Fleming files for Chapter 11 protection
By Andrew Gomes
Advertiser Staff Writer
Hawai'i grocery stores and convenience shops yesterday said they don't expect any significant supply disruptions after the state's largest wholesale grocery distributor, Fleming Companies Inc., filed for Chapter 11 bankruptcy yesterday.
Deborah Booker • The Honolulu Advertiser
The Lewisville, Texas-based company, which lost critical account Kmart last month, listed $4.2 billion in assets and $3.5 billion in debts, and said it is continuing all operations while establishing a critical vendor program and negotiating with lenders to provide emergency financing.
Local retailers have been reassured that Fleming Companies Inc. will work through its financial problems and continue business.
Fleming's move to seek court protection from creditors relieved some of the company's local customers, which include Foodland Super Market, 7-11 Hawai'i, Longs Drugs stores, Times Super Market and Daiei.
Some customers of Fleming, which supplies an estimated 25 percent or more of packaged grocery items sold in the state, had been scrambling to line up alternate suppliers last week after Fleming announced it might not be able to pay manufacturers for goods.
Yesterday, Fleming issued a statement saying the company is open "and conducting business at all of its facilities. ... We are supplying customers from existing and new inventory and continue to work closely with vendors to coordinate product flow."
Still, some industry analysts predict there will be inventory shortages at some stores around the country because some suppliers withheld shipments to Fleming.
Headquarters: Lewisville, Texas Hawai'i operations base: Kapolei Employees: about 10,000, after firing 1,800 in February Hawai'i employees: unavailable Revenue: $15.5 billion in 2002 Hawai'i revenue: estimated at $300 million a year National customers: Target, IGA, Albertson's, Piggly Wiggly, Phillips 66, Circle K and others Hawai'i customers: Foodland, Times, Daiei, 7-Eleven Hawaii, Longs Drugs and others Chief executive: Peter Willmott (interim, after Mark Hansen was ousted last month following a formal federal investigation into Fleming accounting practices) Hawai'i division president: Brian Christensen
Fleming officials in Dallas and Hawai'i did not return calls yesterday.
Fleming Cos. at a glance
Some Hawai'i retailers said they had been reassured by Fleming last week and on Monday that the distributor would work through its financial problems and continue business.
But even some Fleming customers who didn't receive assurances from Fleming said yesterday that they were not concerned by the bankruptcy.
"It's like the airlines, they go under Chapter 11 and they manage to survive," said Ron Shima, president of Shima's Market in Waimanalo. "I think they'll be OK."
Shima and other retailers added that there are a few West Coast grocery distributors doing business in Hawai'i that could help if necessary. Honolulu-based Y. Hata & Co., a grocery supplier to hotels, schools and other nonretail outlets, also has considered expanding its limited grocery distribution to retailers if needed.
Laurence Vogel, president and chief executive officer of Y. Hata, said his company started getting calls last week from about a dozen of Fleming's local retail customers making contingency plans.
"We're just analyzing that," he said. "I think most customers would view staying with and continuing to do business with Fleming to be in their best interest. With Chapter 11 it should provide some stability, and we hope so because it would be so upsetting to the structure here."
The last major change in Hawai'i grocery distribution occurred three years ago when independent wholesale food distributor Hawaiian Grocery Stores Ltd. shut down following a failed bankruptcy reorganization, a displacement that Fleming mostly filled.
Fleming has estimated its market share in Hawai'i at between 20 percent and 25 percent before acquisitions last year of companies that supplied Longs and Safeway.
Today there are not many distribution alternatives, although those in the industry say there are enough to ensure adequate supply of groceries at fair prices.
Star Markets Ltd., for example, receives most of its groceries from Los Angeles-based Unified Western Grocers. KTA Superstores on the Big Island does business with Associated Grocers out of Seattle and buys direct from manufactures. Other chains such as Costco, Wal-Mart and Sam's Club do their own distribution.
It was unclear if Safeway uses Fleming or its own distribution in Hawai'i. Safeway officials did not return calls yesterday.
Roger Godfrey, president of Times, said he has had to do a little alternative ordering in the past week because of Fleming's trouble, but he said it hasn't been significant.
"I've seen zero effect to it really," he said. "They'll continue to operate under the bankruptcy. We don't see any problems in it."
Foodland spokeswoman Sheryl Toda said the state's largest supermarket chain is hopeful that Fleming will continue to provide uninterrupted service.
"However, we have set up alternate sources of supply in the event that problems should arise," she said.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
