Central Grocers’ sudden and stunning collapse imperiled Strack & Van Til, almost allowing rival Jewel-Osco to buy out the nearly six-decade-old Northwest Indiana institution and wipe the supermarket brand from the landscape.
But the unexpected bankruptcy of the Joliet-based cooperative, which was the seventh-largest grocery wholesaler in the United States, also has shaken up things for many independent grocers across Northwest Indiana, such as Walt’s Food Center in Dyer, Miller K Market in Miller, Sam’s Market in Gary and Central Market in Lake Station.
"Central Grocers' exit has left a big gaping hole in the industry," said Zafar Sheikh, president of Central Market.
Owned collectively by the same supermarkets it supplied, Central Grocers served more than 400 independent grocery stores, mostly concentrated in the Chicago area and Northwest Indiana but also in Michigan, Iowa and Wisconsin. Those grocers, often old-school neighborhood markets or corner stores with hand-painted signs, have been scrambling to find other suppliers since Central Grocers went bankrupt and disrupted the way many stores operated for decades.
Central Grocers, which unsuccessfully tried to find a buyer to take it over, said in its bankruptcy filing that it had trouble competing in an increasingly crowded marketplace, especially on price and organic items. It lost many customers during the past year when member stores closed, such as Sterk's Super Foods in East Chicago and Super Save Foods in Michigan City. Ray's Super Foods in North Judson switched suppliers when it was bought out by Heartland Groceries two years ago.
Picking up the pieces
With Central Grocers exiting the market, independent grocers across Northwest Indiana and the Chicago area have been forced to turn to new wholesalers to stock their shelves. Some fear the absence of a local cooperative, which offered rebates to its members, could increase prices marketwide and that it could take a while for new suppliers to restore product variety shoppers have become accustomed to seeing.
“It has a big impact. We had to find a new supplier when we’re an in-between store. The bigger guys didn’t want us,” said Mike Mussa, the manager of Eastside Fresh Meat & Produce in LaPorte.
His grocery store at 4666 W. U.S. 20 in LaPorte ended up switching to Michigan-based SpartanNash.
“They’ve been good to us,” he said. “We’re getting used to them."
But any potential replacement is a for-profit that would take an additional cut for its own profit margins, while Central Grocers was owned by member stores, Mussa said.
"It’s not a co-op. It’s not member-owned," he said of his new supplier. "Central Grocers wasn’t there to make a profit. We received excess profits back as rebates. It was shared. We hated to see Central Grocers go.”
County Line Market, at 5035 Central Ave. in Lake Station, has felt ripple effects from the bankruptcy, but never used Central Grocers as a wholesaler because it was too small to attract their interest.
“Centrella did enough volume where it was a minimum order of $10,000,” manager Wally Musa said. “They delivered by the pallet. You had to get bottled water or canned corn by the pallet.”
Central Grocers’ departure means one fewer competitor in the marketplace, Musa said. But he’s noticed that other wholesalers have been raising prices since Central Grocers went under, increasing them by about 10 percent.
“Mostly, it’s sad,” he said. “It’s upsetting. It’s a good thing on the retail side, but prices have gone up in the market.”
Now the co-op, which once banked $2 billion a year, including as much as $1.1 billion from Strack & Van Til, is folding a century after it was founded by 32 shareholders in 1917. Minneapolis-based rival Supervalu bought its 930,000-square-foot warehouse in Joliet out of bankruptcy court for $61 million.
Battle for market share
Kansas City-based Associated Wholesale Grocers also recently built a distribution center in southeast Wisconsin and has been gaining ground in the Chicago area market, including in Northwest Indiana. First Choice Market, at 5600 Sohl Ave. in Hammond, has been relying on AWG as its main supplier.
“We’ve gone with AWG,” First Choice Market owner Frank Carilla said. “It seems like they’re getting stronger and stronger. They’ve made strides.”
Carilla said it has been an ongoing process of adjustment to the market for AWG because it must familiarize itself with products that are popular in the Chicago metropolitan area, including Oscar Mayer hot dogs.
“Ultra leaving the market leaves a big gap in the community,” he said. “For us, the blow coming from Centrella leaving was offset by increased retail business coming to us. Centrella was a really good company that had cheaper prices.”
First Choice Market used to get between 70 and 80 percent of its business from Central Grocers, but now gets about 50 percent from AWG and 50 percent from smaller suppliers. Carilla said it now takes far more homework to get good prices, by scouring alternatives for meats, produce and other items.
“We’re here for our customers,” he said. “We’ve got to keep our prices low because once you lose a customer, it’s hard to bring them back. We’ve got to be fair on price so they stay loyal. The big stores like Ultra wanted all of your money; we just want some of your money.”