A&P Calls Retreat an Advance
By George Anderson
The Great Atlantic & Pacific Tea Co. has just come off what chairman and chief executive Christian Haub calls its “best quarterly performance in almost three years.” So, what better time to get out of Dodge, or at least the Midwest and Canada, than now?
The company announced yesterday that it was taking steps to rid itself of its businesses in Michigan and Ohio. It also is considering a sale of its Canadian operations so it can strengthen its balance sheet and “focus greater attention and resources on our core U.S. operations and pursue the implementation of our fresh and discount retail formats.”
Moderator’s Comment: What is your take on A&P’s announcement of a “major reorganization”? –
George Anderson – Moderator
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A&P is consolidating their operation by eliminating stores where they have no differentiation and cannot compete. Wal-Mart and Kroger have carved their niche out in Michigan and left little room for anyone else. In the Northeast, A&P does have the Food Emporium stores with a definite differentiation strategy and some good locations, but this is a limited opportunity for expansion! With Pathmark gaining needed investment and ShopRite continuing to grow, I see only more trouble ahead for this struggling retailer.
“Best quarterly performance in almost three years.” A&P has been doing so bad for so long that they measure success not by profits but how much they can narrow their losses. A&P brags to no end how great each new idea is working — all the way up until the time they shut the doors and sell the stores. One thing A&P should know by now is that they just are not, and never will be, any good at the supermarket business. I’m all for giving it your best shot, but there comes a time when reality must set in and its time to call it quits.
One needs only to read the first line of the MarketWatch report on this subject to understand what’s going on: “Shares of Great Atlantic & Pacific Tea Co. vaulted better than 27% Tuesday after the grocer said it is shedding its Midwest operations and considering a sale of its Canadian grocery stores.” Insert reason here: ____________
It was quarterly report time, they wanted to boost the stock price (perhaps they’re looking to sell?), and they had to spin the justification for their announcement. In situations like this, one reason is just as good as another.
The A&P will live on in my memory as the first supermarket I ever visited with my mother as a child. The aroma of freshly ground coffee (DIY even in those days, pick a bag of beans and pour them through the machine then catch the grind as it came back out), the crunch of sawdust underfoot (or did I imagine that bit?) and, I’m pretty sure, fresh baked bread. There were fresh meat and fish counters, I recall, plus the first aisles of colourful breakfast cereals advertising plastic submarines to be redeemed from the exotically named Battle Creek, Michigan. Oh, ’twas a veritable shopper’s haven. You never knew what would be there from one week to the next. All those new product introductions (Pop Tarts, yes!!!), all those coupons to redeem. We trundled from one end of the main street in our neighbourhood to the other, pulling her wire basket as it got progressively heavier, anticipating our weekly treat of fish fingers and canned ravioli for supper. Now that was fast food. If A&P finally goes, all I can say is, rest in peace.
I know the A&P brand only as it exists (which I think is about all it does) in Canada. It is one of those operations that has no distinguishing features – not in design, products, price, or anything else. Back when we all cared about each other, there was some sense that shopping there meant you were supporting your neighbor and community instead of some huge evil corporate entity from downtown Toronto. But we’ve pretty well managed to overcome that sentimentality.
What I don’t understand is that, if they really have a viable “fresh and discount retail format,” why they don’t think it would work in Canada, Michigan and Ohio. Either they know some sad thing about those locations we don’t know, they need the money to launch the fresh format or they’re really not all that confident about the whole thing. My guess it’s all the above.
It is quite possible that some of A&P’s operational woes derive from inefficient geographical store concentrations. The industry has well documented economies which are generated in supply chain operations and advertising based on store concentrations. Having said all that, I am skeptical that a geographic retrenchment qualifies as a “major reorganization.”
Retail “focus” is usually created by narrowing the market in which the retailer competes….reducing the sku count, limiting the categories offered, reducing formats….right? I’ve lived in most of the major geographic regions in the country, and there are differences in food consumption preferences. No doubt. I’m not sure how significant these preference differences are as a percentage of the total store. Probably not so large.
So I wonder what else A&P is doing to compete more effectively. What strategy is being implemented which will establish a competitive advantage in the Northeast which could not have been executed in the Midwest?
“Major reorganizaton” or “Major Retreat” or consolidation – give it the name you wish. It’s the last dying breath of a company close to elimination – finally. How many chances do you get to unsuccessfully remake yourself?
I can remember their launch quite a few years a go of a ‘Future Store’ concept. Funny thing at the time was it was nothing of the sort. In fact, the store didn’t even include scanning at the point of sale. Seemingly every few years they have relabeled themselves. Even in the Mid-West, they went as far as the Food Basics concept. It’s been a chain without direction and identity for decades now. Now their direction is fairly clear. I’m surprised they were beaten to Chapter 11 by Winn-Dixie.
Re: hearing of A&P’s reorganization, and being a music fan, I am reminded of that old Harry James and Helen Forrest WWII classic, “It seems to me I’ve heard that song before.”
Now, after being in the midst of winter, Mr. Christian Haub has come to believe that there is in the Great A&P an invincible summer. May future temperatures rise to Mr. Haub’s expectations and permit A&P become truly meaningful again in the industry it led for so long … long ago.
In hindsight, A&P still continues operating Farmer Jack’s in Michigan. Mr. Haub has been steering the ship of state to a new fresh approach, and it seems to be working. A&P will end this fiscal year in the black for the first time this century.
Stores are being remodeled into the “fresh” store concept as we speak. Prices have been slashed on more than 3,500 items each six week period. The public who has long loved A&P is embracing these changes.
As the company approaches its 150 anniversary in 2009, the signs are for clear passage ahead. Food Basics is a prototype copied by other chains, some successfully, some not so successfully.
The house brand at A&P is of the highest quality. Yes, you can still smell the grinding of Eight O’clock premium coffee at every A&P family store. Fresh thinking since 1859, that’s the A&P way.