Second in a two-part series.
Last week I covered the development and growth of Bashas' family-owned business to become Arizona's third-largest grocery chain.
Today we'll look at how Bashas' was caught in an over-expanded situation in a severe recession, having to declare bankruptcy and reinvent itself to face an uncertain future.
Things looked good in 2007, the company's 75th anniversary. With a peak of more than 160 stores and 14,000 employees, Bashas' continued to plan expansion of its primary formats (Bashas' groceries and Food City).
It also began to explore smaller niche markets. Three new Bashas' formats are noteworthy: a prototype Ike's Farmers Market it closed a in Oro Valley, with a focus on natural foods; the purchase of three Sportsman's Fine Wines & Spirits stores in the Phoenix area; and Eddie's Country Store in Pinetop, with a deli and restaurant.
Filing for Chapter 11
But Bashas' bubble was about to burst. The new-housing boom cratered in Phoenix, pulling the expansion rug from under the company.
Intense competition among Arizona grocers reduced Bashas' sales. Rising supplier costs for food and the costs to lease and cool thousands of square feet of storage, distribution and retail facilities became prohibitive. The global credit crisis made securing low-rate loans much more difficult.
So in July 2009, Bashas' filed for Chapter 11 bankruptcy protection with about $300 million in debts.
Bashas' closed 30 stores, laid off more than 2,000 employees, slashed benefits, cut salaries, sold expensive assets such as airplanes, cut out a broad layer of middle management, renegotiated leases and restructured prices.
In December 2009, Bashas' settled its four-year dispute with the United Food and Commercial Workers Union, halting union efforts (at least temporarily) to unionize the chain of Bashas' outlets.
Most importantly, over the year following the bankruptcy filing, Bashas' came up with a plan to repay the company's $300 million in debts in installments over three years.
Bashas' rejected a takeover bid in February 2010 by Albertsons in favor of proceeding with its own recovery plan.
In August 2010, a federal bankruptcy judge approved Bashas' plan to emerge from bankruptcy protection.
Bashas' exit from bankruptcy was unusual in two respects. First, it was achieved in only 13 months - a short time for a transaction of this financial size and complexity.
Second, it is rare for the party emerging from bankruptcy to plan to pay off 100 percent of its debts - with interest.
Part of Bashas' turnaround can be attributed to loyal customers who went out of their way to shop at Bashas'.
There were even "I support Bashas'" campaigns in Phoenix, complete with fliers, billboards and rallies.
The 'new' Bashas'
As reported in recent company statements, the "new" Bashas' has 132 outlets and about 8,500 employees. Family patriarch Eddie Basha Jr., 73, will continue as chairman with a salary of $1 per year until all Bashas' debts are paid.
Phoenix Magazine reported that Eddie Basha's cousin, Johnny Basha, at a recent Friends of Bashas' rally, said the company likely will scale back its charitable activities in the short run and build smaller markets oriented around more niche products.
Bashas' will be operating in an extremely competitive grocery market under the lingering effects of the worst recession in decades: Giant merchandisers such as Walmart and Target are now selling groceries.
In fact, according to the Arizona Republic, Walmart - including its Supercenters, Neighborhood Markets, Marketside stores and Mercado de Walmart Latin markets - is Arizona's grocery market-share leader, with Fry's second and Bashas' third.
Other chains such as Safeway and Albertsons, plus smaller grocers such as Sprouts, Trader Joe's, Sunflower Farmers Market and Whole Foods, add to the competition.
Workers are key
Bashas' employees are certainly key to the "new" Bashas' survival. They remember when, as a friend who has worked for years at a Phoenix Bashas' recalls, "We were treated the best in the grocery business."
Bashas' must work its way back to the congenial family atmosphere and dedicated community service that can differentiate it from competitors.
The company must also find a way to solve the unionization problem that will surely confront it again.
I for one, am rooting for Bashas' success. For years, Pat and I have been regular shoppers at the Bashas' at 6900 E. Sunrise Drive. Sales and coupons sometimes attract us to other grocery chains too, but we always return to Bashas' and think of it as our home grocery. One year we even ordered a delicious Thanksgiving dinner-to-go from Bashas'.
We appreciate the friendly and helpful employees and their oft-expressed, "Thank you for supporting Bashas'." We plan to continue to support Arizona's only locally owned grocery chain.
Sources: Arizona Local News, azcentral.com; Bashas' History, bashas.com; Bashas' Company Profile, referenceforbusiness.com; Wikipedia.com; Bashas' 75th Anniversary DVD; Bashas' Public Relations Department; Arizona Daily Star; Arizona Republic; Phoenix Magazine
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