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Sunday, October 02, 2005

Is there a TOPS in Bedford's future?

This article was in Oct. 2nd's Plain Dealer. I suggest picking up a copy.
This article is very long so the conclusion will be in the comments section.
As a note we (The City of Bedford) have been in contact with TOPS corporate folks, who state they currently have no plans to close the Bedford Tops.  No not the ringing endorsement we would hope for, but better than the alternative.  We will stay in touch, and work with them to keep TOPS open in Bedford.
-Ron Lisy

A question of commitment
Tops says it wants to expand here, but it's closing stores

By Janet H. Cho
Plain Dealer Reporter

Sunday, October 2, 2005

Five years ago, Tops Markets LLC promised to bring a new, state-of-the-art supermarket to Cleveland’s Collinwood neighborhood – a move city leaders hailed as critical to revitalizing a once-strong business district.

The proposed 58,000-square-foot building at East 185th Street and Neff Road – nearly triple the size of the 41-year-old store there now – was to have been a model for Tops’ future groceries and the envy of its competitors. It was to have an in-store bakery, a full-service meat department, a pharmacy, more organic produce and a Chinese food carryout. And it was to have sold gasoline.

Today, after spending more than $6 million to buy and prepare the land for construction, Tops has changed its mind.

In an Aug. 26 letter to Mayor Jane Campbell’s chief of staff, Chris Ronayne, Tops’ parent company, Giant Food Stores LLC, confirmed the project was dead. After studying the project “from every possible angle, . . . we have been unable to develop a scenario that meets our financial objectives,” wrote Robert Anderson, Giant’s executive vice president of real estate and construction.

A gravel foundation that city officials hoped would support a modern grocery store now is surrounded by a chain-link fence and broken sidewalks.

Peering through the fence behind the current store’s parking lot, City Councilman Michael Polensek rued how hard he worked to get Tops a sweetheart economic incentive package of more than $2.8 million in grants, low-interest loans and tax abatements. “They baldfaced lied to us,” he said.

Polensek isn’t the only one questioning Tops’ commitment to Greater Cleveland. After years of saying it wanted to expand its market share in Northeast Ohio, the region’s No. 2 grocer has closed nine stores in the last year, cut about 850 jobs, reduced store hours and outsourced its popular in-store bakery and butcher departments.

Williamsville, N.Y.-based Tops, which now operates 47 stores in Northeast Ohio, has left a wake of empty storefronts, disappointed shoppers and disenchanted community leaders.


Blogger RonL said...

Denny Hopkins, Giant Foods’ vice president of advertising and public relations, declined to comment for this story. Calls to Tops’ parent company, Royal Ahold N.V. in Zaandam, Netherlands, were referred to a Williamsville spokeswoman who left the company two months ago. Other Tops officials referred calls to Hopkins.

Adding to concern about Tops’ future are changes the chain is making in the Buffalo market, where it was founded, and other areas of New York. Tops recently announced it would sell 31 stores in eastern New York and the Adirondack mountains as part of an effort to redefine its core market in western New York, where it is the leading supermarket chain.

In the last year, Tops has redesigned two stores in Buffalo suburbs and renamed them Martin’s Super Foods Stores. The company plans to open three more Martin’s stores in western New York this fall.

The Martin’s design is patterned after a 55,000-square-foot Brook Park store Tops unveiled in March 2004. That store offers more prepared foods, innovative technology, gourmet bakery and nearly double the amount of organic produce. It also replaces Tops’ traditional red and white colors with purples and greens, although it’s still called ‘Tops.’

When asked about speculation Tops might pull out of this market, close more stores, sell out to another grocer or convert some stores to the Martin’s nameplate, Hopkins would only say: “We don’t respond to rumors.”

United Food and Commercial Workers Local 880, which represents 3,400 Tops workers and is negotiating a contract with Tops and other local grocers, calls Tops a good employer that pays living wages and benefits and an excellent pension. “Tops is an asset to the community,” said President Thomas H. Robertson in an e-mail.

When Tops closed six Cleveland-area stores in January, Max Henderson, executive vice president and general manager, said in a statement: “We remain committed to the Ohio market and are taking these steps in order to strengthen our market position overall.”

When Tops closed two more stores in April, Regional Vice President Dennis Hanley issued a statement that said: “While closing these stores are painful in the short term, they will help us preserve jobs and grow our business in the future.”

Yet, according to Ahold’s 2005 quarterly financial statements, “market share at Tops declined, primarily as a result of eight store closures so far this year.”

Tops’ share of the local grocery market has fallen from 28 percent in 2000 to less than 25 percent in June, according to Trade Dimensions International Inc., a firm that tracks market share. And that was before arch-rival Giant Eagle Inc. started heavily promoting its lowered prices, in-store butchers and Fuelperks gasoline-discount program.

Although Trade Dimensions also shows declining market share numbers for Giant Eagle, experts believe the Pittsburgh-based grocery store chain has gained market share through its aggressive marketing. Giant Eagle will not release actual figures.

Royal Ahold is the world’s fourth-largest food retailer and operates some of the most successful grocery stores in the United States and Europe. But Ahold President and Chief Executive Anders Moberg has called Tops’ Northeast Ohio division the weakest link and the biggest source of concern in his international retail food empire.

In a Feb. 28 interview with Supermarket News, a trade publication, Moberg said: “Over the past 10 years, Tops has changed managements and strategies a little too much. I think we’ve confused not only the customers, but our own people.”

Ahold has been preoccupied with getting its own financial house in order after weathering a 2003 accounting scandal for overstating its earnings by more than $1 billion, a debacle that earned it the dubious distinction as the “Enron of Europe.”

Tops’ critics say its U.S. parent, Giant Foods of Carlisle, Pa., doesn’t seem to understand the Cleveland grocery market. Giant, which operates 101 Giant Food Stores and 20 Martin’s Food Markets, is the leading food retailer in many of its markets but faces relatively few rivals and operates mostly non-union stores.

Tops, on the other hand, competes with a number of national and regional supermarkets in Northeast Ohio, as well as locally owned stores such as Marc’s Deeper Discount Stores, Acme Fresh Markets and Dave’s Supermarkets. And that was before Wal-Mart Stores Inc., the world’s largest grocer, announced it was building several more supercenters in Northeast Ohio.

On Jan. 19, Tops Markets, citing an “extremely competitive marketplace” in Northeast Ohio, announced it was closing six “underperforming” stores and eliminating about 390 jobs.

On April 8, Tops put two more Cleveland-area stores and a Sandusky store on the chopping block and cut another 450 jobs. It also let go about 200 butchers in favor of prepackaged beef and pork from an outside vendor, and hired Cleveland-based Orlando Baking Co. to bake its private-label bread and rolls. Tops has not closed any stores in its other markets.

“We think in the long run, this is going to improve sales,” Hopkins said of the switch to case-ready meat and other moves.

The $500 billion U.S. grocery industry is an extremely low-margin business based on volume. Sales are driven by the number of customers, how often they shop and how much they buy. Tops has watched its customers defect to other stores and its net sales decline more than 4 percent from April to June alone, according to Ahold reports.

In Madison and Kent, Tops closed two new 70,000-square-foot stores only a few years after signing 25-year leases, said landlord John McGill, president of McGill Property Group in Solon. And although McGill is still receiving rent for those now-vacant stores, he would much prefer active businesses.

Alec Pacella, vice president of investment services for Grubb & Ellis Co., a commercial real estate services firm, estimates Tops is shelling out more than $500,000 a year for both properties, a multimillion-dollar investment over 25 years.

In Ravenna, Tops spent millions acquiring land and building its 47,000-square-foot store on West Main Street, only to abruptly shut down less than two years later. The company is still paying about $45,000 per year in property taxes for that site, plus utilities, Pacella said.

“We were very surprised, because this community, as well as the city, had done a lot to bring that business into town and nurture it as much as possible,” said Joseph Bica, a Ravenna City Councilman and chairman of the Community and Economic Development Committee.

“We were just astonished that they could make an $8 million-to-$10 million investment in this store and then a year and a half later, completely pull out. They’ve got to be completely hemorrhaging money.”

Buildings designed as grocery stores are hard to market to other businesses because of their size and customized features.

“Thousands of tenants will take a 2,000-square-foot spot, but a 70,000-square-foot spot” would appeal to only a handful of big-box retailers, Pacella said. “That’s the biggest challenge — finding a large-enough tenant to take that space. Another grocery store is obviously what you want in that space, but they’re not the easiest stores to backfill.”

McGill said he started building a third store for Tops at the Neff Road site, but after company officials couldn’t make up their minds about what they wanted, “We decided that we had better things to do elsewhere.”

That’s not an option for Polensek or other Collinwood residents. Not only has Polensek refused to shop at Tops for two years, he is spearheading an effort to force Giant Foods to address the eyesore it left behind, including 26 pages of health, building and zoning violations in the 22,000-square-foot existing Tops and adjoining property that could cost nearly $500,000 to fix.

Last week, he wrote a letter to Ahold Chief Executive Moberg outlining his outrage at the company’s disrespect of his Ward 11 constituents and inviting Moberg to “make amends” by donating the entire property to Cleveland. He is awaiting a reply.

“I wonder if . . . any of them have ever been to this store,” Polensek said. “I wonder if any of them have ever come to Cleveland.”

Plain Dealer News Researcher Cheryl Diamond contributed to this story.

5:40 PM  

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