By David Goetz
The Courier-Journal

The Louisville area can be a tough place to peddle groceries.

The last two years have seen a tattered Winn-Dixie pull out its stores as part of an unsuccessful bid to avoid bankruptcy and the folding of the Buehler's Markets that replaced them.

But the competitive environment hasn't stopped brothers Greg and James Neumann. The small family-owned chain of ValuMarket stores has endured -- and it's expanding.

Last month the company bought out of bankruptcy the former Buehler stores in Louisville's Mid City Mall and in Mount Washington, along with the equipment from a third Buehler's outlet on Blankenbaker Parkway.

The $2.9 million deal raised ValuMarket's number of stores from three to five -- and lifted the company's projected annual revenues by about 75 percent, said James Neumann, vice president.

In just a few years the company has gone from a small business trying to survive to one that claims the title of largest locally owned grocery chain in the Louisville area.

Beginning in 1998, Kroger, Meijer and Wal-Mart battled for market share for about four years, with the fallout from their discount pricing affecting stores down the retail food chain -- including ValuMarket, which had cultivated a reputation as a discount grocer itself.

"Anyone who tells you they didn't lose money in that war is a liar," said James Neumann, 32. "You lost money to keep yourself alive."

The brothers credit their father, Frank Neumann, who co-founded the company in 1978 and retired in 2003, with anticipating the battle and building a war chest of cash. Those reserves allowed the company to lose money for about four years and stay afloat.

But there was more to it than that, said Greg Neumann, president. They were forced to close their company offices, moving into their Hurstbourne Plaza store. They laid off nearly half their administrative staff and took on heavier workloads.

"You have to choose to stay in business. It is not a fun thing to have to close an office and (fire) staff and move into a store, squeeze into rooms that are a third the size you're used to," said Greg Neumann, 45. "You start wearing more hats, and you work more hours, and you find people willing to do that with you."

They studied every item in their budget, said James Neumann, and reviewed their contracts with service companies. "If you want to remain in business, you can negotiate how to get what you need at a different price."

It tests your service suppliers, Greg Neumann said.

"You find out who wants to be a partner and who wants just to get a check from you. The ones that want to be a partner will find ways to help you save money. It took awhile, but we were able to emerge out of that. We're making money now, and we have been for three years."

So when the Buehler stores became available at what the brothers considered a good price, they were ready to move.

"It was almost a once-in-a-lifetime opportunity to expand without sticking your neck out," Greg Neumann said.

ValuMarket can operate the Mount Washington store profitably because of the company's leaner operating costs, Greg Neumann said.

Meanwhile, James Neumann has plans to adapt the Mid City store to the Highlands neighborhood. "This store is going to become a mirror of the neighborhood and it's going to become a fun and exciting place," he said.

"We're trying to be a little more focused on our neighborhoods," he added.

The model is the ValuMarket at Iroquois Manor shopping center. A decade ago the store's manager noticed the large number of Hispanic and Asian immigrants at the store and began seeking out products to meet their needs.

Customers wanted fresh ingredients and seasonings to make their own ethnic foods. So the company sought out suppliers. Eventually the chain found it cheaper to go directly to the markets in Chicago and Florida, though that sometimes means arranging their own shipping.

"The general ethnic consumer will spend three times as much on fresh produce and meat" as the average shopper, James Neumann said. Produce used to make up about 4 percent of weekly sales at the Iroquois store. Now it's sometimes as high as 18 percent.

Ethnic foods will have a place at the Mid City store. There also will be double the number of frozen foods and a larger selection of natural/organic products. The store hopes to market premium offerings from Louisville prepared-food vendors, and Tologono on Lexington Road is already onboard.

But the Mid City store changes will start with a major remodeling aimed at improving the view through the long row of picture windows that look out onto the mall concourse. Plans call for moving the checkout to the Bardstown Road end of the store and replacing it with a produce section.

"So when you look in, you see fresh, you see color, you see excitement, you see 'come in and shop,' " James Neumann said.

Mid City Mall co-owner Sandy Metts said she was concerned at first about having a discount grocer replacing the up-market Buehler's, but she likes the plans. "They've got some good ideas, and this is going to be a prototype store."

Another feature the brothers believe will be popular at both of the new stores is the company's Curbside Direct service. Shoppers can order online and arrange a pickup time, then stop at a call box outside the store and collect their groceries without getting out of the car.

"It's one of the first programs we've launched in the past couple of years that has brought us a significant change in new sales," James Neumann said.