LOS ANGELES -- Directors of Certified Grocers of California here and United Grocers, Portland, Ore., said last week they have formally agreed to merge the two companies under the name Unified Western Grocers.
The companies said they hope to complete the merger by late August, pending regulatory clearance, completion of financing and approval by shareholders of both organizations at meetings tentatively scheduled for late August.
The intention to merge was disclosed in late March when the two companies announced they had signed a letter of understanding. In an interview with SN last week, Alfred A. Plamann, president and chief executive officer of Certified -- who would carry the same titles in the new Unified Western entity -- discussed some of the new company's post-merger plans, including the following:
Anticipated savings of more than $20 million within the first two years after the merger.
The possible shutdown of two of the combined companies' four northern California warehouses.
Maintenance of existing sell plans to avoid conflicts with Y2K systems changeovers.
Relocation of the new company's administrative offices to one of its three operating areas (southern California, northern California or Portland).
A structure that would allow other Western cooperatives to join in partnerships, alliances or other combinations.
Plamann said the merger would create the largest retailer-owned grocery cooperative in the Western United States, with annual sales of approximately $3 billion, and is expected to result in annual savings in excess of $20 million within the first two years after it is completed.
Those savings would come as a result of eliminating redundant facilities, combining similar departments and functions to reduce overall administrative costs, implementing best practices and increasing the members' combined buying power, he explained.
Both Certified and UG would continue to maintain their individual identities as divisions of the new parent company, particularly in southern California and the Pacific Northwest, respectively, where both have strong private-label programs "that we want to capitalize on," Plamann said.
However, in northern California, where neither company has been operating for more than 15 years and where their identities are less definitive, the new Unified Western identity may be allowed to take hold, depending on local customer preferences, Plamann said. "Whatever we do will be member-driven," he explained. "If retailers in northern California tell us it makes no sense to maintain our two separate identities there, we will take that into account in our planning."
However, no changes will be made in either company's current sell plan in any of the three divisions for several months, Plamann said. Instead, each company will maintain its existing programs for the foreseeable future to avoid making systems alterations during the Y2K changeover, he said.
The two companies are expected to retain their existing distribution facilities in southern California and the Pacific Northwest, Plamann said. But where they overlap in northern California -- where each company operates its own dry grocery warehouse and a frozen/chilled facility -- "we probably only need two of the four facilities," Plamann said.
He said no decisions have been made on which facilities may be closed.
Also still to be determined is where Unified Western would be headquartered. "It could be in Los Angeles, the Bay Area or Portland -- we're not sure yet, and we have no preconceived ideas," Plamann told SN.
However, programs will be designed to meet the needs of each marketing area, he said. "Because each area has different needs, we will design sell and marketing activities for each one. But we will centralize most support services."
Management expects to complete an organizational chart once the merger has been approved "that will probably result in a reorganization of both companies' staffs," Plamann said.
"We haven't determined the full organization structure yet, though Terry Olsen [president and CEO of UG] will hold a significant position in the new company, with the chairman chosen from among the retailers on the combined company's new board."
Plamann said the name Unified Western Grocers and the new company's structure "sets up a conceptual framework that would allow other co-ops, if they were interested, to participate in various fashions, whether through partnerships, alliances or future mergers. But right now all we're trying to do is complete this merger."