KEENE, N.H. -- C&S Wholesale Grocers here had hoped to become a wholesaler of national scope when it acquired the assets of Dallas-based Fleming for $400 million last August, Mark Gross, executive vice president, told SN.
However, things didn't go according to plan.
"Our purpose [in acquiring Fleming] was to grow our business," Gross explained. "That's the reason we entered into negotiations with Fleming -- to expand into a lot of markets we weren't in.
"But after we agreed to buy Fleming and began working through the due diligence process, it became clear to us that Fleming's business was no longer viable in some of the stand-alone markets we had hoped to enter.
"At that point, Fleming had shut down many of its distribution centers in the mid-Atlantic, the Southeast, most of the South, and the Intermountain West, though it was still operating in Florida, Texas, California and parts of the Midwest."
To keep what was left of Fleming's business viable while it completed the acquisition, C&S agreed to supply selected products for Fleming to distribute to its dwindling customer base, to hold onto some of the sales that were rapidly slipping away.
"We realized some of the pieces that were left would make attractive packages for other wholesalers," Gross said, "and so rather than let Fleming be sold off in pieces to a lot of different companies, we felt those wholesalers stood a higher chance of success if we acquired Fleming and then made deals with them."
The wholesalers with whom C&S made deals were Supervalu, Minneapolis; Associated Wholesale Grocers, Kansas City, Kan.; Grocers Supply, Houston; Associated Grocers of Florida, Miami; and Associated Grocers, Baton Rouge, La., "each of whom was able to purchase parts of Fleming because we designated them as purchasers," Gross pointed out.
C&S held onto Fleming's West Coast operations in California and Hawaii, and was hoping to operate in Wisconsin and Ohio as well, Gross said -- until it began considering the prospect of trading those Midwest operations for something closer to its home base.
Ultimately, C&S opted last September to swap the Midwest stores with Supervalu in exchange for Supervalu's New England operations, which enabled C&S to solidify its Northeast distribution system with 250 accounts representing about 1,000 additional stores while enabling Supervalu to do the same in the Midwest with a like number of stores, Gross said.