Safeway

Zagara's Fresh Markets L.L.C., the operator of three stores in the highly competitive business of selling fresh gourmet food, has filed a Chapter 11 petition in U.S. Bankruptcy Court in Camden but will continue to operate while it reorganizes, company officials said yesterday. Zagara's has stores on Route 38 in Mount Laurel, on Route 73 in Marlton, and in Glen Mills, Delaware County. To customers, the stores appeared to be operating normally yesterday, with virtually every inch of shelf space filled with merchandise, and the usual array of fresh produce, meat, pastry and prepared foods available.

Companies don't often admit their mistakes - such as taking a perfectly good part of their business and messing it up. But Karl Schroeder, Safeway Inc.'s eastern division president, stood between the freshly baked cakes and the pizza counter at his company's Genuardi's supermarket in Wynnewood last month and did precisely that. In the spring of 2002, after California-based Safeway bought the popular Genuardi's chain from its founding family, the parent moved swiftly - too swiftly, Schroeder and others say now - to cash in on its $500 million investment.

Safeway Inc., the parent of the Genuardi's stores in the Philadelphia suburbs, reported a sharp decline in second-quarter profit yesterday as it struggled to overcome a variety of problems. Safeway, based in Pleasanton, Calif., and the nation's third-largest supermarket chain, faced slow sales growth because of the weak economy and increasing competition in some parts of the country from Wal-Mart Stores Inc. In this region, Safeway faced a different problem after it acquired Genuardi's from its founding family in early 2001.

When Safeway Inc. reported yesterday a whopper of a loss for last year, it was a measure of the indigestion the company has been suffering from the acquisition of Genuardi's and three other supermarket chains since 1998. Since Safeway bought Norristown-based Genuardi's from its founding family early in 2001, many longtime customers have complained that in-store service has slipped, the quality of produce and prepared food has fallen, and stores no longer stock some favorite brands.

The first day Jim DeGilio walked into Zagara's gourmet food store in Marlton more than four years ago, he fell in love - not with someone, but with the concept of what he calls "a restaurant inside a grocery store. " DeGilio, the former director of food service for Genuardi's Family Markets, may need to summon that emotion again for the task he has just taken on. As a new owner of Zagara's, one of the region's pioneering chains of high-priced specialty and natural-food stores, DeGilio knows he needs to find ways to bring once-devoted customers back to his stores.

It's mea culpa time at Genuardi's. Responding to a barrage of customer criticism and a decline in its market share, the supermarket chain has launched an advertising campaign to apologize for angering shoppers with sweeping changes made in its stores after Safeway Inc. acquired the company 21 months ago. "Despite our best intentions, not all of the changes we've made recently have gone smoothly, and we're sorry if your Genuardi's experience was...

For retiree David Peoples, it was the little things that he once loved about the Genuardi's supermarket near his home in Spring House. And it's the little things that annoy him now. Like many Genuardi's shoppers in the Philadelphia suburbs, Peoples believes that the region lost something valuable last year when its largest family-owned chain - and one of the most widely admired companies in the supermarket business - sold its 44 stores to Safeway...

Working to organize employees at Genuardi's Family Markets, five United Food and Commercial Workers union locals are asking customers to shop elsewhere as they mount a big recruiting push over the busy Memorial Day weekend. The locals plan increased picketing, and a radio advertising campaign is scheduled to begin today. "The employees are calling us," said Anthony Cinaglia, president of UFCW Local 56 in Cherry Hill, which plans to picket about 20 stores today and over the weekend.

What's left? That was one question food industry representatives were asking after the announcement last week that Genuardi's Family Markets was being acquired by Safeway Inc. The planned sale leaves Clemens Markets, a 19-store chain based in Kulpsville, Montgomery County, at the top of a very short list of independents. Clemens has an estimated 4 percent of the regional grocery market. The list also includes individual owners of ShopRite stores with a combined 12.1 percent share; and individual owners of Shop N Bag and Thriftway markets, with a combined 6.3 percent share.

Genuardi's Family Markets, the local family-owned supermarket chain that began in 1920 when an Italian immigrant peddled garden vegetables from his horse-drawn cart, will be sold to Safeway Inc., a California-based supermarket company. "The Genuardi family intends to exit the supermarket business," said chief executive officer Charles A. Genuardi, a grandson of Gaspare Genuardi, the immigrant farmer who modernized his business by upgrading to a Model-T truck in the early '20s. The cash price was undisclosed.