After a transition period that took longer than expected, the owners of Bonner Foods Inc., which acquired three Tidymans LLC grocery stores here in 2006, say theyre moving forward with the last of three remodeling projects at those storesthis one in Spokane Valley.


Bonners Ferry, Idaho-based Bonner Foods bought the assets of Tidymans stores at the southwest corner of Sprague Avenue and McDonald Road in Spokane Valley, the Latah Creek area of Spokane, and Post Falls. The company renamed those stores Trading Co. Stores Food & Drug. The acquisition more than doubled the number of outlets the company has and nearly tripled its work force overnight, says Paul Matejovsky, who owns the company with business partner Gary Morgan. Bonner Foods revenues, which Matejovsky declines to disclose, rose 150 percent within a year of the acquisition, he says.


Matejovsky and Morgan, who met while working for Eden Prairie, Minn.-based wholesaler Supervalu Inc. and Rathdrum-based Steins IGA, respectively, formed Bonner Foods in 1994. Shortly after they bought the assets of a Bargain Giant store in Bonners Ferry, they renamed it the Boundary Trading Co. Store.


Following a grow or die philosophy, the company then bought the assets of the Excell Foods store in Cheney in 2001, and renamed it the Cheney Trading Co. Store, Matejovsky says. The acquisition added 50 employees to the 75-employee operation and increased the companys volume by 70 percent, he says.


Although Bonner Foods was looking for additional expansion opportunities in the region, the acquisition of the Tidymans stores came as a surprise, he says. Tidymans, a longtime grocery chain here, was struggling at the time and sought offers for four stores it operated here and in Pullman. Matejovsky says he and Morgan submitted a conservative bid for the three stores in Spokane and Post Falls, but not the Pullman outlet. They didnt expect a response.


We submitted our offer, not thinking it would be accepted or even considered, Matejovsky says. When their broker called to tell me they had accepted our offer, it got real quiet on our end of the phone.


Bonner Foods then negotiated a final sales price with Tidymans, which Matejovsky declines to disclose. He adds, though, that one of the big factors affecting the deal was the amount of money the company knew it would need to spend after the acquisition on needed maintenance at the stores.


The roof to the walk-in dairy coolers in the Post Falls store caved in shortly after the acquisition was completed, he says. The walk-in freezers at the Valley store also are on the verge of collapse, and will be repaired before the company begins its remodeling project there this spring, he says.


These things are invisible to the customer, but they slow down your renovation schedule, Matejovsky says. There hadnt been a single significant upgrade to the stores for years, and when you dont even do basic maintenance, theres some catching up to do.


He adds, (Tidymans) didnt do anything wrong. They acted as a company with financial struggles would act.


While the maintenance projects werent visible to customers, Bonner Foods also made some changes that customers could readily notice. It changed the signage on the three former Tidymans stores and installed new cash registers, he says. Then, it did further renovations to the Post Falls store. Part of that project involved converting space in the store that FirstBank NW Corp., of Clarkston, Wash., occupied into a video-rental and customer-service area after Spokane-based Sterling Savings Bank acquired FirstBank and closed the branch.


Next, Bonner Foods renovated the Latah Creek store. The project included relocating the floral department and converting the space that formerly housed an F&M Bank branch and a U.S. Postal Service branch into a video-rental and customer-service department, he says.


This spring, Bonner Foods plans to start remodeling its Spokane Valley store, in a project that will include renovations of the pharmacy, floral, and produce departments, Matejovsky says. The restrooms and entryway also will be remodeled, and a customer service department will be installed. The company hopes to complete the project by the end of June, he says.


Bonner Foods also has installed Spokane-based Thomas Hammer Coffee Roasters stands in all three Spokane-area stores, Matejovsky says. Bonner Foods sold the three pharmacies it had acquired through the deal with Tidymans. Those pharmacies now operate under the name Well Life Pharmacy and lease space in the three stores, he says.


After the Valley project is completed, the company will have spent more than $2 million on improvements to the three stores, he says.


Brand changes


The main other change Bonner Foods has made that would be visible to customers is the brands the stores now carry, Morgan says. The company sells food distributed by Spokane-based URM Stores Inc., which carries different brands, such as Western Family, than did Tidymans wholesaler, Supervalu. Bonner Foods also sells a different brand of beefDouble R Ranch USDA choicethan Tidymans did, and the majority of its baked goods are made from scratch in the store, while Tidymans mostly sold thaw-and-serve products, Morgan says.


The business partners, who describe their management style as hands on, travel to each store weekly. After the acquisition of the Tidymans stores, Morgan moved to Post Falls from Bonners Ferry to be closer to the stores here. In July, the company opened a small office in Spokane Valley to provide a more central location for four of its administrative staff members to work, Matejovsky says. The company employs another four people at its headquarters in Bonners Ferry, he says.


Bonner Foods now has a total of roughly 350 employees, says Mike Gilden, its director of operations. Initially, it retained all of the roughly 230 people that Tidymans employed at the three stores combined, although a few have left since then, Gilden says. Typically, Bonner Foods prefers to operate lean, but Tidymans had overstaffed its stores as a result of relocating employees to them from other stores it had closed, and Bonner Foods wanted to retain those experienced workers.


Retaining workers who have expertise in the grocery industry is becoming vitally important as the labor market tightens in this region, Matejovsky says.


You almost have to get into a bidding war to hire a skilled employee these days, he says.


The biggest challenge supermarkets face here, though, is the onslaught of big-box retailers on the Spokane market, he says. While competition has been increasing, so have food and gas prices, which puts further pressure on an industry in which margins already are notoriously thin, he says.


Traditionally, the grocery store has always been the low-cost leader, Matejovsky says. While we can pass those costs onto customers, we also have the big boxes and labor shortage as big concerns.


To compete, the small, independent chain of five stores is focusing on keeping its stores clean and up-to-date, selling high-quality perishables, and meeting the needs of its customers and employees, he says.


Were just keeping it simple and offering people a good value, he asserts. Price is important, but were not putting it above quality.


Bonner Foods is focusing on its stores here for now, but, similar to its approach to the Tidymans deal, is open to future acquisitions, Morgan says.


Well always have an interest in future acquisitions, but were not actively seeking at this point, Morgan says. If the opportunity is there and the numbers are right, thats a good thing.


Contact Emily Proffitt at (509) 344-1265 or via e-mail at emilyp@spokanejournal.com.