Winn-Dixie Parent Files for Chapter 11, Latest Victim of Amazon and Changing Times

If you shop at Winn-Dixie, Bi-Lo, Harveys Supermarket or Fresco y Más grocery stores, your local store could be closing soon. That’s because Southeastern Grocers LLC, their parent company, has just filed for Chapter 11 bankruptcy in U.S. bankruptcy court.

Winn-Dixie Parent Files for Chapter 11, Latest Victim of Amazon and Changing Times

In this “prepackaged” filing, Southeastern arrives before the court having already secured a deal with its major creditors that will allow for its reorganization and reduced debt payments. A prepackaged filing streamlines the legal process, making it both less expensive and faster, because negotiations with creditors have already taken place and simply require court approval.

If Southeastern’s bankruptcy is approved, the company, which has more than 51,000 employees, will be owned by its creditors in exchange for reducing its debt by about $500 million. It will close at least 85 stores and sell 33 more, keeping 581 stores open, and possibly opening new ones in the future. The company buys 70 percent of its stock from C&S Wholesale Grocers, which has agreed to an extended payment plan that will give Southeastern some liquidity to get through the bankruptcy.

Both Winn-Dixie and Bi-Lo have been through bankruptcy reorganization before, Bi-Lo in 2009 and Winn-Dixie in 2005-2006, after which it was acquired by Bi-Lo. As this history suggests, it seems to be harder and harder to remain profitable as a traditional grocery store in today’s America. Southeastern’s bankruptcy filing explains that the company faces obstacles competing for high-end customers seeking out “what used to be considered difficult-to-find” natural, organic and gluten-free foods. At the mid level, it faces fierce price competition from competitors with more liquidity, combined with deflating food prices that cut into profit margins. At the low end, it suffered from reductions to the Supplemental Nutrition Assistance Program (formerly called Food Stamps).

Tough times for regional chains.

Southeastern is hardly the only one. New York State grocery chain Tops Markets filed for bankruptcy last month, and Marsh Supermarkets and wholesaler Central Grocers filed for bankruptcy protection in 2017. The supermarket chain Albertsons also just announced that it would merge with Rite-Aid with the goal of becoming more competitive.

All in all, it’s a tough time to be a regional grocery chain. Discount retailers such as Aldi are part of the problem, but Amazon probably dealt the worst blow to grocery chains like Winn-Dixie. That consisted of a one-two punch of easy online ordering of nonperishable items via Amazon Dash and Echo devices (and the Amazon website), along with price cuts at Whole Foods after Amazon acquired it. The continued growth of specialty chains such as Trader Joe’s and the growing popularity of meal kit delivery services isn’t helping matters.

To make matters worse, as regional chains struggle they tend to be acquired by private equity firms, which means they’re saddled with massive amounts of debt just when they need to make capital investments to remain competitive. That debt made matters worse for Winn-Dixie and Bi-Lo, as well as Tops Markets.

Experts predict that these woes will continue, and that we should expect to see more consolidation within the grocery industry. In the end, there may be few or no regional grocery chains left.

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