Weatherill leads new design, new marketing for
Cost Cutter stores

Lance Henderson

Kevin Weatherill, the new president and CEO of the newly formed The Markets LLC, has taken over at a critical time.

After Brown & Cole LLC emerged from Chapter 11 bankruptcy last year, The Markets took over as a new company with new leadership and a new direction. As part of that transformation, Weatherill took over leadership from Craig Cole, who retired after a 22-year reign as president of Brown & Cole.

Although it was just formed, the company had inherited Brown & Cole’s old problems: a chain of Cost Cutter and Food Pavilion stores in dire need of reinvestment to stay profitable.

But now The Markets is going forward with virtually no debt and a new majority stakeholder, Hancock Park Associates, which has the money to reinvest in the company and execute the vision of The Markets’ new CEO and management.

With the imminent unveiling of its Birch Bay store and a planned transformation from the Lakeway Cost Cutter to The Market at Lakeway to be complete in the first part of next year, The Markets is hard at work.Even with his busy schedule, however, The Bellingham Business Journal caught up with Kevin Weatherill to discuss the past, present and future of the company.

BBJ: What were some of your major concerns when you decided to take over the company as it emerged from bankruptcy?

Kevin Weatherill: I guess my major concern was that our team thought all of our challenges were behind us. We all had to be open to changing many aspects of how we do our work in order to position our stores and our company to grow and succeed against pretty tough competition and a challenging shift in how consumers spend their money.

BBJ: How can The Markets capitalize on this trend?

Weatherill: I think we have been pretty well-positioned because we have been a value-positioned retailer. We’ve had market-leading prices, in terms of value, in meat and produce and we’ve been strong in our [main food aisles.] We also switched our wholesale supply and we did that because [Associated Grocers] had sold to a California company. They had a different marketing strategy than the one that existed and we felt that dealing with SuperValu, which is the largest independent grocery product wholesaler in the country, would be to our advantage. So the last six months have been about absorbing all that change. It’s sort of like taking out your electrical panel at home and rewiring everything. So a lot of time has been spent on adjusting to those changes and learning how we can take advantage of some of the things we saw about switching our business.

BBJ: What are some of the practices and procedures that contributed to Brown & Cole’s filing Chapter 11 that will be specifically addressed so it doesn’t happen again?

Weatherill: Brown & Cole got hit by a few, almost independent, events that really put the business in distress and it just became very difficult for it to get out.

One, we were the largest owner of [Associated Grocers] and they hit financial difficulty in the early 2000s. We owned a lot of them and we were dependent upon them, so their financial difficulty triggered our lender’s concern that if they are having difficulty, what does it say about our company? We were put in a position with the lenders where we had to refinance, change our balance sheet and get rid of some debt and the moves made somewhat weakened the company.

Then, the growth of health care costs in the early 2000s really put a burden on store profitability.

In general, it was just a slow degrade on the ability of the company to keep up with all of its legally bound obligations like leases. You can’t just say we aren’t going to keep that store anymore; you’ve got to continue to pay for them. That drain prevented them from reinvesting in their stores and so there were a good number of stores that haven’t had any investment for some time and they need it.

The Markets going forward has virtually no debt on it. We have investors who are committed to renewal of the company and are aggressively spending money to upgrade our facilities and add those features that customers come to expect.

BBJ: So Brown & Cole’s woes were all external?

Weatherill: They had debt structure problems, but not people structure problems. They just had a balance sheet that was difficult and in a difficult business environment for a number of external factors that made it difficult to reinvest in stores and maintain market share.

I also think they grew pretty fast in the late ‘90s, and had they looked toward growing internally by reinvesting in some of the stores they had rather than acquiring new ones, they would not have had the balance sheet problems and would have had solid market share in those Brown & Cole markets that we added to.

BBJ: What are some of the advantages and disadvantages to having Hancock Park Associates as a major stakeholder in The Markets?

Weatherill: I don’t really see any disadvantages and I haven’t experienced any. They are very smart business people and their mission is to support us in the execution of our plan. What The Markets is becoming is what we feel we need to do to grow this business and strengthen it. They agree with what we think and they are there to support us and challenge our thinking.

The advantages are that they are very committed to strengthening this company and reinvesting in it. They didn’t buy it to milk it. They bought it to build it up. They are very smart people who are experienced across a great number of industries and have a track record of a lot of success in buying companies and seeing them grow.

BBJ: What about company morale? Did a new stakeholder and a clean slate reinvigorate employees?

Weatherill: I think morale was impacted heavily with the uncertainty of the business and some of the declines that we saw. The instability in not knowing if we were going to come out of bankruptcy or how we were going to come out of bankruptcy. Would the company be sold off in parts?

Then there are the obvious distresses of seeing market share erode in places because of the competition’s ability to reinvest and our lack of it. I think there was a lot of employee concern about what would happen to them if they were working for Brown & Cole. These are good-paying jobs. People work here for many years. Great benefits. You can help raise a family from working in this business with what we pay. These jobs are very important to people and it was uncertain how it might change. There were a lot of morale issues. I don’t know how you would avoid it.

Coming out of bankruptcy, the challenge for our team was to go back and recommit and put their jobs first before their personal preferences, and that can be a challenge. Change brings with it a certain level of discomfort. That was really one of my concerns: Coming out of bankruptcy, we didn’t take anything away from anyone. They didn’t start over in seniority. They didn’t lose benefits. They didn’t lose accrued vacation. All of those things were carried forward at the management’s recommendation to Hancock Park.

We felt like we wanted our team members to come out whole as much as possible. Given that you could come out whole, you don’t want people to come out the other side thinking that we are not still in a fight to make this company a great company and it is going to come with a lot of effort and change and figuring things out and trying things differently. There is more change coming. It would come even if we didn’t change ourselves; it would just be a change that wasn’t predictable and managed and controlled by us.

BBJ: Why is the company rebranding? What does it accomplish in your eyes?

Weatherill: It’s a fresh start and that is really what we have with a change in management. In terms of executive management, there is one person who was with Brown & Cole. Almost everybody moved or was brought on in the last 24 months as part of the turnaround and succession of the company going forward.

Also, because we grew through our acquisitions, we had this cluster of brands and confusion. So you would have three different brands within the same geographic area and we need to bring those brands under one brand to get the synergies with image. As we refresh and renew stores, we are going to rebanner and rebrand.

And I think people are confused about bankruptcy. It’s a confusing process. When we exited bankruptcy as Brown & Cole, we were a new company. A lot of people thought it was the old company, and trade and vendors and folks that were impacted by that bankruptcy are upset with Brown & Cole. It’s just that carrying Brown & Cole forward, when it’s not the same Brown & Cole, not the same owners, not the same obligations, different people — rebranding creates more of a fresh start in the market.

BBJ: Do you have to repair some relationships with old vendors, or are you striking forward with a completely new path?

Weatherill: Yeah, particularly the small local vendors. There is a hierarchy of debt: secured, then unsecured. At some point, there is an agreement on how much money there is available to extinguish those obligations. And if you’re an unsecured debtor, which most of the trade vendors are, they are after the owners. If there is anything left, the owners get something.

Well, there was very little after the primary, so we worked real hard with our local farmers and local manufacturers to get them whole or give them as much business as possible to alleviate some of the pain involved with that, because there was pain for everyone.

BBJ: What will be Craig Cole’s future involvement with The Markets?

Weatherill: He’s retired. So he’s available for us as a resource if we have a need for an area where we feel he could help us. But he’s retired and he enjoys that. I mean, it was stressful enough for anyone, particularly him.

BBJ: The Markets is undergoing a thorough image retooling currently. What can customers expect to see as the Birch Bay store comes online and Lakeway is remodeled?

Weatherill: They are going to see a lot of features they don’t see in other supermarkets. They are going to see some new departments I am not going to disclose because we are not there yet. But we are going to improve our fresh food business significantly. We are going to improve the variety and quality of our deli programs, which will be differentiated within the market. These changes are going to allow us to compete with where people spend their food dollars.

You know a lot of food dollars are not spent at supermarkets. We have to compete with quick-service restaurants and fast-food outlets. We are not going to try to compete with white- table restaurants, but we are going to have a variety of great, fresh food available. We are going to have service meat and seafood departments. I think customers value that. And we’re going to have some pretty great grocery departments that are not found really anywhere in Washington.

We’ll have great variety, and with our strategic move to change our wholesale supply, we have a cost-of-goods advantage that we did not have before, so we are going to have good values in our grocery aisles.

Kevin Weatherill Bio

Name: Kevin Weatherill

Age: 47

Title: President and CEO of The Markets LLC (formerly Brown & Cole)

Experience:

• Hired at Brown & Cole in 1985
• Was Brown & Cole’s chief operations officer when he left in 2000
• CEO at Bornstein Seafood until he rejoined Brown & Cole in 2006
• Also owns Whatcom Falls Mini-Mart and Deli on Electric Avenue