RETAIL VIEW: Once mighty A&P falls on hard times
- September 27, 2010
Over the past several months, The Great Atlantic & Pacific Tea Co. has made quite a bit of news. However, most of it has been bad.
The one-time retail giant continues to lose money on a regular basis; its stock has lost 75 percent of its value since January. Store closings and layoffs have been announced several times. The company has sold numerous outlets to other retailers, reportedly for operating cash, and The Wall Street Journal recently reported that a financial consulting firm has been hired to explore the possibility of selling Food Emporium, certainly the most upscale and possibly the most profitable A&P banner. In addition, Pathmark Stores, another brand owned by A&P, has been on and off the market recently with apparently no bidders offering an acceptable price.
Launched in the middle of the 19th century, A&P is the nation's oldest retail chain and at one time was the largest, but it seemingly has lost its way over the past decade or two, continually shrinking in size and launching new initiative after new initiative, according to several industry observers. Today, the former nationwide retailer has about 425 stores that it operates in eight states and the District of Columbia.
Its recent actions naturally lead to speculation about its future. Will A&P rebuild itself into a formidable retail presence? Will it survive as a small niche player? Will it be sold in parts as has been the case recently? Or is it a potential takeover target?
The Produce News asked a handful of retail produce experts to assess A&P’s recent past and its future. As expected, some declined to speak on the record but others were willing to be quoted, including a trio of longtime A&P produce division employees.
Ron Pelger, a columnist for The Produce News, who spent close to 40 years with the retailer beginning as a part-time bagger and rising to a very high level in the produce division, served in many different roles over the years and retired from A&P in the late 1990s as the director of produce merchandising and procurement.
"I don’t see how A&P can turn it around," he said. “You can only close so many stores. Growth makes a company healthy and happy. If you are doing the opposite of growing, it just doesn’t work.”
Mr. Pelger was quick to add, “It pains me to say this. I am not one to say negative things. I have a lot of heart in that company, and I still refer to it as 'we.’“
But he said that he has to be realistic and he finds it very difficult to see anything positive in the current situation. “Of course a company has to close its unprofitable stores, but you have to change what you are doing or the stores that you keep open will eventually become unprofitable also.”
Mr. Pelger traces A&P’s difficulties to its many acquisitions over the years. He said that the retailer bought too many companies and was not able to assimilate them into the operation. Instead, A&P had many different programs going on at any one time and ended up confusing customers as well as its own employees.
“I always said that people are your best product, and A&P did not treat their people right,” he said.
Echoing a sentiment that was uttered by other former A&P executives, Mr. Pelger said that it is the in-store personnel that can make or break a company, and A&P employees have not been motivated for a long time. “Outside management people continued to come in and stayed long enough to break the windows and then they left. They never stayed on a program long enough to see it through,” he added.
Lou Kertesz, who was with A&P for about 20 years in the 1970s and 1980s, rising to the top produce position for the firm during his career, minced no words in discussing his former employer. “Lack of leadership is killing them.” He said that too many employees have been let go, which has led to a lack of good feeling by those that remain. “There is no motivation there right now. You can’t expect people to work hard and do a good job when they have no future or job security,” he added.
Dick DelGizzi is another former A&P produce executive that does not expect the company to survive. “That’s a very touchy subject,” he said. “I spent 48 years with the company, and though I have been gone 10 years, I still get personally upset when I think about A&P.”
Mr. DelGizzi said that for many of those years, he was Mr. Pelger’s right-hand man. “He did everything in the office and I worked in the field in the stores. They are closing stores that Ron and I opened. That hurts me.”
He believes A&P self destructed. “For some reason or another, they just couldn’t stay with one program,” he said. “Over the last 15 years, they have started so many new programs and then just didn’t see them through. And they have fired so many good people. New people have come in at the top and they have gotten rid of their best people and they don’t even know it. To be perfectly honest, I am broken-hearted about it.”
Mr. DelGizzi does not expect the chain to survive for too many more years. “Food Emporium is their powerhouse, and they are trying to sell that,” he said. “In the last 15 years, all they have done is downsized.”
Mr. DelGizzi expects the downsizing to continue until there is nothing left of The Great Atlantic & Pacific Tea Co.
A couple of other well-known observers of the retail scene had similar views. Dick Spezzano, president of Spezzano Consulting Services in Monrovia, CA, said that A&P “is absolutely not heading in the right direction. I don’t see a bright future unless they totally change management, starting with their chairman.”
He said that the retailer has made some very questionable calls in recent years, including selling off its Canadian division and acquiring several other operations. He said that there appears to be no consistency in its actions. It has bought inner-city stores when it seemingly has no expertise in that realm. It has bought operations that did not have sufficient numbers to create efficiencies and did nothing to rectify that situation.
“And now they are looking to sell Food Emporium,” Mr. Spezzano said. “That is a jewel with locations that you could never get [if they didn’t already exist].”
Mr. Spezzano expects that A&P will find a buyer for Food Emporium largely because of the great locations.
Toward the future, he said that if A&P wants to turn it around, “they have to fix Pathmark. Pathmark did a good job. They understood their customers, but the acquiring company (A&P) got rid of most of the brainpower that knew how to run inner-city stores. I think if A&P is going to survive, someone is going to have to take them over.”
Sharing that same view was Ed Odron, president of Produce Marketing Consulting in Stockton, CA, who said, “I’d have to agree with the majority and predict that A&P won’t be around five years from now. And that makes me sad.”
Mr. Odron got his start in the retail business with A&P in the Chicago division when he graduated from college in the 1960s. “I was with A&P for five years when they had about 3,000 stores and were the number one supermarket in the country. We must have had 300 stores in the Chicago-Milwaukee division alone.”
A&P, he said, got left behind when the supermarket industry changed and it stayed the same. “Everyone else was building big stores and moving into the large shopping centers and they just stood still while everyone else passed them by.”
But he added that the produce industry should not forget the contribution that A&P made to the industry.
“They had a great training program and trained a lot of produce people who then went elsewhere. For years, all the former A&P guys that I trained with would get together during the second day of the [Produce Marketing Association] convention and have a drink and tell old war stories. There were probably 20 or 30 of us. When I was with them, I went through their training program and learned everything from apples to zucchini. At one time, they were on the leading edge — but not anymore.”
Being headquartered in California, Mr. Odron said that he rarely sees an A&P store, which are mostly in the Northeast. “So I only know what I read,” he said, “and I have been reading about how they are closing stores and selling stores and laying off people. I wouldn’t be surprised if somebody absorbs them in the near future.”
A&P did not respond to requests for comment.