Earth Fare rebounds: Once bankrupt, Asheville based supermarket booms with 20-plus stores

Mackensy Lunsford
Asheville Citizen Times

ASHEVILLE - Randy Talley never thought Earth Fare could fail. 

But after New York City-based private equity firm Oak Hill Capital Partners acquired Earth Fare and drove up massive debt as it pushed through aggressive expansion efforts, that's exactly what happened last year. 

In a story Talley described as akin to that of the Phoenix rising from the ashes, original investors in Earth Fare resurrected the grocery store chain while reeling it closer to its original mission.

In about a year, the investors, including Talley, now the chief sustainability officer, former Earth Fare CEO and now-president Mike Cianciarulo and Dennis Hulsing, president and CEO of Hulsing Enterprises, have reopened more than 20 locations.

"We have signed 24 leases and to date opened 22 total stores," Talley told the Citizen Times on June 16. Three more are scheduled for Florida and one in Virginia, with potentially more in the works.

Though the growth is quicker than expected, Hulsing, whose company owns the Crowne Plaza as well as a number of local fitness centers and medical businesses, said the team of local investors has a different perspective on expansion than an out-of-state private equity firm would. Hulsing is also part owner of Food Matters in Brevard.

After this first year of growth, he said, the company will focus instead on growing ties with local food producers and increasing local marketing and brand presence. 

"That's where we want our focus to be, and not on the next opening," Hulsing said. "That's what we believe will make the company ultimately successful and, if we happen to grow, we happen to grow. If not, we're going to be the best with what we already have." 

Talley added that, without the investment group's acquisitions, there would have been no Earth Fare left to save. 

"We were chasing a company that's melting, because once it's gone, it's gone," he said. "In fact, we were really trying to save what's good and healthy and did work, and could work again."

Earth Fare's birth and near-destruction

The natural food grocery store chain's story began in 1975, when founder Roger Derrough first opened it on Merrimon Avenue.

Talley arrived in Asheville in 1992 with a background in natural foods, including the 1988 founding of the Weaver Street Market in Carrboro, North Carolina. Talley thought Asheville, crunchy but not yet saturated with health food stores, would be fertile ground to plant the seed for Earth Fare's expansion.

"And Roger was ready to make that legacy happen," Talley said. 

More:Earth Fare employees file lawsuit on behalf of thousands of workers

First to go was the name. "Dinner for the Earth had become 'Dinner for the Rich,' a bad nickname," Talley recalled. "Plus, it was a mouthful and no one really understood what it meant."

After moving to what's now Moog Music Inc. on Broadway, the store again moved, opening in Westgate Plaza in 1994 as Earth Fare.

Talley believed that more palatable name contained all of the meanings and missions he wanted to convey, including the store's evolution from corner co-op into a more wholly formed supermarket.

People dance to protest the closing of Earth Fare in Asheville February 7, 2020.

Even as it made the shift, Earth Fare remained a pioneer in natural grocery stores. The store had already banned hydrogenated oils in 1993, years before the vast majority of shoppers knew what that meant. In 2001, the store banned artificial sweeteners and sucralose, followed two years later by high fructose corn syrup.

By then, Earth Fare had already begun a period of slow expansion, bringing on Cianciarulo as CEO from 1998-2007.

Cianciarulo and Talley grew Earth Fare to 13 stores before selling it to Massachusetts-based private equity firm Monitor Clipper Partners in 2006. Soon, the store was off to the races, doubling in size across the Southeast.

Six years later, that firm sold about 80% of Earth Fare interest to Oak Hill Capital in a transaction valued at approximately $300 million. Oak Hill began a stage of aggressive growth and, with it, aggressive borrowing.

Within eight years, Oak Hill had 55 stores. In late 2019, the private equity firm closed five of them. By then, the writing was on the wall. On Feb. 3, Oak Hill announced it would close and liquidate the remaining 50 stores, sending the future of 3,000 employees into question. The following day, Earth Fare filed for Chapter 11 bankruptcy protection in federal court.

More:Some Earth Fare stores coming back. Whole Foods buys S. Asheville store

Earth Fare in South Asheville after renovations under Oak Hill.

"That devastated every single person who worked for the company, every vendor and every customer who counted on the company for healthy food," Talley said. "And I would never had thought in a million years it would have been possible because there was just so much value there."

In Asheville, customers protested in very Asheville ways — by dancing and banging cowbells in the swiftly emptying aisles to celebrate the store's past — underscoring its local cult following.

Talley, whose own belief in healthier food had led him to open several locations of Green Sage Cafe, one adjacent to the Westgate Earth Fare, was also concerned about the impact on his store.

"And it was a problem not just for Green Sage, but for that whole shopping center," he said.

Green Sage closed that location this year, moving staff over to the North Asheville store to help facilitate operations there. The move was mainly a reaction to the complications of running a business during COVID.

Finding investors to rebuild a store

After Earth Fare declared bankruptcy, and A&G Real Estate Partners moved to manage the sale of the closed stores, Talley decided he would make it his mission to revive the company he helped nurture.

Whether that meant one or many stores remained to be seen.

"I started reaching out to potential investors in the Asheville community," Talley said. "I connected with some people inside of Earth Fare, and my ambition to save some of the company was matched only by some of the people inside who also wanted to save as much as possible."

Earth Fare intends to open its newest specialy grocery at the Shoppes of St. Johns Parkway in St. Johns County in the second quarter of 2021. Picured is the former store in Jacksonville's Mandarin neighborhood.

More:Coronavirus, groceries and more: The most-read food and restaurant stories of 2020

Aided by a team of people who had worked within the company, in particular the 30 or so stores that had been profitable, Talley scrambled to put together a business plan to reach out to "angel investors" who wanted to help save the imperiled chain. Roger Derrough was one of them.

Meanwhile, investors with deeper pockets — including Winn-Dixie and the Amazon-owned Whole Foods — were also separately negotiating to snap up stores before the bank-set deadline.

The former South Asheville Earth Fare was purchased by Whole Foods.

The race was on. Talley had a proposal put together, but when the day of the deadline dawned, not enough money. "I woke up that day and said, 'I have failed,'" he said. 

Then the phone rang. It was Dennis Hulsing, who also called Cianciarulo to ask if he would help save the company.

"And Mike (Cianciarulo), who is 71 said 'Sure,'" Talley said. "Like all of us, he had love for the company and a direct connection to it."

Cianciarulo, also former CEO of Goodings Supermarkets, said one of his biggest mistakes had been letting Earth Fare slip. He wasn't about to let it go again. 

The investment group, through the bankruptcy court bidding process, purchased the leases and equipment for Earth Fare stores at Westgate and others in Roanoke, Virginia, and Athens, Georgia. 

The group also tried to nab the former South Asheville store, but was outbid by Whole Foods. 

Leases for 38 locations A&G handled were rejected and returned to the landlords in late March, Supermarket News reported. In the midst of a pandemic, the Earth Fare investment group worked aggressively to re-sign many of them. "We literally cold called 30 additional locations and signed 24 leases," said Talley. Twenty-two of them are now open. 

Jennifer Murray, left, talks to Sherri Lynn Clark, a 35-year employee of Earth Fare, at the checkout counter June 22, 2020. Murray said she has been shopping at Earth Fare since 1996. "It's a huge part of my history here in Asheville," she said, "It's such a small town, I used to do her hair."

It was like putting a puzzle back together, he said. And in many ways, it was a leap of blind faith. "Imagine having the courage to save a company that had just gone bankrupt, and then COVID hits and the economy looks like it's in peril," Talley said. 

Now, the investors say they're trying to manage growth in a sustainable way with fewer expenses. Talley said reopening costs for some stores, many of which retained equipment, were a fraction of starting from scratch. "And that allows us to evolve more organically and to really sort of focus on the basics of retail," he said.

Excessive growth not the whole story

Still, the notion that Oak Hill's failings stemmed entirely from swift growth and too much competition fails to tell the whole story, Hulsing said. Oak Hill, he said, wasted millions on fancy corporate offices and a huge corporate staff. 

"Between the tremendous financial burden of that bloated corporate office and with approximately 40% of the stores losing money and a huge, heavy debt structure they had to pay — and the need to grow when there was no capital to do so — those were all recipes for disaster," he said. 

People shop at Earth Fare at Westgate Shopping Center February 3, 2020, the day the establishment announced it would be closing.

Plus, they simply didn't understand the market, Cianciarulo said, part of what led Oak Hill to renovate its existing Earth Fares to look sterile and more brightly lit.

"The conventional guys think the natural food business is funny and weird," he said. "Our team is passionate about natural foods, which is different from being bottom-line driven — we love the product and believe in the product."

Still, Talley said, there have been plenty of growing pains in revitalizing the stores. "This has been a year of not just reopening and putting stores together, but rebuilding systems and teams, and COVID kept that challenging," he said. 

Another COVID challenge: supply issues and inflation of commodity prices from dairy to chicken wings. The great chicken wing debacle has largely stemmed from bottlenecks and staffing issues at meat plants, said Hulsing.

Justin Betson wraps chorizo on Earth Fare's first day of reopening June 22, 2020.

That the store is doubling down on working with local producers, including Hickory Nut Gap, which has meat in all Earth Fare stores, helps assuage that issue, he said. 

That salad and hot bars were closed during COVID also helped contribute to "shrinkage," industry jargon for margin-eating food waste. Without those outlets, it's harder to move food quickly. 

More:Chicken wing shortage? Yet another strange pandemic complication coming to a bar near you

Now in-store cafes and smoothie bars are back open, Talley said, which help add to the convivial atmosphere he thinks ultimately turns shoppers into the sort of repeat customers who stage dance-ins in protest of store closings. Asheville still outperforms all other stores.

But don't expect that sort of dancing in the aisle any time soon.

"We're going to run the company smartly like we own it and care for it and nurture it back to life," said Talley. "We don't have plans to sell it."


Mackensy Lunsford has lived in Asheville for more than 20 years, and has been a staff writer for the Asheville Citizen Times since 2012. Lunsford is a former professional line cook and one-time restaurant owner.

Reach me:

Read more: Subscribe to the Citizen Times here. Subscribe to my newsletter here