Those who know Al Plamann realize he’s a straight shooter, especially on critical topics like the economy’s impact.
“It’s not a rosy picture, it’s a tough economic environment,” Plamann, president and chief executive officer of Unified Grocers, Los Angeles, said recently about business conditions in Unified’s 10-state market area in the Western U.S. “In the states in which we operate, there are some really significant unemployment ratios.”
This environment has challenged the cooperative’s members, some of which have encountered difficult financial problems and closed stores.
Other Unified independents, however, have seen notable growth despite the challenging environment. In the last fiscal year that ended Oct. 3, 2009, members opened some 47 new stores, both acquired and ground-up units, and this year that number is still expected to be in the 30s, Plamann said.
Unified has taken a number of steps to help retailers negotiate these tough times. “We’ve been successful in not raising prices on products to help retailers maintain a competitive edge at shelf level,” Plamann said.
The wholesaler is urging retailers to conserve cash as much as possible.
“It’s difficult for independents to obtain bank financing since banks are under significant stress from the real estate market, which has never recovered,” he said. “As unemployment stays high, the consumer buying patterns pressure retail margins. So it’s important for retailers to retain cash.”
In a proactive move, Unified has “added some borrowing capacity to help our retailers in the event they need some support to buy a store or remodel a store.
“There are opportunities with commercial real estate tanking the way it has. Independents may find locations that otherwise might not have been available to them.”
On the financial performance side, Unified’s members have been impacted by changing consumer buying patterns and product mixes. “The heavy emphasis on private label led branded CPGs to come on strong with marketing monies … to raise market share,” he said. “This has had a dampening impact on top-line sales. We’re seeing the same or even a larger number of cases moved through the warehouse at a lower average case value. So the activity is there, but the consumer has changed buying habits. This will continue well into next year if not through all of 2011.”
Unified’s retailers have pursued various strategies to adapt to these consumer behaviors. The price-impact group, for example, has focused on cost-structure and been sensitive on shelf prices, while the more upscale operators have added some private-label merchandise and other price-oriented items.
Meanwhile, earlier this year Unified extended the lease for its Seattle wholesale grocery warehouse operations for an additional five years, a move that will buy Unified more time to decide on strategies for a new facility.
Also earlier this year, Unified elected Richard Goodspeed as chairman, the first time a non-shareholder has been elected to that role.