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Who’s surprised Winn-Dixie failed?

For all those who have visited metro Jackson-area Winn-Dixies lately, the recent news that the Jacksonville, Fla.-based grocery store chain is closing a total of 326 stores, 29 of them in Mississippi including 14 in the metro area, should have caused little surprise.

To wax Jeff Foxworthy-like, “If you have more employees in the store than shoppers, you could be in trouble.”

Spacious, yet deserted, parking lots and well-stocked shelves bordering empty aisles were a dead-giveaway that Winn-Dixie’s days, at least in the metro area, were numbered.

Actually though, the end to this sad story was foreshadowed by some very questionable decisions that go back decades and to another grocery store chain that grew itself into bankruptcy — Jitney Jungle.

Big pants

At one point, Jackson-based Jitney Jungle Stores of America Inc., which opened its first store in 1919, had a customer and brand loyalty that was as good as it gets. In fact, it was such a part of the local landscape that author Eudora Welty included the flagship Jitney No. 14 store on Fortification Street in Jackson in her fiction. It was the locally-owned, neighborhood grocery store, period.

That all changed in late 1995 when Jitney was purchased by the investment firm Bruckmann Rosser Sherrill & Co. of New York. The grocery store retained the Jitney name, but now the strings were being pulled a half-nation away from Mississippi.

Speculation began immediately that Bruckmann Rosser Sherrill had plans to take Jitney public. The rumor mill really heated up when, in November 1997, Delchamps was purchased for $213.6 million. A publicly-held grocery store chain, many wondered if the Delchamps acquisition was a convenient way to help Jitney go public.

In the end though, the Delchamps buy helped Jitney go bankrupt. It simply outgrew its breeches. By early 1999, news of financial difficulties surfaced. In June, the CEO and CFO of Jitney departed. Analysts saw signs even then that a Jitney buy-out was in the works. The only question was, “Who would the winning suitor be?”

Déjà vu all over again

In November 2000 when Winn-Dixie paid $85 million for Jitney, which filed for Chapter 11 bankruptcy in October 1999, it was not Winn-Dixie’s first foray into the Magnolia State. The grocer had come and gone before, selling stores in 1986 in Jackson, Vicksburg and Hattiesburg that effectively ended its first presence in Mississippi. And who was the buyer? Yes, Jitney Jungle.

So in essence, Winn-Dixie was buying into a territory that had proven unsuccessful both for itself and, in the end, for Jitney. The irony of Winn-Dixie’s purchase of Jitney was only heightened when the Federal Trade Commission approved the merger in January 2001, ruling that the deal would not upset the competitive balance in communities served by the grocery store chains, though the commission did specify four Jitney stores that Winn-Dixie could not buy because “entry by a competing supermarket chain would be difficult.”

Of course, these stores were down in traffic and sales when they were Jitneys (Winn-Dixie originally retained the Jitney name, but changed all stores to Winn-Dixies in September 2001), well before Winn-Dixie bought them. But that’s more of a criticism than a defense.

Now, Winn-Dixie, which filed for bankruptcy protection last February, plans to close the once-Jitneys August 20. That certainly won’t be the end of the story. Grocers are slicing and dicing for market share, and rest assured that some entity will gobble up the closed supermarkets.

And we’ve learned what?

So, let’s review. Jitney Jungle was a successful, locally-owned grocery store for some 80 years when, feeling competitive heat, decided to strap it on and play on the bigger guys’ home turf. It lost, and was promptly bought by Winn-Dixie, which had trouble scoring in Mississippi the first time it had the ball, but somehow thought that buying failing stores from a bankrupt company would be a winning formula in a second attempt at victory. Now, Winn-Dixie sits in the loser’s locker room. Is anyone surprised?

There is a difference between getting bigger and getting stronger. Growth does not always bring strength. Often, it leads to a top-heavy company, wobbling around on spindly legs. What Jitney had was muscle. Now, all that is left is skin and bones.

In May 2001, a Winn-Dixie executive told the Mississippi Business Journal, “We’ve been able to turn the stores back into very nice, wonderful little neighborhood stores for people to shop in.” One wonders now if Winn-Dixie even knows what a neighborhood store is. Can you be a large grocery store chain and offer the corner-store experience? Certainly, but it obviously isn’t easy.

Retail analyst Candace Corlett told cnn.com that grocers need “to stop blaming Wal-Mart and focus on improving the shopping experience.” In other words, simply changing the sign out front won’t cut it.

Here’s my slant on the Winn-Dixie experience. “If the echo of your customer’s footsteps is louder than your elevator music, you could be in trouble.”

Contact MBJ staff writer Wally Northway at northway@msbusiness.com.

About Wally Northway

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