Acme Tells Vendors It’s Ready For A&P Store Acquisitions; Chain Could Grow By 76 Units
At its annual vendor meeting held on September 15 at its corporate offices in Malvern, PA, Acme executives, led by president Dan Croce, outlined the growing chain’s priorities while also discussing the company’s pending acquisition of 76 A&P stores.
While Acme, which was the largest “stalking horse” bidder for A&P, Pathmark and Super Fresh stores in Pennsylvania, Delaware, New Jersey, New York and Connecticut (the latter two states would be new operating territories for the retailer) still has to wait for the actual auction to conclude (it’s scheduled for October 1 and 2), before final confirmation can be attained. Croce noted virtually all stores have been “greenlighted” by the FTC and Acme will shortly begin the conversion/reset process.
Termed “Project Azalea,” the plan is to change over approximately 12 stores per week beginning on September 28 with the conversion of the Super Fresh on Girard Avenue in Philadelphia and concluding with 10 stores on November 17. The stores, which parent company Albertsons/Cerberus agreed to pay $256 million for, range in size from 12,400 square feet (Pine Street in Philadelphia) to 67,300 square (Cottman Avenue, also in Philadelphia). Using a staggered system, all stores will close and re-open three days later. During the “dark” days, attention will be paid to cleaning all stores thoroughly, filling orders and changing IT systems.
Croce acknowledged that the physical condition of many of the A&P stores presents a challenge, but he was encouraged by the attitude of the A&P stores associates, noting that they are “excited” and looking forward to the opportunity to “win” again. “They were concerned and anxious for the opportunity to better serve their customers.”
The South Jersey native, who became president of Acme about six months, began his career with A&P 30 years ago before joining Acme in 2005. He told the more than 350 vendors in attendance (a packed house) that Acme will be relying on them to help ease the conversion process.
As for the general business meeting, Croce reiterated the company’s mantra of “sell, sell, sell,” and noted that even with the tremendous growth of the entire Albertsons organization, CEO Bob Miller’s decentralized go-to-market plan – where each division is responsible for growth, assortment margins, costs, customer service, merchandising and operations – remains very much in place.
Croce said that during the next 12 months, more Pennsylvania stores will offer beer and that new stores and major remodels will occur in Sea Isle, NJ (a “from the ground up” replacement similar to the successful new Long Beach Island unit, which opened in May); Newtown, PA; Paoli, PA; and Ridley Park, PA.
Also addressing the vendors at this year’s meeting was Kim Gray, VP-merchandising and marketing, who noted that Acme will become even more aggressive in its feature pricing and increase its community involvement. He urged the suppliers in the room to develop stronger trade partnerships with Acme, adding that Acme’s fresh and center store areas continue to post strong ID sales gains. “We have met our budget in every quarter since the new regime has taken over (March 2013).”
Director of marketing Sherry Caldwell updated the audience on Albertsons’ national programs as well as Acme’s progress on digital and social media. A new blog with weekly email blasts called “The Dish” will shortly be unveiled featuring recipes and new product offerings.
In his usual humble manner, Croce told the vendors: “It ain’t grandma’s Acme anymore. We’re grateful for the loyalty over the years. However, we are now moving forward and looking to the future.”
‘Round The Trade
More Albertsons news: according to a report from Reuters, it seems that Albertsons’ IPO launch (which was first announced in July) could be completed in the next month with a potential market valuation (including debt) as high as $24 billion The story noted that majority owner Cerberus Capital Management (which also controls Supervalu which is looking to spin off/sell its profitable Save-A-Lot unit) is seeking to capitalize on the strong performance of the largest and most successful pure play supermarket chain – Kroger. Part of Albertsons’ reported IPO strategy is highlighting still unrealized synergies from the Safeway merger which was completed earlier this year. And if the management team in Boise doesn’t have enough to do with its potential acquisition of the aforementioned 76 A&P stores, it now has to answer to Haggen’s $1 billion lawsuit against the chain. Haggen, which earlier this month filed for Chapter 11 bankruptcy protection, claims that following Haggen’s purchase of 146 Albertsons and Safeway bannered stores, Albertsons engaged in “coordinated and systematic efforts to eliminate competition and Haggen as a viable competitor in over 130 local grocery markets in five states,” and “made false representations to both Haggen and the FTC about Albertsons’ commitment to a seamless transformation of the stores into viable competitors under the Haggen banner.” Furthermore, the complaint notes, Albertsons sought out Haggen in order to convince the FTC that Haggen would be a new competitor in local markets, which enabled Albertsons to gain the FTC’s approval of a merger between Albertsons and Safeway – a merger that created “one of the largest food retailers in the United States, with over 2,200 stores and $61 billion in combined sales.” Despite the FTC’s orders and Albertsons’ agreement to abide by all conditions of the sale, the complaint alleges, Albertsons engaged in an illegal campaign against Haggen including “premeditated acts of unfair and anti-competitive conduct that were calculated to circumvent Albertsons’ obligations under federal antitrust laws, FTC orders, and contractual commitments to Haggen, all of which were intended to prevent and delay the successful entry of Haggen (or any other viable competitor) into local grocery markets that Albertsons now dominates. Albertsons, which initially sued Haggen in July for fraud and breach of contract, claimed that the upstart retailer (also controlled by a PE firm Comvest) refused to pay more than $40 million for inventory it reportedly acquired as part of the $300 million deal in December 2014. Albertsons’ response to Haggen’s suit was quick and decisive: “The allegations are completely without merit, and we will vigorously defend ourselves in court. Albertsons has not engaged in anti-competitive or inappropriate practices as alleged by Haggen. Like the process followed by Albertsons in prior divestitures, our process with Haggen is the subject of regular reports to the FTC and review by the monitor trustee appointed by the FTC. From the outset, Albertsons has satisfied its obligations and worked to ensure the success of the transition of the divested stores to Haggen and several other companies. Recently, Albertsons was forced to sue Haggen for an amount in excess of $40 million for unpaid inventory. Rather than paying the amounts owing, Haggen responded by filing this lawsuit against us in an attempt to deflect attention from their failure to comply with basic contractual obligations.” The Haggen debacle is one of the industry’s worst train wrecks over the past 25 years. Attempting to grow a company overnight from 18 stores to 164, with limited capital expenditures would have been a daunting task for any operator. When you also recognize that Haggen is owned by a junior grade private equity firm, acquired many inferior physical plants and entered new operating areas with no established traction, it’s easy to see how this formula failed. Unfortunately, bankruptcy is always a bailout method for venture capitalists leaving tens of thousands of people potentially unemployed. And while it appears that Haggen wants to hold on to its original 18 units in Washington and Oregon, I doubt that will even happen. What were these guys thinking? I feel bad for my buddy Bill Shaner (ex-CEO of Save-A-Lot), who left the company as co-CEO just prior to the bankruptcy. Bill’s a great operator who swung for the fences and came up way short. Can’t blame him for trying, even if the model was flawed and his equity partners were way too inexperienced to play with the grocery industry big boys…interesting read of the month is the recently published “We Are Market Basket” – which details last summer’s tale of the feuding Demoulas family. It was written by Daniel Korshum assistant professor of marketing at DrexelUniversity and Lowell Sun reporter Grant Welker, who covered the family’s six-week holy war last summer from the battle lines. And just released this week is a movie version about the intra-family dispute called “We The People: The Market Basket Effect,” which is narrated by actor Michael Chiklis and produced by Ted Leonsis, owner of the Washington Capitals and Washington Wizards. Both Chiklis and Leonsis hail from Lowell, MA where the now svelte sports owner began his successful entrepreneurial career as a bagger for the Demoulas family. Incidentally, regarding Ahold’s earnings, which are discussed later in this column, one of the Dutch chain’s realities next quarter (which will adversely affect Shaw’s and Hannaford’s sales and earnings, too) will be to swallow the impact of a fully healthy Market Basket operation. Insiders tell me that ID sales at the Tewksbury, MA family-owned high volume merchant have vaulted seven percent over the past year, and that doesn’t include five new stores that Market Basket has opened over the past 12 months… Target has named former Safeway and (for a brief time) Albertsons CEO Robert Edwards, to its board of directors. Edwards and current Target chief executive Brian Cornell worked together at Safeway from 2004-2007 when Cornell was the chain’s EVP/CMO and Edwards was then EVP/CFO…in other national news affecting two of the country’s largest merchants, Kroger has realigned its senior level management team. Four senior VPs have been promoted to EVP, including: Fred Morganthall, former Harris Teeter president, who will now supervise all retail operations; Mike Donnelly, who now becomes EVP-merchandising; Mike Schlotman, who remains CFO and becomes an EVP; and Chris Hjelm, who now becomes EVP and CIO. “Kroger is fortunate to have an exceptionally strong group of leaders across our company. Our entire senior leadership team brings unmatched depth and experience to achieve our goals. This new organizational structure will help Kroger achieve laser-focus to accelerate growth, improve our connection with the customers and deliver value for our shareholders,” said company CEO Rodney McMullen. And, at Wal-Mart, the news continues to be less than joyful. We’ve heard from several national suppliers who have complained that the Bentonville Behemoth is squeezing them harder than ever by demanding storage fees for space at its distribution centers and for shelf space in its stores. Wal-Mart had previously stated that it was refining certain aspects of its vendor relationships in order to create equality with all suppliers and reduce costs so it can offer its customers the lowest prices. Vendors see it differently. “This is just another squeeze play to increase margins and most likely offset wage increases (to $9 per hour) it offered to its store associates earlier this year,” said one senior VP of a large CPG firm. And, speaking of wage hikes, which are expected to cost Wal-Mart about $1 billion annually, numerous reports have surfaced that the world’s largest retailer has been reducing the number of hours at its stores in an effort to improve expense control. Kory Lundberg, a Wal-Mart spokesman, said the labor cutbacks are only taking place in locations w
here managers have over-scheduled workers, adding that the hourly reductions won’t affect efforts to better staff stores, shorten checkout lines and improve cleanliness and stocking. Shorten checkout lines? Improve stocking? I’m still chuckling.
Local Notes
I moved from chuckling to laughing out loud when I read a recent piece in Crain’s New York Business about John Catsimatidis, the billionaire owner of Gristedes, who is attempting to refurbish his aging and ailing 31 store supermarket chain. Catsimatidis, who’s been disengaged from the daily affairs of his grocery chain for years, is suddenly going to lead the charge of the his light brigade with a capital improvement plan that totals $10 million (that’s a whopping $325K per store). And who’s going to be “Lord Cardigan’s” aide-de-camp? None other than 77 year-old Tony Najjar, a former Gristedes executive whom Catsimatidis lured out of retirement. Of course, if the retailer turned oil baron tuned ex-mayoral candidate really cared about his supermarket organization, he would never have let Whole Foods, Trader Joe’s (not Trader John’s) and Fairway trample over his business for the past 15 years. Perhaps the last paragraph of the story (written by Aaron Elstein), best summarized the perception of Gristedes: “Still, Mr. Najjar understands that changing Gristedes and what people think about it won’t be easy. Upon entering another Chelsea location, he was greeted by a shopper who barked, ‘Still a s–t hole!’ Mr. Najjar’s exit was then momentarily foiled when the sliding glass door failed to open right away. A deputy promised to get the troublesome door fixed. ‘You practically need to hit the door to make it move,’ he grumbled.”…and now on to Ahold’s second quarter earnings and sales. The results were generally improved, primarily because of strong sales performance by the chain’s Albert Heijn unit in the Netherlands where revenue jumped 6.8 percent and ID sales increased 3.4 percent. In the U.S., which accounts for approximately 60 percent of Ahold’s total revenue, its performance was aided by favorable exchange rates and the positive impact of the post-Easter week falling into Ahold’s first quarter results. However, at constant exchange rates and excluding gas (where falling fuel prices hurt most retailers), overall sales fell 0.3 percent. Identical store sales did improve by 1.8 percent (ex-gas) from negative 1.8 percent last year. In the post-release conference call with financial analysts, CEO Dick Boer expressed his ongoing confidence in “Project Thunder” which is currently in the new produce department rollout phase. He spoke briefly about the potential acquisition of 25 A&P stores in Metro New York (Stop & Shop) where he said the company will spend between $2-3 million per unit on improvements. He also spoke briefly about the pending Delhaize merger, noting, “We are excited about the agreement with Delhaize, which brings together two highly complementary businesses to create a stronger, international food retailer for the benefit of our customers, associates and shareholders.” From the very big to the very small at Ahold: the mega-retailer debuted “bfresh” – its small format banner – earlier this month when it cut the ribbon on the first of what the chain hopes will be hundreds of stores. The new 10,000 square foot unit is located on Harvard Avenue in Allston, MA (I used to live about half a block from that location while in college). The Allston unit is actually the end result of “Everything Fresh,” the 3,000 square foot laboratory store that Ahold USA opened last December in Philadelphia to experiment with the format. We hear the next “bfresh” will open shortly in Fairfield, CT. After visiting the Allston bfresh unit soon after it opened, I can attest the Ahold USA folks did a nice job of both connecting with the thousands of college kids who live within a mile of the site and executing at a high level. Now, AUSA must build substantial scale rather quickly if bfresh is to become a contributor to its portfolio…Redner’s closed its Trexlertown, PA unit on September 19, company officials confirmed. The reason: after 25 years of serving that LehighCounty community, the store’s lease expired and Redner’s chose not to seek renewal. A contributing factor was certainly the future impact of new Whole Foods, Costco and Target units which will open next year (those stores will be located in the Hamilton Crossings mega-center in Trexlertown) as well a relatively new 74,000 square foot Giant replacement store which opened less four years ago and is virtually adjacent to the Redner’s location… Rite Aid has agreed to acquire the pharmacy assets from 12 of the 25 stores that A&P plans to close next month. The deal, which was approved by the Bankruptcy Court, allows A&P to transfer prescription records and patient lists/profiles to the drug chain. The price: $8.1 million…after last month’s disastrous earnings report by Fairway Market (a loss of $13.9 million), the retailer’s stock plunged precipitously on September 15 following a report that the “Like No Other Market” retailer was nearing its leverage ratio, which would technically violate terms of its loan covenant. The stock reached an all time low of $1.58 per share. While a technical violation like this should not cause any perceptible change in its go-to-market strategy, the share decline illustrates exactly how fragile Fairway’s financial perception is with its shareholders and on Wall Street…Wakefern will be adding two more stores to its growing ShopRite fleet. The Ammons family, which operates ShopRites on Aramingo Avenue in Philly and in Mullica Hill, NJ, will be the new anchor tenant at the Shoppes at Wissinoming, a new retail development in the Tacony section (Harbison Avenue) of Philadelphia. The new ShopRite will be 68,000 square foot in size and is expected to open in the fourth quarter of 2016. A Wawa store – with fuel – has also leased space at the new shopping center. And in Orange, CT, Harry Garafalo will open a 63,500 square foot ShopRite on the site of a former Stop & Shop store (Bull Hill Lane) in about a year. Garafolo’s other Connecticut ShopRites are located in Milford, East Haven, Stratford, Hamden and West Haven, where the latter unit is located only 2.7 miles from the new Orange location…The Fresh Market made an excellent hire earlier this month when it named Rick Anicetti its new president and CEO. The former Food Lion CEO is smart, intuitive and an extremely hard worker and has just the right personality to re-energize a company that’s kind of lost its way despite a very solid business model…a few deaths to report over the past month: I’m sad to report the passing of Frank Gifford, the former New York Giants football star who was voted to the Pro Bowl at three different positions (running back, wide receiver and defensive back). Gifford’s career was almost ended by a vicious (but clean) tackle by Eagles Hall of Famer Chuck Bednarik (one of the toughest football players in NFL history) at Yankee Stadium in 1960 (a game I attended). Gifford sat out the entire 1961 recovering from his injuries and went on to play three more years before retiring. As famous as he was for his 12 years in the NFL, Gifford was even better known for his 15 year run as co-host of “Monday Night Football” which began in 1971. “Frank Gifford was an icon of the game, both as a Hall of Fame player for the Giants (he was inducted in the Pro Football HOF in 1977) and Hall of Fame broadcaster for CBS and ABC,” NFL Commissioner Roger Goodell said. “Frank’s talent and charisma on the field and on the air were important elements in the growth and popularity of the modern NFL.” Gifford was 84…also passing on (and hopefully not to hell in his case) was iconic horror film director Wes Craven. Craven, a Johns Hopkins University graduate, who began his career as a college professor before catching the movie bug in the 1960s. His first horror flick was “The Last House on the Left” (1972), which was made for $87,000. In 1984, he scripted and directed what many critics consider his masterpiece, and one of the best horror movies of all time, “A Nightmare on Elm Street,” starring a then-unknown Johnny Depp and featuring the debut of the notorious Freddie
Kruger (Robert Englund). All told, Craven, 76, directed nearly 30 films, most of them of the horror genre…Judy Carne has also passed away. Carne, 76, became famous by reciting four words – “Sock it to me” – on the legendary TV show “Rowan & Martin’s Laugh In.” A young character actress in the 1960s, who was also the first wife of actor Burt Reynolds, the British- born Carne got her break when she was hired as one of the ensemble players for a low-budget, one-time special that appeared on NBC in 1968. The success of that special spawned a six-year run for the weekly variety show. Despite its popularity, Carne claimed the sexist typecasting of her character essentially ruined her career. Later, Carne battled substance abuse problems and other legal issues…I’m also sad to report the death of Moses Malone, the former basketball great who helped lead the 1982-1983 Philadelphia 76ers to their last NBA championship (Malone and Julius Erving were the stars of that team which was coached by Billy Cunningham). Moses Malone, who was just 60 when he passed, first joined the ABA Utah Stars straight out of high school in Petersburg, VA in 1974 (he was the first high schooler to go directly to professional basketball). Malone played for 19 seasons in the NBA and during his career was named league MVP three times and appeared in 11 all-star games. He was inducted into the Naismith Memorial Basketball Hall of Fame in 2001. At 6 feet 10 inches and weighing only 215 pounds, Malone was hardly the biggest or strongest center in the league. But his intensity and perseverance made him a terrific player. He still holds the NBA record for career offensive rebounds…finally, I’d be remiss if I didn’t mention the recent passing of another great Philadelphia 76er – Darryl Dawkins (the first high school player to directly enter the NBA). Dawkins, whose flamboyant backboard shattering dunks earned him the nickname “Chocolate Thunder,” passed away late last month at the age of 58.
