Viewpoints

A&P Completes Strategic Retrenchment to the Northeast

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Last month, the Great Atlantic & Pacific Tea Co. completed the sale of 21 stores in Louisiana.

That sale brought A&P another step closer to a strategic strengthening of its core and historic operating area, the Northeast. Now there's just one step left: completion of its proposed $679 million buyout of rival Pathmark. When that deal is wrapped up, possibly as soon as this month, A&P will comprise more than 500 stores, all in the Northeast and Mid-Atlantic states. A&P's headquarters are in Montvale, N.J.

The sale of its stores in Louisiana marked a sharp break with its long past in another way, too, since it included disposition of a store on Royal Street in New Orleans, A&P's oldest operating location. With last month's transaction, A&P not only completed the divestment of heritage areas such as Louisiana, but also of assets it gained during the 1980s, a time when it grew rapidly by acquisition. A&P's strategy of growth by acquisition was pursued by its former president and chief executive, James Wood. The buying spree started in 1981 with the purchase of 17 Stop & Shop supermarkets in New Jersey, the first time A&P had acquired stores from a competitor. Here's a sampler of what followed during that decade: A&P acquired Kohl's in Wisconsin, Dominion in Ontario, and Farmer Jack in Michigan. Closer to home, A&P acquired Shopwell in the Bronx and Waldbaum's on New York's Long Island.

In 1998, Christian W.E. Haub succeeded Wood as president and chief executive. Haub is a member of the family that controls the Tengelmann Group of Germany, which has owned A&P since 1979. Starting in 2003, A&P began its plan to pay down debt and restructure the company by spinning off outlying assets and becoming more geographically compact. A&P will still be a multi-banner operator, though, with stores under the names A&P, Waldbaum's, Food Emporium, Super Fresh and others — and soon Pathmark too.

The combination of A&P and Pathmark and the concentration on the Northeast is likely to prove to be a winning strategy. A&P's management will have its hands full integrating the sizable purchase of Pathmark and figuring out how to position it in the market. Early thinking is that A&P's banners will be positioned much as they are now. Pathmark's emphasis will remain oriented toward low-price provision. Some of the other banners, notably Food Emporium, will remain aimed at the higher end of the market. In any event, A&P's management can better execute whatever strategy emerges without the obligation to run chains in distant markets. A&P's strategies will also be bolstered by the financial flexibility afforded by proceeds of asset sales.

As for the newly divested stores in Louisiana, most were acquired by Rouses Markets, Thibodaux, La., as was reported in last week's SN. The sale may strengthen the Louisiana stores, too, since they will come under the management of a local operator who can cater to regional sensibilities better than a remote owner could.

Finally, with A&P's retrenchment to the Northeast, the chain will return fully to its roots — and what long roots they are. It was in 1859 that A&P's first store was opened, on Vesey Street in New York City. That street is now the northern boundary of the former World Trade Center site in lower Manhattan.

Contributors

Julie Gallagher

Julie Gallagher’s delicious foray into coverage of the food industry was purely accidental. With a background in technology, she joined Supermarket News as associate editor of its Technology...

Mark Hamstra

Mark Hamstra is the editor of the Retail/Financial section of Supermarket News covering mergers and acquisitions, quarterly earnings reports, executive changes and other significant events and trends...
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