2258 8 LINKEDIN 77 COMMENTMORE

Kroger of Michigan has agreed to buy all seven Hiller's Market locations in a deal that will close the Commerce Township store in July but keep the remaining stores open.

"The only store they will not operate is our location on Union Lake Road in Commerce Township because they have a brand-new store and fuel center directly across the street," Hiller's vice president Justin Hiller said

The other six stores will operate under the Hiller's banner until the sale is finalized in early July, said Ken McClure, consumer communications manager for Kroger of Michigan. The locations then will switch to the Kroger brand.

Hiller and McClure both declined comment on terms of the sale Friday. Hiller wouldn't discuss why the 74-year-old, third-generation chain is selling to Cincinnati-based Kroger, but did say, "We've been in discussions for several months."

Kroger aims to incorporate Hiller's upscale, diverse product line and highly customer-focused culture into the chain and develop a hybrid that can be scaled across the grocery division, McClure added.

"We've been expanding in natural and organic foods, and in local and ethnic food, so our hope is to learn the local and ethnic components that Hiller's is so good at, and merge it with our stores," said McClure, who worked for Hiller's for 20 years, including eight years as chief operating officer. "We're looking at a hybrid that takes advantage of the best of both worlds."

Founded in 1941 as a downtown Detroit butcher shop, the first Hiller's store opened in Berkley in 1951. The stores feature a large selection of ready-to-eat deli and specialty foods, impressive fish and meat counters, meticulously arranged produce and an abiding emphasis on customer service. While most grocery stores stock about 15,000 items, Hiller's stocks upward of 70,000, and strongly emphasizes made- and grown-in-Michigan products, as well as large selections of foods that are not genetically modified and what the company claimed was the Midwest's largest selection of gluten-free foods.

Owner Jim Hiller has been the voice of Hiller's in radio ads, and made the decision to stop selling cigarettes in 2009 after losing two friends to lung cancer. After discovering he suffered from high-blood pressure in 2010, Hiller, then 62 years old, moved to include a wide range of low-sodium foods.

That kind of personal touch paid off, analysts say.

"What made Hiller's so successful is the ability to have a super-close connection with its local customer base, and the whole ability to have different products and a commitment to local shopper needs that was somewhat unprecedented," said Meg Major, an editor with the national trade magazine Progressive Grocer.

But basic shelf staples, such as rice and canned beans, are a mere commodity in the fiercely competitive grocery business, where margins are razor-thin and consolidation has left most areas of the country with a few major players, small specialty chains and local independents.

"Everyone sells some kind of food," Major said.

In an era when canned goods, boxed foods and snacks can be purchased anywhere from the gas station and dollar store to CVS and Bed Bath & Beyond, the grocery market has split into either low-price chains, such as Aldi's, or upscale operations, such as Trader Joe's and Whole Foods, leaving the plain-vanilla supermarket of the '90s fading into extinction.

To grow, grocery stores are focusing on more profitable opportunities in specialty, healthy and prepared foods that can prompt customers to skip the carry-out restaurant to pick up dinner at the grocery store, then stick around to add gourmet cheese or wine, along with a half-gallon of milk and a box of Pampers.

"The things that a supermarket can add to their mix to give people opportunities to linger a little longer and spend a bit more money are things like a fresh meal that's healthy," Major added.

The Hiller's acquisition fits right into Kroger's recent, aggressive series of acquisitions and expansions, notes David J. Livingston, a supermarket research analyst and founder of DJL Research in Milwaukee.

"Kroger likes to acquire well-run independent operators, and doesn't like fixer-uppers," Livingston said. "They like to acquire someone who's doing everything well, and Hiller's has been doing very well for several years."

He added that he expects the Hiller's stores will see some reduction in the level of customer service. "Hiller's has an exceptional amount of service and that will be very difficult for a chain store to maintain," Livingston said. "The stores will probably be a little bit more homogenized after Kroger takes over."

On the other hand, Major, of Progressive Grocer, noted that it could be Kroger that changes, not Hiller's. She points to Kroger's acquisition of the North Carolina-based Harris Teeter Supermarkets Inc. in 2014.

"Harris Teeter had a very strong reputation for perishables and a great shopping experience," Major said. "By and large, observers would say Kroger has left Harris Teeter alone. Instead of reinventing that business model, Kroger seems to be coming in to learn all they can."

Hiller's workers will need to apply to Kroger, which already has 900 job openings. Kroger also partners with the same collective bargaining unit, and will need to align the two separate bargaining agreements. "Our intention is to take as many associates as possible who are a good fit and who are willing," said McClure of Kroger.

Hiller said the sale was partly motivated by the idea of preserving jobs.

"Kroger is looking for a lot of experienced associates in leadership positions as well as in other roles," he said. "Competition is tough, but this is an opportunity for Hiller's employees to start a career with Kroger."

Along with the Union Lake Road location in Commerce Township, Hiller's currently operates stores in Ann Arbor, Northville, Plymouth, South Lyon, West Bloomfield, and another in Commerce Township.

Kroger, which recorded fiscal 2014 sales of $108.5 billion, operates 2,625 grocery stores in 34 states under more than 20 different names, including 123 stores and 64 Kroger fuel centers in Michigan. Kroger launched a $100 million improvement and expansion program in 2014 for its Michigan stores. The company trades on the New York Stock exchange, where shares closed up $1.22, or 1.77 percent Friday, ending at $70.13, near the top of its 52-week range of $45.31 to $77.74.

boconnor@detroitnews.com

(313) 222-2145

2258 8 LINKEDIN 77 COMMENTMORE
Read or Share this story: http://detne.ws/1GLMSmN