Illinois' Central Grocers files for bankruptcy as winds down business

[May 06, 2017]  By Tracy Rucinski

CHICAGO, May 4 (Reuters) - Central Grocers Inc, a wholesale grocery cooperative in the Chicago area, filed for bankruptcy on Thursday as it tried to close or sell businesses after struggling to adapt to consumer shifts to online and gourmet shopping and "big box" stores.

Central Grocers, with about $2 billion in annual sales, said it had a plan to close its distribution business, which supplies local independent supermarket retailers, and sell its Strack & Van Til grocery stores in Illinois and Indiana.

The Joliet, Illinois-based group said the sale process was the "lynchpin" of its Chapter 11 strategy and "critical to maximizing recoveries for all creditors and preserving thousands of jobs."

"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," CEO Ken Nemeth said in a news release.

The group calls itself the seventh-largest grocery store cooperative in the United States serving 500 supermarkets.

Strack, which added juice bars and more organic and prepared meals to its stores in recent years, is the largest employer in Northern Indiana with about 4,250 employees, according to a filing with the U.S. Bankruptcy Court in Delaware.

Central Grocers listed $262 million in total assets and $232 million in total liabilities for the group in a court filing.

The petition followed a filing in Chicago by a group of food suppliers including Coca-Cola, General Mills, Mars Financial and Post Consumer Brands seeking $1.8 million they said they were owed by Central Grocers.

The cooperative said it would ask for the Chicago proceeding to be dismissed.

Supermarkets' razor-thin margins have been hit by falling food prices and growing competition from big box stores including Wal-Mart Stores Inc and online options such as Amazon.com Inc.

In the past two years, both the operator of New York-area supermarket chain Fairway Markets and West Coast regional grocer Haggen have filed for bankruptcy.

Also contributing to Central Grocers' bankruptcy filing were tightening trade terms among vendors, it said. A recent migration by its co-op members - independent grocery stores in the Midwest - to other suppliers also hurt, a source with knowledge of the matter said.

Reuters reported on April 20 that Central Grocers was considering bankruptcy as it struggled with debt. (Additional reporting by Jessica DiNapoli in New York)

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