Seizing Opportunities When the Outlook Is Bleak

During the past two years of economic malaise, it is easy to assume that business activity has “slowed down.”

It is reflected in the national unemployment levels and in many companies' top-line performance, especially those companies that are dependent on consumer spending.

But beneath the surface, a closer look reveals that some operators in the food distribution industry have indeed been quite active in terms of preparing for the future and taking advantage of situations that the downturn has created.

At Minneapolis-based wholesaler Nash Finch Co., for example, the company saw opportunities to expand the footprint of its military-supply business by buying up real estate for distribution facilities while prices are low.

“The first instinct is to hunker down, pare back your business and hang on for dear life,” Alec Covington, chief executive officer, told SN in an interview for a feature beginning on Page 14. “My belief is, if that is all you do, you could be playing a dangerous game.”

So in the past several months, Nash Finch has snapped up properties in areas where it had hoped to eventually expand anyway — near military facilities in Indiana, Georgia and Oklahoma — at discounted prices, and it is preparing to ramp up its operations there.

“The recession has impacted our business and impacted our plans, but not in the way you might expect,” Covington said. “It has accelerated our growth plans, actually.”

At the same time, Nash Finch has also focused on keeping its debt levels down so that it is prepared to expand its traditional wholesaling business as opportunities for acquistions arise.

Covington said he believes wholesalers are entering another era of consolidation due to overcapacity, in part due to the economic slowdown, and he is seeking to position the company as an acquirer of those businesses as they become available.

Similarly, other companies in the industry have also been able to expand their operations in the economic downturn through strategic investments, particularly in the Northeast, an area analysts have long said has been ripe for consolidation.

Williamsville, N.Y.-based Tops Friendly Markets, for example, nearly doubled in size with the acquisition early this year of many of the former Penn Traffic locations as that company went through its third and final bankruptcy. Montvale, N.J.-based A&P, and Shaw's, owned by Supervalu, Minneapolis, also have pared back, to the benefit of their acquisitive competitors like Big Y, ShopRite and Stop & Shop.

In addition, several companies in the industry have been busy refinancing their debt while interest rates are favorable, perhaps better positioning them for future growth opportunities.

All of these strategies might have eventually unfolded even without the recession and its aftermath, but the pace seems to have been accelerated by the lingering economic downturn — at least for those companies that are ready to seize the opportunities.

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