EXTERNAL, INTERNAL EVENTS BUFFETED THE INDUSTRY IN 2004

David Merrefield

As sure as the arrival of winter, it's time to take a look back at industry events to see what the limited perspective of the present moment might suggest. That's the idea of this special issue of SN, which is devoted in large part to a look at what happened during this quickly fading year. You'll see relevant news articles identified by the logo inset to the right.

Last year at this time, we were still amazed by the then-recent collapse of Fleming Cos. and by Ahold's stumble. Luckily, we didn't see the like of those situations during 2004, but there was one telling event that bridged from 2003 to 2004, and that echoes still. That was the labor strife in Southern California. Last year at this time, the strike-lockout had held sway for many weeks and there was no way to tell when it would end, or how. But it had an end in early March.

Results betrayed the fact that organized labor didn't have a strong hand to play, which may explain why terms of the several contracts that expired thereafter were negotiated without undue incident. A continuing effect of the contention is attenuated sales and earnings produced by the three retailer protagonists: Safeway, Albertsons and Kroger. Indeed, it's likely that no other event in the 2003-to-2004 period will have such a great influence on the future direction of the food-distribution industry as will the California labor clash.

Another event that included Albertsons was its acquisition of Shaw's Supermarkets for $2.5 billion. That was the year's largest buyout. A number of other companies and stores were traded during the year; most were opportunistic fill-in store purchases.

Also, attention was put on the revenue challenges in front of Pathmark Stores, Winn-Dixie Stores and A&P. Those chains, and others, resorted to extraordinary measures to retain or restore profitability. The challenges will continue into next year. As they're addressed, the upshot may include the addition of store assets to the market.

The industry was also buffeted by powerful external forces. They included the disastrous hurricanes that raked Florida, the quick change from deflating food prices to inflation, high energy costs, protracted war in Iraq, the election and a generally precarious economy.

All those forces combined to make 2004 a year that fit few templates, and that required quick and flexible approaches. That was seen as numerous retailers tinkered with margins and promotional activity. Many tried increasing and decreasing those factors in a bid to find balance. Some rolled out new formats. Others made a few halting steps toward shaking off the dependence on promotional dollars that has propped up profits in the past, but which is now ushering in vexing accounting woes.

This editorial page will be on hiatus next week to make room for a special issue based on the lists published in SN during the year. We'll be back next year.