Tops Markets President Frank Curci is the Ted Nolan of the Buffalo grocery business.
Like Nolan, the popular Buffalo Sabres coach who returned to the bench last week, 16 years after his firing stunned hockey fans, Curci capped his own comeback at Tops by leading a group of six high-ranking executives to buy the supermarket chain from the investment firms that now own it.
“It certainly is the crowning moment in Frank’s career,” said Burt P. Flickinger III, the managing director at SRG Insight, a retail consulting firm in Connecticut. “It’s a major comeback.”
Actually, the comeback started more than six years ago, when Curci, who was working as the chief operating officer of Southern Family markets, a supermarket chain based in Birmingham, Ala., approached Morgan Stanley Global Private Equity about bankrolling a purchase of Tops from its embattled owner, Royal Ahold.
When they agreed, that alone marked a remarkable turnabout for Curci, who had resigned from Tops in 2003 amid allegations of accounting irregularities during his three-year stint as the Amherst-based supermarket chain’s president and chief executive officer.
It was even more remarkable when Morgan Stanley brought back Curci to run Tops as its president and chief executive officer, showing faith that he could put the wayward chain back on the right path.
When Curci returned, he certainly had his work cut out for him. Tops had stumbled badly under Ahold’s ownership.
When Ahold bought Tops in 1991, it was the chain’s fourth owner in eight years. Yet Tops had remained a powerful force in the Buffalo Niagara grocery market by paying attention to its local roots, featuring local products and supporting local suppliers.
But Ahold’s management didn’t see it that way. The Dutch grocery giant started running Tops as just another one of its many national chains.
Under its one-size-fits-all approach, it started sharing management with its other chains, weakening its Western New York connection. Store-brand products from some of Ahold’s other chains, such as Finast, started showing up on Tops’ shelves, while many local products, from Weber’s mustard to Sahlen’s hot dogs, disappeared.
Ahold even launched a new supermarket brand in the Buffalo Niagara region – Martin’s – in a perplexing move that put it in competition against its own Tops chain.
“When Ahold was running the company on an absentee basis from out of state, Tops really struggled,” Flickinger said.
After the Morgan Stanley deal, Curci and his management team set to work rebuilding the chain’s local connections and sprucing up its stores through a $150 million capital improvement plan.
With Morgan Stanley’s deep pockets backing him, Curci set out on a mission to make Tops bigger, too. It snapped up more than 50 stores from bankrupt grocer Penn Traffic Co. in 2009. It added 21 more Grand Union stores in October 2012.
When the dust settled, Tops had more than doubled its store count, which jumped from 71 when Morgan Stanley took over to 159 today. It bulked up its presence in northern New York, northern Pennsylvania and western Vermont. Tops management even showed it had a soft spot for smaller grocery stores in smaller markets where it was the only game in town.
Tops showed it can be nimble, too. It developed a smaller store concept for its more competitive and cramped markets, leading to the opening of supermarkets like the one on Harlem Road in Cheektowaga. It’s bought a few smaller independent stores, including one in North Boston in July 2012, where it doesn’t have any big competitors nearby.
“Tops has kept grocery stores in small towns and urban communities, built stores where there was no supermarket presence,” said Katie McKenna, a Tops spokeswoman.
Tops even staked out a claim in the upscale grocery market by launching its Orchard Fresh concept in Orchard Park this spring, beating Trader Joe’s to the punch months before the cult favorite opened its first local store in Amherst.
“The acquisitions put Tops in a position where they can compete,” Flickinger said. “It’s good to have a major food and drug chain locally owned and operated, without the oversight from Wall Street.”
But Tops’ expansion carried a hefty price, saddling the chain with more than $650 million in debt. Curci’s biggest challenge now will be to find a way to manage the debt load that was built up during Morgan Stanley’s tenure. That’s far beyond the $350 million to $400 million in debt that Flickinger sees as the most that a company of Tops’ size should carry.
But with interest payments on that debt sucking up more than $70 million a year, Curci and Co. will have to be focused on squeezing even more profits out of Tops’ operations at a time when its customers have been buying less and switching to lower-priced products.
With the focus on boosting profits – Tops lost $9.5 million during the first half of this year as same-store sales slipped 0.5 percent – the chain may try to hold the line on its spending and investments, at least for the near future.
That’s especially likely if the long-term plan is for Tops to go public or sell out to another buyer. Either way, Tops will have to be more profitable if Curci and his team hope to turn their all-in bet on the supermarket chain into the investment of a lifetime.
“Tops’ people are certainly capable of increasing profitable sales,” Flickinger said. “They’ve made enough acquisitions. Now it’s just about making more money.”