AG CLOSING DC, SELLING NONFOOD BUSINESSES

ELLIOT ZWIEBACH

SEATTLE -- Associated Grocers here said last week it plans to sell its general merchandise and health and beauty care business.

The retailer-owned cooperative also said it will close its 350,000-square-foot nonfood warehouse in Kent, Wash., in mid-August and seek to sell the facility.

The moves come less than two weeks after an arbitration ruling that prohibited AG from outsourcing its nonfood operation to another company's warehouse. AG said it had negotiated a supply agreement with Unified Western Grocers, Los Angeles, that would have enabled it to market nonfood more efficiently to its customer base, but Teamsters Local 117, which staffs the Kent warehouse, took the matter to arbitration.

The arbitration ruling said AG's contract with the union would not allow such an outsourcing arrangement.

According to Bob Hoyt, AG president and chief executive officer, "We believe the negotiated supply agreement was the most favorable solution for AG customers and the company, as well as for the long-term retention of jobs at Associated Grocers. We are extremely disappointed that we couldn't work through the new arrangement with the support of our union."

Union officials could not be reached for comment last week.

The Kent facility carries general merchandise, health and beauty care products, specialty groceries, cigarettes and service-deli products. AG said cigarettes and specialty groceries will be transferred to the company's 1-million-square-foot distribution center here when the Kent facility closes; a spokesman said the company has not decided what to do with service deli, although he said AG is likely to lease space to warehouse those lines.

When the Kent warehouse closes, 25 to 30 of its 125 employees will be moved to AG's distribution center here, while the rest will be laid off, the company said.

AG has already initiated discussions with several other wholesalers for its nonfood business, Hoyt said. "A sale of the business will allow the buyer to increase purchasing scale and provide more competitive prices to our stores," Hoyt said.

AG, with 2000 sales of $1.1 billion, services approximately 340 stores in Washington, Oregon, Alaska, Hawaii, Guam and the Pacific Rim.