traveled industry exec (and I do mean well-traveled) whose special skill as a blowhard is second to none that I’ve witnessed since I began reporting about the business in 1973.

By the time Noddle was forced out in 2009 and replaced by one of most inept boobs of this generation – Craig Herkert – there was only a little hope that the entirety of Supervalu retail, including Farm Fresh, could be fixed. However, that hope was quickly dashed once we got to witness Herkert’s unique reverse Midas touch; it became clear that the only thing the former Albertsons and Walmart executive could turn around was the swivel chair in his office. A special salute (not saying which kind) should also be given to Wayne “Underperforming” Sales, a former tire peddler who joined Supervalu’s board in 2006, became non-executive chairman in 2010 and even served as chief executive for a brief stint after Herkert was finally banished to the permanent “time out” chair in 2013. With this triumvirate at the helm, I’d probably bet on the ’62 Mets.

Ron Dennis retired in 2010, a series of managers was brought in over the last eight years, including the talented Micky Nye, who all tried to alter the retailer’s course. However, with no money in the coffers and no love from Eden Prairie, the inevitable was announced on March 14 – 21 of the last remaining 38 Farm Fresh stores would be sold, with the remaining units to be closed by May 14 (with a chance some may be sold at a later date). About 3,100 associates are affected.

The stores had been on the selling block for more than a year, so it was surprising and disappointing to see only a little more than 50 percent of the store base sold. And at slightly more than $2 million per unit, Supervalu couldn’t be happy with what it thought they may have fetched originally. Furthermore, with both Kroger/Harris Teeter and Food Lion as the buyers, there’ll be no supply contract opportunities associated with the transaction, another disappointment for SVU.

This is going to be a difficult grind for the Minneapolis area distributor. There aren’t many industry observers I’ve chatted with who don’t believe that all approximately 180 remaining SVU corporate retail stores will eventually be sold or closed and I, too, feel it’s just a matter of time. With the current competitive retail environment and not many active strategic buyers to draw from, it wouldn’t be shocking to see the same 50-60 percent store sales “batting average” reoccur at Shoppers, Shop ‘n Save, Hornbacher’s and even Cub, if or when one or all of those banners would be up for sale.

Still, as I said before, I believe current Supervalu Mark Gross is doing the right thing, as painful as it is now. He needs to reshape the company as a pure-play wholesaler; anything else would be a distraction in the way of SVU’s goal of survival and potential future prosperity. That’s why he was hired in 2016. And to rephrase Billy Joel, he (Gross) “didn’t start the fire.”

I feel so badly for the associates – many of whom I’ve known for a long time. They didn’t deserve this ending or the process they’ve had to endure for the past decade. Some will find new employment with the acquiring retailers, but I fear many others won’t.

And once again, another once-great company is reduced to ashes by horrible leadership. How many times will this scenario repeat itself?