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New competition has hit liquor chain Centennial hardest so far

Centennial Beverage Group plans to reorganize in bankruptcy, but one of the oldest liquor store chains in Texas needs a lot of cooperation from suppliers and the patience of customers to make it happen.

The chain has 23 locations under the Centennial, Big Daddy’s and Majestic banners that still have the lights on, but little inventory is on their shelves. That may be the case until after New Year’s Eve, which is the biggest day of the year for alcoholic beverage retailers.

If it can’t reorganize in bankruptcy, Centennial will be the first big casualty in a market that turned hypercompetitive after Houston-based Spec’s and national chain Total Wine & More opened stores in Dallas and Fort Worth over the past year.

Wholesale clubs Costco and Sam’s have also stepped up wine and beer selections in the market.

At the same time, voters removed dry areas in several local cities, which allowed existing stores run by Kroger, Tom Thumb, 7-Eleven and others to start selling beer and wine. Centennial’s stores were positioned to take advantage of the old geographic patchwork.

Late last week, the 76-year-old company said after a huge inventory sale that generated $2.7 million in badly needed cash that it planned to remain in business and would be negotiating with vendors this week. Now it’s doing so under the protection of the U.S. Bankruptcy Court for the Northern District of Texas, where it filed for Chapter 11 bankruptcy on Monday.

Centennial owes more than $5 million to its two largest suppliers, Dallas-based Glazer’s Wholesale and Republic National Distributing Co.’s Grand Prairie operation. That put Centennial on the Texas Alcoholic Beverage Commission’s “delinquent list,” which prohibits it from buying more beer, wine and liquor.

But bankruptcy rules allow the company to purchase additional merchandise if it negotiates new terms with its suppliers, Centennial’s bankruptcy attorney Robert D. Albergotti said.

“We don’t have an agreement yet, but we’re trying to come up with a plan to get products in the stores by early January,” Albergotti said Wednesday.

Centennial’s lawyer will present some procedural motions before Judge Barbara Houser on Thursday, asking to be allowed to pay employees and continue health benefits.

Requests to close additional stores probably won’t be made until January, Albergotti said. Centennial has about $8.4 million in inventory, including beer, wine and liquor.

According to the bankruptcy declaration, Centennial has 247 employees and had sales of $158 million over the last 12 months.

Sales declined 50 percent from a year ago, president and CEO Gregory L. Wonsmos said in the filing.

“Big-box retailers have posed a serious challenge in both pricing and selection, and changes in local alcohol laws have increased competition by expanding the ability of grocery stores and other retailers to sell beer and wine,” he said. He also noted higher expenses because of Centennial’s recent expansions.

Centennial was acquired in March 2010 by an investor group that included management and led by majority owner Doug Miller, chairman and chief executive of Exco Resources Inc., a Dallas-based natural-gas and oil production company.

Centennial grew to a chain of almost 70 stores at the height of its expansion. In 2011, it acquired Majestic Liquors in Fort Worth, adding 32 stores and two warehouses. Stores in East and West Texas have been sold off or closed. Lubbock was another market where voters created more wet neighborhoods and automatically gave Centennial a host of new competitors.

The chain has been downsizing dramatically in the last year. It has sold stores and leased them back to raise cash and plans to sell its warehouse and corporate headquarters in Dallas and move into a smaller facility, probably in Tarrant County, Albergotti said.

Since its first store opened a year ago, Spec’s has opened six more stores in the market, including a second Dallas store at Preston and Royal and one each in Plano, Fort Worth, Hebron, Garrett and Lowry Crossing. Spec’s declined to comment on the North Texas competitive environment and its plans. It has at least three more previously reported stores in the works, including one on State Highway 121 in The Colony.

In May, Maryland-based Total Wine & More opened its superstore in Dallas and has since opened a store in Fort Worth.

“Dallas and Fort Worth are absolute home runs for us,” said Edward Cooper, spokesman for Total Wine.

The Dallas store is in the top five in performance in the chain of 89 stores in 14 states, Cooper said. Total Wine had sales of $1 billion last year and plans to move into San Antonio next with two stores next year. “We’re bullish on Texas. It’s going to be phenomenal for us,” Cooper said.

Total Wine accelerated the already competitive pricing in the market.

Sigel’s, another Dallas liquor chain that dates back to 1905, has a large hotel and restaurant wholesale business that insulates it from some of the competition. It operates 11 local stores.

Centennial was close to finding its white knight as recently as a couple of weeks ago. Goody Goody’s president Joe Jansen said last week that his locally based chain of liquor stores was “within hours” of sealing the deal to acquire Centennial.

“We had all the legal work done,” he said. “My lawyers, the bankers had everything ready. But we pulled the plug on it last Monday. It didn’t feel right.”

Jansen offers several reasons why he stepped away from the deal, among them a concern about “the damage” done to the brand name in recent months.

Centennial has $16 million in real estate assets it will try to sell to pay down $11.7 million in debt owed to Compass Bank. A sales tax bill for December will be due to the state in mid-January.

Someone could still step forward to buy the chain.

“A lot has to happen especially in the next eight weeks, and if everything gets done, the company can emerge from bankruptcy,” Albergotti said.

Founded in 1936, Centennial is one of the oldest continuously operating liquor companies in Texas. It was formed three years after Prohibition ended in the U.S.

The current owners bought the business from Jim Vandeveer’s Vantex Enterprises Inc. Vandeveer acquired Centennial from its founder, Albert Susman, in 1968.

Staff writer Robert Wilonsky contributed to this report.

Source: http://www.dallasnews.com/business/retail/20121219-new-competition-has-hit-liquor-chain-centennial-hardest-so-far.ece