A&P’s next leader

HELP WANTED
Experienced, hands-on executive to take the reins of a 150-year-old regional chain. The ideal candidate must be able to hit the ground running (for his life) and able to think outside the box (but not too far or too often); someone who can help develop new formats and promotions (that go nowhere). In short, someone who can become part of  supermarket royalty (but ready to abdicate). This is a full-time position (maybe). Qualified candidates contact: A&P, Montvale, N.J.


If this sounds like an attractive prospect, then you have my undying admiration, best wishes and obviously the intestinal fortitude of a billy goat.

I am not here to regurgitate A&P’s failings over the past several decades or its recent decision to show CEO Eric Claus the Montvale moat. I’ll leave that to analysts, suppliers, assorted skeptics and shareholders such as Yucaipa Cos., run by billionaire investor Ron Burkle, which will no doubt be pushing harder for a return on a sizeable investment.

Frankly, I admire a company that’s been around for 150 years and expresses a desire to keep going despite the odds. And, I have a soft spot for the “Tea Company,” which is probably why I refuse to get rid of the rusty old Eight O’Clock coffee can I use for spare change. This makes me wonder if A&P is doing the same thing. But instead of holding onto a tin can, it is clinging to 435 stores under the A&P, Pathmark, Waldbaum’s, Super Fresh, Food Emporium and Food Basics banners.

Shepherding A&P through yet another reorganization will be one of the most challenging and frustrating jobs in the business and you have to wonder who’s up for a battle which, to this point, has been a losing one. In its most recent quarter, the Tengelmann-controlled chain posted a whopping $80 million loss and $145 million for the half—not a record by any means, but a tidy sum that leads some to wonder if, despite restructuring rhetoric, A&P might soon join the ranks of such urban legends as Bohack, Food Fair and Grand Union.

Tengelmann, whose takeover of A&P in 1979 fueled wild speculation about a European invasion of the U.S. supermarket industry, has not said anything about selling A&P.  But chairman Christian Haub recently told a German magazine that it could be an option in a couple of years when the operation becomes more profitable. Recent overtures have reportedly been far too low for the family to consider.

But is Tengelmann family patriarch Karl Erivan Haub ready to give up the ghost? There has been heated debate within the family on whether to keep it. But Mr. Haub has an emotional attachment to A&P. He reportedly bought it because he was afraid the Russians were going to start World War III and wanted to have a second base of wealth and security for his family in the U.S. Additionally, the Haub family fortune was built on supermarkets.
But “was” is the operative word. Tengelmann has been systematically pulling out of the supermarket, hypermarket and cash-and-carry businesses in favor of DIY, clothing and dollar stores all over Europe. “What’s left is 700 supermarkets in Germany,” said Boris Planer, director of research for Planet Retail, based in Frankfurt. “Another quarter of the supermarket network in the Frankfurt area is apparently going be sold to Edeka, a competing retailer, within the next several months,” he said, noting that other divisions in Austria, Romania and Bulgaria are close to being sold.

In the final analysis, what’s the point of sinking hundreds of millions of dollars in investment capital in 400 U.S. stores when you could use it to plaster central and Eastern Europe with far more profitable discount clothing stores like Kik that have virtually no competition, according to Planer. Tengelmann realizes that even if A&P works, it would never produce more than a fraction of the money that can be made in the European nonfood business.

Moreover, will waiting a couple of years to improve its salability compensate for the losses A&P could ring up this year and next? Of course, there are scenarios other than an outright sale. Namely, pulling out of active management and becoming a minority investor through Emil Capital partners, the Haub family private equity business. Who takes the majority interest? Maybe everyone ends up working for Yucaipa?
In the end, whether A&P survives as an entity will be a financial decision. Sometimes persistence just isn’t enough. 
 
Len Lewis, a regular Grocery Headquarters columnist, is a veteran industry journalist, commentator and editorial director of Lewis Com­munications, Inc. He is the author of The Trader Joe’s Ad­venture—Turning a Unique Approach to Business into a Retail and Cultural Phenomenon. He can be reached at [email protected] or at www.lenlewiscommunications.com.