NORFOLK, Neb. -- Affiliated Foods of Norfolk here and Affiliated Foods of Elwood, Kan., are trying to negotiate a merger, the presidents of both co-ops said.
The companies started formal talks just two weeks ago, and are still in the discovery stage. Once their respective accountants report back, both Virgil Froehlich, president of Affiliated Norfolk, and his counterpart in Elwood, Loran Hinds, say they hope to present their boards with a proposal that leads to a merger.
Between them, the co-ops service 928 customers in 10 midwestern and western states, and overlap in four of them -- Nebraska, Iowa, Kansas and Illinois. A combined company, they say, would bring in an estimated $750 million in annual revenue and give the new entity a better opportunity to withstand competition from the major chains.
"There's a lot of advantages that a combined house would be able to bring to the table," Hinds said."The overall direction we're looking at is, this will better enable us to serve the independent retailer. Our goal is always improving service."
Froehlich told SN that a merger with Affiliated Foods of Elwood, about 250 miles away, is not only "a logical step," but a necessary one, given the industry's consolidation marathon.
To Froehlich, the respective wholesale food cooperatives don't have too many differences outside of zip code. That's why he and Hinds say a deal makes sense.
"It's almost like looking in a mirror and seeing each other," Froehlich said. "We see all these mergers and acquisitions taking place, and we say to ourselves, maybe we should be looking at this; hey, let's get a little smarter and see if we can get this thing together."
Besides the overlap in territory, there are many other significant similarities in the two co-ops, according to Froehlich and Hinds.
One of the independent retailers served by Affiliated Norfolk said he's optimistic about the prospect of a merger with Affiliated Elwood. "I think nowadays, with all kinds of mergers going on, about the only way to keep up is with extra buying power," said Larry Meyer, owner of the six-store Grocery Kart chain in western Nebraska.
"This is only going to help us compete with the Wal-Marts, the Safeways and the Albertsons," Meyer added.