Amid rough conditions for retail in general and supermarkets in particular, the century-old Strack & Van Til parent company Central Grocers is winding down its distribution operations over the next two months and will lay off nearly 550 workers.
The Joliet-based company announced it is filing for bankruptcy and looking to sell 22 Strack & Van Til stores and its 934,490-square-foot distribution center in Joliet through an auction in bankruptcy court. Central Grocers reported it owes more than $16 million in debt to its 20 largest creditors, including $3 million to Kellogg, $2.3 million to Kraft Foods, $1.9 million to Nestle USA, and $1.3 million to Tyson Foods, according to its bankruptcy filing.
Strack & Van Til stores will remain open.
“Our stores are open, and we are as focused as ever on supporting our customers and providing the legendary service that we are known for," Strack and Van Til Chief Executive Officer Jeff Strack said. "As we move through this process, our priorities, values and commitments to our customers and our communities will not change. We thank our loyal customers for their continued support, and we thank our employees for their hard work and dedication.”
Saying Central Grocers hadn't been paying its bills, creditors such as Coca Cola and General Mills had filed an involuntary bankruptcy petition earlier this week trying to liquidate the Joliet-based company — a $2 billion cooperative which has been in business for 100 years. Central Grocers, which supplies 400 independent grocery stores across the Chicago area, responded by filing Chapter 11 bankruptcy, which would let it sell off its assets before going out of business instead of being stripped apart by a court-appointed liquidator.
The impact will be far-reaching and extend beyond the Region's largest locally owned grocery chain, which once operated as many as 38 stores under the Strack & Van Til, Ultra Foods and Town and Country brands across Northwest Indiana and the greater Chicago metro. Central Grocers distributes the Centrella brand products, meat, produce and other grocery items to many local independent grocers, including Save More Foods in Gary, Central Market in Lake Station, Reliable Supermarket in Hammond, Walt's Food Centers in Dyer and the south suburbs and Treasure Island in Chicago.
Its dissolution may mean the end of the Centrella Brand, a store brand of supermarket staples like ketchup, mayo, beef stew, green beans, canned peas and bottled water.
The wholesaler is looking to sell remaining Strack & Van Til stores to an interested buyer of its choosing to avoid a low bid. The grocery chain expects to sell off the 22 remaining Strack & Van Til stores, its distribution center in Joliet and other assets through a court-supervised auction process under Section 363 of the U.S. Bankruptcy Code.
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“In light of the increasingly difficult environment for independent supermarkets and retailers, we have been working tirelessly to achieve an outcome that is in the best interests of our stakeholders," Central Grocers President and Chief Executive Officer Ken Nemeth said. "We are using this court-supervised sale process to provide us the time and flexibility to conduct an orderly sale of the Strack & Van Til stores, while we work to sell the warehouse in Joliet and wind down our wholesale distribution operations.”
Conditions have been rough for the retail sector, which has announced more than 3,100 store closings nationwide so far this year as e-commerce continues to sap market share from brick-and-mortar shops, according to the International Council of Shopping Centers. The Bureau of Labor Statistics estimates more than 90,000 retail jobs have vanished since the fall.
It's been particularly tough for grocery stores, low-margin businesses that have been struggling with the worst price depreciation in decades and intense competition. Michigan City-based Al's Supermarket has closed locations in South Haven and LaPorte over the last two years. Indianapolis-based Marsh announced Friday it was closing nine more locations, just weeks after it said it would close 10 of its grocery stores. Even tony, high-end Whole Foods has been struggling and activist investors have clamored for it to find a buyer to take it over.
Amid industrywide pressures, Central Grocers faced competition from the much larger co-op Associated Wholesale Grocers, which has a warehouse in Kenosha, Wisconsin, and has been making an increased push into the Chicago area market.
The Joliet-based co-op, which allowed mom-and-pop grocers to pool their resources and negotiate lower prices by buying in greater volume, is sending employees a Worker Adjustment and Retraining Notification Act or WARN notice saying it expects 549 layoffs in Joliet. It said in the letter that no buyer had stepped forward to operate the central warehouse as a distribution facility so there was no expectation that any jobs would be retained.
"This is anticipated to be a permanent shutdown of the entire plant; no bumping rights will exist," Nemeth wrote in the letter to employees.
Warehouse workers and truck drivers are expected to lose their jobs between June 26 and July 10. Central Grocers expects to completely wind down operations in the next six to eight weeks.
It owns 80 percent of its largest customer Strack & Van Til, which it acquired in the 1990s, according to the bankruptcy filing. Andrew Raab and Jeff Strack each own 10 percent of the grocery chain, which started in 1959 and is widely considered the Region's grocery chain.