A&P: Formatted for Success
Targeted formats have been and will continue to be key to the success of the Great Atlantic & Pacific Co.’s (A&P) in the New York metro market, the company’s executive chairman Christian Haub told attendees at Lehman Brothers’ 11th Annual Retail and Restaurant Conference.
According to a report on the Progressive Grocer website, Mr. Haub said A&P has transformed itself from a “geographic banner” to a “format-driven” operation. A&P counts three primary formats (Discount, Fresh and Gourmet) as helping it achieve its number one share of market in New York and its surrounding suburbs.
With the acquisition of Pathmark, A&P is also looking to launch a center-store price impact format under that chain’s banner.
Mr. Haub is also looking to expand A&P’s Food Basics banner, which he said has fared well in Canada. A&P currently operates 11 of the Food Basics stores in New York, New Jersey and Pennsylvania and A&P’s executive chairman sees an opportunity to grow the count to “100 stores or more” within its existing trade area.
Discussion Questions: What do you think of A&P’s “format-driven” strategy? Has it been as successful as Christian Haub suggested at the Lehman Brothers’ conference or are there other factors at work in the New York metro market to explain A&P’s upbeat self-assessment? Which of the formats do you see as having the greatest potential for the company?
Matching formats to locations that have the consumers interested in that format is a challenge but an innovative approach that has potential. A&P may need to develop a greater variety of formats but this is an interesting approach and one to watch.
There was a time when an A&P sign threw terror into the hearts of all other retailers everywhere. But times change and fear subsides. Now A&P says it is “format driven” and it has a few better mousetraps in which to capture customers. If it can revive the old magic into Pathmark, they could have a winner. Their “Fresh” format stores have potential too. But, I fear, the glory days of a great A&P is of another era.
The format driven strategy makes sense in this finicky and diverse market. That said, we can’t overlook A&P’s greatest legacy in the New York area: Location, Location, Location.
Having multiple formats benefits consumers as well as A&P. Other retailers may vary the in-store product mix to create neighborhood appeal, but they usually do not go as far as A&P. I would be interested to learn the revenue and profit numbers for each format to see if they are having the positive impact that Mr. Haub touts.
Past results are no guarantee of future success, but they sure can be indicative. Sorry to say I remain skeptical, based on senior management mis-steps (not the folk in the trenches), as well as the logistical challenges of all this. But I’ve stopped paying much attention to A&P, frankly. Many, many years ago, the Boston Red Sox hired a first baseman named Dick Stuart. He was a big guy, going to be the home run wonder. But he hit .220, and was sort of a dud. I was watching one game on TV when Stuart swung for the fences and hit what looked like a bunt, before being thrown out at first. One of the commentators said to the other, “Wow, did you see that?” And the other commentator said, “No, I missed it. I don’t watch .220 hitters.” There’s an analogy here.
It’s really interesting to see the words “A&P” and “Success” in the same headline.
A&P consolidated to 7 states (NY, CT, MD, PA, NJ, DE, DC). The strategy: stay in the most uncompetitive markets in 1 region and try to absorb the other local chains, creating less competition. Supermarkets in the NYC metro area have the lowest quality in the country: a “great” supermarket in Queens would be considered the worst in Minneapolis.
I remember when the Berlin Wall came down and East Germans were interviewed on TV exclaiming how wonderful it was to find fresh bananas in West German supermarkets. That same week my sister and I were visiting my brother in Minneapolis. We went to Byerly’s and my sister’s exclamations sounded exactly like the folks in East Germany.
A&P is upbeat about everything…all the way up until they shut down the stores. Pretty much the same old song and dance. Companies that are doing well don’t go to conferences to try to sell their story.