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Unified Sees Threat From Tesco
LOS ANGELES Unified Western Grocers here said last week it sees the entry of Tesco's Fresh & Easy Neighborhood Markets as a threat to its retail members comparable to the potential spread of Wal-Mart Supercenters. With Wal-Mart decelerating growth in California, the competitive landscape will change as if Wal-Mart was expanding when Tesco begins opening stores, Al Plamann, president and chief executive
Elliot Zwiebach
February 19, 2007
3 Min Read
ELLIOT ZWIEBACH
LOS ANGELES — Unified Western Grocers here said last week it sees the entry of Tesco's Fresh & Easy Neighborhood Markets as a threat to its retail members comparable to the potential spread of Wal-Mart Supercenters.
“With Wal-Mart decelerating growth in California, the competitive landscape will change as if Wal-Mart was expanding when Tesco begins opening stores,” Al Plamann, president and chief executive officer, told the cooperative's annual meeting. “We expect Tesco to be so aggressive at some locations that it will impact our members.”
That impact will be felt at a time independent retailers are demonstrating a strong growth pattern, he noted. “The last few years have seen a renaissance among independents, with dramatic growth in the last three years.
“In the last five years, independents in Southern California have picked up market share of 2% to 3%, and in Northern California and the Pacific Northwest, we've seen a resurgence of growth among independent operators.”
That growth is reflected in Unified's financial results for the first quarter that ended Dec. 30, which showed sales up 4.1% to $781.4 million — an increase the company attributed to new stores opened by members and continued growth in its perishables and specialty products divisions.
Patronage dividends were up 29% to $6.6 million due to improved sales combined with reductions in post-retirement benefits and transportation expenses, the company indicated. However, net earnings fell 40.4% to $3.5 million, which it attributed primarily to a favorable adjustment to claims reserves in its insurance subsidiaries in the prior year resulting from changes in California workers' compensation laws.
In his presentation to the membership, Plamann said Unified is close to completing a facilities upgrade that will position the company to meet the needs of its retail members and consumers over the next three to five years.
“Given the dynamism of the retail marketplace, we as suppliers need to think about what happens to our members from a consumer perspective and satisfy those needs,” he explained, “so two years ago we began looking at our distribution system facility by facility to determine if we had the capabilities necessary for the next few years.”
Since conducting that assessment, Unified has completed several projects over the last two years, Plamann said, including:
Getting control of additional space adjacent to its headquarters facility in Commerce, Calif., to open a produce warehouse; to relocate trailers parked at a separate facility onto the main property, at a cost savings of $1 million a year; and to expand a second office building on the property so the company could consolidate all buyers in one location.
An expansion of its Stockton, Calif., distribution center that included a 45,000-square-foot addition with a higher cube capacity for frozen and deli, and the addition of a 31,000-square-foot building connecting the grocery and perishables warehouses that includes a sorter to facilitate batch orders.
A re-racking of its frozen-foods facility in Portland, Ore., that involved replacing an automated system with traditional racking for greater productivity.
A re-racking of its perishables facility in Santa Fe Springs, in Southern California, that utilized unused ceiling space for nearly four additional pallet positions per bay.
Going forward, Plamann said Unified will focus on evaluating a specialty products facility in Hayward, Calif., whose lease is up early next year.
In an effort to grow sales profitably and maximize its potential “to develop an edge in the marketplace,” Plamann said, Unified has completed collecting data to boost selling, marketing, merchandising and customer service, and plans to spend the next couple of years implementing some of those recommendations, including a more focused approach to sales; developing greater intimacy with members regarding what consumers want; and developing world-class customer care — a term Unified prefers to “customer service,” Plamann noted.
With perishables sales hitting $630 million in 2006, Plamann said Unified is on track to boost perishables sales to $800 million by 2008 from about $350 million in 2003.
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