After almost 100 years of doing business, Joliet,Ill.-based Central Grocers filed for Chapter 11 bankruptcy May 4 and will lay off about 550 employees at the company's Joliet warehouse.
Central Grocers is a grocery cooperative that has long operated as wholesaler for more than 400 independent grocery stores in the Chicago area — including chains such as Treasure Island, Pete's Fresh Market, Angelo Caputo's Fresh Market and Sunset Foods — distributing private-label Centrella products as well as produce, meat and dairy. It's also the parent company of Strack & Van Til and Ultra Foods stores in Illinois and Indiana, which are included in the bankruptcy filing. The layoffs are expected to occur between June 26 and July 10 as the cooperative's business gradually shuts down, according to a mass layoff notice sent to employees May 3.
Last month, Central Grocers announced plans to sell 22 Strack & Van Til stores while closing nine "underperforming" Ultra stores. About 750 workers at seven of those Ultra stores in the Cook County suburbs will be laid off by June 17, according the state's April 30 report on layoff notices.
On May 4, the company said it expects to enter into a sales agreement for 19 of the Strack & Van Til stores with a "stalking horse bidder" soon, and intends to auction the nearly 1 million-square-foot Joliet warehouse and headquarters as well as other assets.
In addition to the many people who will lose their jobs, grocery retailers that have long depended on Central Grocers will also feel the impact of the bankruptcy. While some already have switched to other distributors, many are still owed large chunks of money.
For example, Sami Deffala, owner of Morgan Mini Mart, a corner store in Chicago's Englewood neighborhood, said he's still owed a $10,000 deposit — a substantial sum for a small store operator. Recently, Central Grocers cut him a check for the deposit but the payment isn't going through, Deffala said.
"I could use that money to improve my store. ... [Not having the money is] going to have an impact. Not catastrophic to where I'll have to close my store, but it's going to have an impact," Deffala said.
Many larger retailers, some of which have stock in Central Grocers, are owed much more money.
Mike Bousis and his father Dimitrious Bousis own and operate a combined 15 Cermak Fresh Market stores. Cermak was only a partial member of the Central Grocers cooperative, which supplied Cermak with center-store packaged goods, Bousis said. The chain recently switched fully over to Supervalu, a Minnesota-based grocery distributor.
Central Grocers still owes deposits on six Cermak stores, varying between $10,000 and $30,000 per store, Bousis said. But he doesn't expect to see that money again unless the retailers band together in a class-action lawsuit.
"You put a deposit down to get stuff supplied and they're worried about you paying them. And now you're not getting your money back. It's disheartening," Bousis said.
Central Grocers CEO Ken Nemeth didn't respond to a Tribune request for an interview. Instead, Central Grocers passed along the request to Joele Frank, a New York public relations agency, where employees would not answer questions on the record. In the company news release May 4, Nemeth referred generally to the "increasingly difficult environment" for independent stores.
"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," Nemeth said in the news release.
Central Grocers' Chapter 11 filing comes after a group of suppliers — including Coca-Cola, General Mills and Mars Financial Services — filed a petition May 2 to force the grocery cooperative into involuntary Chapter 7 bankruptcy.
The company's bankruptcy filings listed its total assets at about $262 million and its total liabilities at about $232 million. Central Grocers is seeking debtor-in-possession financing.
Highland Park-based Sunset Foods also recently enlisted a new distributor for grocery items — such as crackers, soups and cereals — that its five stores had been stocking from Central Grocers, said Thaddeus Tazioli, vice president of marketing for Sunset.
"Obviously there were issues with the organization and so a decision had to be made about what to do next," he said. "It's really exciting, from our perspective, the opportunities that are going to open up."
Sunset is now working with Supervalu, which will supply Sunset with brands the stores were not receiving from Central Grocers, Tazioli said.
Angelo Caputo's Fresh Market heard trouble was brewing with Central Grocers and started the search for new wholesalers, said Robertino Presta, CEO of the eight-store suburban chain.
"It's been in the works for a couple of months," he said. "There'd been talk, so we just started looking elsewhere."
His company used Central Grocers for "staples" such as yogurts and cereals, but the chain wasn't totally dependent on the cooperative. Angelo Caputo's imports much of its food from Europe, and does in-house baking and cooking with ingredients that didn't come from Central Grocers, Presta said, so the bankruptcy is not affecting it much.
Still, Presta said the prospect of getting back the stocks or deposit it paid to the cooperative didn't look good.
"We'll see what happens," he said.
Representatives of locals 703 and 710 of the Teamsters, the union representing the bulk of the Joliet Central Grocers employees facing layoffs, couldn't be reached for comment.