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Rochester Democrat and Chronicle

08/04/1995
1a
National
Gary Craig

Philosophy, not funds, led to Midtown demise

Byline: Gary Craig
New grocery hopes to make profit, too
By GARY CRAIG, STAFF WRITER
Wegmans Food Markets Inc. last year grossed $10 million in sales at its Midtown Plaza store, about 66
percent more than industry experts say is necessary to make the standard industry profit, according to
financial records reviewed by the Democrat and Chronicle .
But the records, confirmed by a second source, also support Wegmans' claims that its business had leveled
off at the Midtown Plaza operation.
In April, Wegmans announced it was closing its Midtown store. In June, it vacated the store, seven months
before the lease expired.
Wegmans' gross sales dropped about 1 percent from 1993 to 1994, records show.
However, that was the only year in the last five years to show a decrease in gross sales. The 1994 sales were
about 6 percent above the 1990 volume, according to the figures.
When cost-of-living increases are factored in, the sales figures indicate that the annual sales were staying flat
or declining slightly year-to- year.
City officials yesterday announced that a new grocery store Midtown Food Market will open in the Wegmans
space Aug. 21.
It will be owned by Rochester Food Enterprise Inc., a new subsidiary of Midtown Holdings Corp.
Olean Wholesale Grocery Co-op will supply the market, and a former longtime Wegmans manager will run
the new store.
The city will provide a $625,000 loan toward the project using federal funds from the Department of Housing
and Urban Development. Rochester Food Enterprise will invest $125,000.
Mayor William A. Johnson Jr. called the deal a tribute to Rochester's private sector willing to work with
government.

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"People who have chosen to live within the city limits . . . should not be inconvenienced to shop for their
food," he said. Wegmans has come under criticism from some community activists who say the company is
turning its back on the city's poor and senior citizens by shutting down urban stores.
Wegmans officials refused to comment on the figures for the company's Midtown Plaza store. They referred
the Democrat and Chronicle to an April letter from Wegmans chairman Robert Wegman to the newspaper's
editorial page.
"To permit unprofitable operations to drain resources can be very dangerous for a company," Wegman wrote
in the April letter. After the closing, Wegmans officials didn't indicate that the store was unprofitable, but
they said that business there was not increasing.
Industry experts say that a store with about 20,000 square feet of sales space, such as the Midtown operation,
can make an acceptable profit with about $6 million in annual sales.
Expenses are fairly standard in the supermarket business, so there is not great variance in the gross sale
figures needed to make a profit.
However, industry experts acknowledge that Wegmans' expenses are often steeper than other supermarkets
because they use more labor and sell higher-quality produce and other goods.
And, for supermarkets, the standard profit in the industry is often only between 1 percent and 3 percent.
Industry experts say that Wegmans is likely comparing its performance against itself, not the rest of the
industry.
Its gross sales at the city stores may in fact appear tiny when compared to the megastores Wegmans has
turned to building in recent years.
"It's outrageous they're shutting these stores," said Joel Steiker, a consultant with the Philadelphia- based firm
Praxis Associates Inc., which in 1993 conducted a supermarket study for Rochester. "They're applying a
corporate standard to operating these stores, and they're totally insensitive to the community."
Wegman, in his letter to the Democrat and Chronicle, wrote: "We're not good at running small stores; it's not
our core business.
"We concentrate on a single store format, the superstore . . . in fact, we've pioneered this in the industry, and
we're efficient and successful at it, providing over 13,000 jobs in the Greater Rochester area."
Art Aspengren, who heads the area Industrial Management Council, said, "Wegmans has to make economic
choices. Wegmans is not abandoning the inner city or the city of Rochester at all."
Wegmans contributes heavily to a variety of programs to help city youth and residents, Aspengren noted. In
his letter, Wegman said that the business' Work-Scholarship Connection program assists 400 city students at
risk of dropping out. When compared to its other stores, the Midtown Plaza probably did appear to be
unsuccessful, Aspengren said.
"I understand where Wegmans would decide philosophically that that store was not doing well compared to
their other stores," he said.

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One nationally known industry expert, who is familiar with the Rochester supermarket industry but asked not
to be identified, said: "Why are they going out (of the city)? They're just thinking bigger and bigger.
"They're measuring that (Midtown) store against all their other large large stores," he said. "It could well be
accurate that, compared to what they were doing elsewhere, it was a loser.
"The question is `Wegmans, are you divesting in the city?' And the answer is `yes.' Thank God you've got
Olean coming in."
In his letter, Wegman denied that the company was "divesting itself of the city." He noted three successful
city stores still exist 1750 East Ave., 1411 Mt. Hope Ave., and 375 Driving Park Ave. And Wegmans wants
to expand the Mt. Hope operation and will need zoning approval to do so, he wrote.
Consultants who have studied Rochester's supermarket scene in recent years have concluded that the
Midtown and Culver Road stores were among Wegmans' least successful, even when compared to other city
stores.
Includes reporting by Suzette Norris.
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Wegmans Food Stores

Grocery Trade, Food Store