Sometimes the impact of Wal-Mart’s dominance in the grocery sector is so obvious that even the media can see the fingerprints. This week, the media in Arizona couldn’t help but link the financial woes of a locally-owned grocery chain with the rise of Wal-Mart as grocer. The Arizona-based chain store Bashas’ filed for bankruptcy, the first time since the store was founded near Chandler, Arizona in 1932 — three decades before the first Wal-Mart would open. By 1993, the company had purchased more than half a dozen Arizona Supermarkets, and in 2003 the company opened a gourmet branch, called AJ’s Fine foods. Basha’s today claims to be the 12th largest employer in the state. On July 12th, 2009 Bashas’ filed for Chapter 11 Bankruptcy reorganization in Phoenix. The company will close 15 of its supermarkets and Food City stores this week, and lower its pricing to compete with the larger chain stores, most notably Wal-Mart. Roughly 1,000 workers at Bashas’ will lose their job. The grocer will still employ approximately 10,000 workers. Bashas’ claims to have $200 million in assets and close to $245 million in debt. The company is currently Arizona’s largest privately held grocer. The Arizona Republic newspaper traced Bashas’ problems back 10 years to the opening of Wal-Mart superstores in Arizona. In 1999, there were no Wal-Mart superstores in Arizona. The retailer had 34 discount store. Today, there are 63 supercenters and only 9 discount stores left. Three out of four Arizona Wal-Mart discount stores have either been closed or expanded into superstores. The giant retailer has three empty stores today in Arizona for sale or lease. According to the Arizona Republic, Wal-Mart now controls 30% of the grocery sales in Phoenix, Arizona. The latest entrant into the Phoeniz market is the latino-focused Wal-Mart Supermercado. During Wal-Mart’s decade, Bashas’ has fallen from 18% of market penetration to 16%. Another grocery competitor, Fry’s Food Stores, dropped from a 34% share, to a 25% market share. One spokesman for the Arizona Food Marketing Alliance told the Republic newspaper, “There are just more stores than there are people to support them.” The newspaper quotes one retail analyst at the Strategic Resource Group as saying that Wal-Mart’s success has contributed to bankruptcy filings by a number of grocery, drug and general merchandise chains. Wal-Mart’s stealing away customers from other stores creates that appearance of new jobs and revenues — but its merely what the analysts call ‘captured sales.’ The slow recession has converted consumers into bargain hunters who are hunting for the lowest prices. “People are buying the ad specials and loss leaders, and that’s about it,” said the spokesman for the Arizona food Marketing Alliance. One of the casualties was Bashas’ — like many other grocery stores before it across the nation.
To stay alive, Bashas’ was forced to enter into a food fight price war. The company has implemented price reductions on more than 10,000 items. Fry’s Food also began offering discounts coupons and free products. According to the Republic, in an attempt to sink to Wal-Mart prices, Bashas’ price cuts have sliced its profit margins to almost nothing. On the company’s website, there is a statement about the grocer’s ‘restructuring.’ “On July 12, 2009, Bashas’ Inc., and two (2) related companies filed petitions in the United States Bankruptcy Court for the District of Arizona seeking relief under Title 11, Chapter 11 of the United States Code… We made this bold move to help preserve the business, and the jobs of our more than 10,000 members (employees),’ said Mike Proulx, Bashas’ president and chief operating officer. ‘We did this to improve the health of the company as we navigate through difficult economic times. This filing helps us to stay on track with both the company’s short and long-range plan, and to solidify our position as Arizona’s preferred local, family-owned grocer.’ According to company executives, the filing decision was made after evaluating a combination of three factors: 1. The national credit crisis, which has caused credit markets to tighten; 2. An especially challenging Arizona economy and stagnation of growth which has, in effect, caused the state to be ‘over-stored’; and 3. The repeated, ongoing attacks from the international and local grocery workers’ union designed to defame and intentionally interfere with the grocer’s operations. ‘We are confident that our Family of Stores is here to stay,’ said Edward (Trey) Basha, a senior vice president and Basha family spokesperson. ‘We’re not winding down operations, and it is not our intention to sell to another entity. We’ve been privileged to serve the needs of Arizona families for more than 77 years and we’re committed to continue that tradition.’ Bashas’ has financial backing and has obtained a Debtor in Possession loan commitment for $45 million to continue operations. ‘ABCO markets, Mega Foods and Southwest Supermarkets did not have that,’ said Proulx. ‘It’s our intention to operate our business, so as not to impact our member (employee) wages or benefits and to continue to provide fresh products at competitive prices for our customers.’ Basha said, ‘The short-term plan is to emerge from Chapter 11 in the first quarter of 2010, and clearly we’re developing long-term strategies to ensure future success.’ Bashas’ owns and operates more than 150 stores in Arizona, California and New Mexico. But the company that laid Bashas’ low, Wal-Mart, has more than three times as many employees in Arizona, or 32,190 workers. Bashas’ is at least the fourth major grocery chain in Arizona to run into financial trouble during Wal-Mart’s ascendancy. Readers are urged to leave a customer comment on Bashas’ website at http://www.bashas.com/comments.php?com=2 with the following message: “It would be good for Bashas’ to stop bashing its organized workers, and tell the Arizona public the truth about why the company has filed for bankruptcy. The rise of Wal-Mart superstores had more to do with Bashas’ current plight than anything done by the United Food and Commercial Workers. Wal-Mart has saturated Arizona with an incredible 63 superstores in the past decade, as local officials embraced these new buildings as ‘progress.’ Now the price paid is becoming clearer: 1,000 jobs lost at Bashas’ — plus losses at other grocery chain stores like Fry’s. You are losing market share to Wal-Mart. This demonstrates once again that Wal-Mart’s rise has not meant new jobs, but simply old jobs in new aprons. It’s time for Bashas’ to tell the public the truth about Wal-Mart’s high stakes game of retail musical chairs.”