A&P goes out with a whimper

Discussion
Jul 21, 2015

There was a time when A&P was the largest grocer in America. Later it became the butt of jokes. (Where’s the best place to open a supermarket? Anywhere close to an A&P.) Today, it’s too sad to make fun with news that A&P has filed for Chapter 11 protection for the second time in the past five years with plans to sell or close the stores it currently operates.

According to reports, Great Atlantic & Pacific Tea Co. (A&P’s corporate name) has reached an agreement to sell 120 of its 296 stores to Stop & Shop, Acme Markets and Key Food Stores. It has also identified 25 locations it plans to close. One of the factors that may complicate the sale of locations, as reported by The Record in June, is that many stores have only five or six years left on their leases. With locations primarily in the New York metropolitan region, any new owner would likely face even pricier rents under new lease terms.

The reasons for A&P’s decline are no secret. For years the company was criticized for being slow to respond to market conditions, often focusing on extracting dollars from vendors rather than selling to its customers. It failed in comparison to competitors on both price and customer experience. For many shoppers, including this one, A&P-owned banners became the place to drop in for a quick purchase because stores were nearby. There were never enough customers in a store to cause long lines at the checkout.

A&P old and new

Photos: A&P

The decision to file for bankruptcy was also not a surprise as news reports and rumors of the company’s struggles have been widely circulated. Back in June, Imperial Bag & Paper Co., a supplier of shopping bags and food containers, sued A&P for failure to pay close to $3.7 million in debt. The grocer, it was alleged, ended its relationship with Imperial after the vendor asked for payment upon delivery rather than continuing to extend it credit terms.

Do you think A&P’s management missed opportunities to change over the past decade that could have led to a different outcome? Can you identify other regional supermarkets that should heed the lessons of A&P?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Who else to blame but senior management? The customers? No. The economy? No. The competition? No. The lesson here is the same as it always is for retailers."
"Oh, A&P. Where I first pushed the grocery cart — after riding in it for too many years. Where I had my first screaming blow up because I could not get candy during check out. Where I watched my mom grind coffee each time we went to the store."
"Shortly before the last filing, I was hired by a group of bondholders to interview the CFO and others and determine the viability of the company. Several issues led me to report that it wasn’t a question of if A&P would file but when."

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20 Comments on "A&P goes out with a whimper"


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Kevin Graff
Guest
6 years 10 months ago

Who else to blame but senior management? The customers? No. The economy? No. The competition? No.

The lesson here is the same as it always is for retailers. Change, evolve and get better fast or die.

They didn’t have to reinvent the wheel to survive. They just needed to open their eyes to what the competition was doing to steal their customers … And act!

Tom Redd
Guest
6 years 10 months ago

Oh, A&P. Where I first pushed the grocery cart — after riding in it for too many years. Where I had my first screaming blow up because I could not get candy during check out. Where I watched my mom grind coffee each time we went to the store. The issue with A&P was a pure complex management issue. They were out of touch with the teams running the stores, the distribution team and others. Management felt that it would all just keep running cause they were A&P.

Am I sure? Yes. In my earlier years in retail tech I met the leaders. They kind of thought some of the new tech stuff was overkill. It was that overkill that killed my beloved A&P.

Other regionals, like Spartan Foods (Midwest), need to step up the pricing battles. They need to re-tune their pricing to become more competitive in the small towns that they serve. Kroger knows this and they are doing great as they expand and increase customer loyalty.

I still deserve that candy from A&P.

Tony Orlando
Guest
6 years 10 months ago

A&P was the king at one time, when I was a kid. In the ’80s things started falling apart, as many new competitors came in and were able to undercut A&P with their heavy labor costs. The retail supermarket industry has changed dramatically, with every type of player in the game and now with online convenience, especially in the cities, which has further eroded business for A&P among others who have consolidated or merged.

They tried new fresh formats but were too late, as their reputation for high prices and bad service had already taken their toll. I look at Save-A-Lot, Fleming (which was huge) and others who all collapsed and it shows me that change is necessary to survive, and things will continue to change every five years, as players will exit and new ones will come in.

Cathy Hotka
Guest
6 years 10 months ago

Grocery has been a contact sport forever, requiring grocers to adapt to a host of changing customer requirements. Watching those middle aisles shrink? Check. Gluten-free section? Check. Tons of prepared food? You bet.

It’s adapt or die in the grocery biz, and all the smarter players know it.

Ron Margulis
Guest
6 years 10 months ago
Shortly before the last filing, I was hired by a group of bondholders to interview the CFO and others and determine the viability of the company. Several issues led me to report that it wasn’t a question of if A&P would file but when. Included on the list were the exorbitant payments A&P had to make to several Yucaipa executives January 1st of each year — for what, I couldn’t figure out. Also, the salaries they paid store managers were higher than managers at companies with stores posting three even four times the sales. And there was much more. I’m really not sure there are any opportunities they successfully took advantage of during the last decade. Even the decent ideas, like the Fresh format, were so poorly executed that you’d have to wonder if management ever talked to the customer or even cared about them. For example, when Fresh first started, some bright person in Montvale determined that shoppers wanted diapers and candy in the same aisle located, by the way, right next to the… Read more »
Frank Riso
Guest
6 years 10 months ago

It was A&P that gave me my first job in retailing many years ago and it is sad to think they are going away forever.

I do think A&P’s management made several mistakes in the last decade. The biggest in my opinion was the purchase of Pathmark. One poorly performing chain buying another poorly performing chain was the start of this disaster.

The money used to buy Pathmark in whatever form should have been used to improve the current base of stores and compete better in the NY Metro area. The best of the best in ShopRite and Stop and Shop are very difficult competitors. A&P should have let Pathmark fold and then it would have one less competitor in the region.

All that being said, King Kullen on Long Island may be the next to fold if they do not learn how to compete with both Stop and Shop and the new arrivals on Long Island, ShopRite.

Ed Rosenbaum
Guest
6 years 10 months ago

Quite a past but no future. In fact, many of us thought A&P was not in business before this surfaced. A&P has struggled for many years. Sadly none of this is new. Many years ago they were competing poorly against a small chain called Colonial Stores. There has to be a reason why A&P has not even been an afterthought in people’s minds for so long. Maybe a better question is, how have they survived so long?

Ian Percy
Guest
6 years 10 months ago

Let’s face it, innovation in the food business is tough. But it’s doable as so many other companies have demonstrated. Kevin pretty well hits it perfectly. Like in hockey, if you don’t keep you head up you’re going to get hit.

Almost more to the point I’d suggest the downfall was due to corporate ego. Just because you were king yesterday doesn’t mean you’ll still be king tomorrow. Credibility — personal and corporate — needs to be re-earned constantly.

I’m appreciative of A&P for another reason. I spoke at one of their corporate conferences years ago and had the pleasure of meeting another speaker there — fellow BrainTrust panelist Ryan Mathews.

J. Peter Deeb
Guest
6 years 10 months ago

A&P management started missing opportunities as far back as the ’70s! Look at all the markets they exited over the years and all of the bad decisions made when they decided to defend the Northeast markets through poor acquisitions and even worse marketing and technical decisions. I am surprised it took this long to finally dissolve.

This should serve as an example for other regionals (see Haggen, etc.) to tread very carefully when expanding, or just competing in their existing markets without the infrastructure, resources and management talent to succeed.

Hy Louis
Guest
6 years 10 months ago

Bi-Lo, Winn-Dixie, Albertsons-Safeway, Marsh, Roundy’s, Haggen, Fairway (to name a few) are all on the death watch. Maybe not this decade but the next. Or maybe by Christmas. Sure they missed opportunities to stay viable. But staying viable is not always the goal and desired outcome of a grocery chain. A lot of us in the industry have made an honest, and dishonest, dollar on the perceived poor decisions made by A&P and other distressed grocers. It’s easy to blame Walmart, the unions or the economy. Those of us in the business of recycling real estate, A&P has been the gift that keeps on giving.

It’s quite obvious that many of the perceived bad decision simply had to be done on purpose from leases, labor, procurement, debt and supply. A lot of people can get wealthy from a failing company.

Ryan Mathews
Guest
6 years 10 months ago
A decade ago takes us all the way back to 2004, at which point the handwriting was painfully, and indelibly, inked all over the Not-So-Great Atlantic & Pacific Tea Company wall. Management was surely the author of those commercial charnel house musings, but in more subtle ways than the fact that they stayed happily mired in the glory days of the 1950s and 1960s. For years A&P has been a financial windfall for consultants and investors — two groups who, especially when acting in concert — rarely create happy endings for food retailers. By the time the fees were paid and the investments were maximized (a la Ron Margulis’ apt if politely veiled observations) it was already too late. The “fix” — if there was one — should have come 20 or even 25 years ago and should have been spearheaded by a management team that understood both modern retailing and the perils of “cheap and easy” capital infusions. As to what other chains could learn a lesson from what happened at A&P, let me paraphrase Marlon… Read more »
Gajendra Ratnavel
Guest
6 years 10 months ago

A lot of businesses go through periods of stress but something is seriously wrong upstairs if the signs of a ship taking on water were not fixed for so long. It’s not like it happened over night.

Roy White
Guest
Roy White
6 years 10 months ago

At some point all companies come under the law of unavoidable failure, and A&P has been operating under this law for a very long time. For at least 10 or 15 years there has been no way A&P could bring itself back to life. There was a point when you visited the Montvale headquarters in the early- to mid-2000s that a spirit of “let’s get this organization on the move” prevailed throughout the building. But it faded quickly. At that point, failure was indeed unavoidable and the end should have been swift. But it wasn’t, and it took some time before the snowball of foreign ownership, merger with Pathmark that made no sense, equity company control interested in cash, and decades of operating really conventional stores in a market increasingly oriented towards other formats finally took over. Quite frankly it went on longer than anyone had the right to expect.

Herb Sorensen, Ph.D.
Guest
6 years 10 months ago

It is a sad day indeed. A&P was the first billion dollar retailer in the world, and the story of how the two Hartford brothers brought that about is still relevant. Unfortunately, both leaders of the indomitable and visionary team that brought that about died in the early 1950s with NO competent succession plan.

A decade later, Sam Walton assumed the retail philosophy mantle they had dropped, and with the addition of groceries 30 years later, Walmart drove on to become the world’s largest retailer. You can read about the first part of this story in Marc Levinson’s “The Great A&P and the Struggle for Small Business in America.”

The logical successor in this global evolution of retailing is “The Everything Store: Jeff Bezos and the Age of Amazon.” However, assuming the A&P/Walmart mantle will yet require Amazon to cross the boundary into brick-and-mortar retailing.

Converging bricks and clicks (not operating them as two different things) will solve the twin capital problem that current brick-and-mortar retailers are struggling under: “The Problem: “Parked” Capital.”

W. Frank Dell II, CMC
Guest
6 years 10 months ago

A&P management has missed the boat for close to 25 years. They have lived in their own world. At one time I counted 11 management levels to make a decision. Nothing could get through all these levels so nothing changed. One of the best examples of a silo company is A&P. Couple that with old tired technology and you have a company on the way down. Even their real estate was old as many of the stores were small by today’s standards. We have one store in Stamford that was not remodeled for over 30 years and when they did remodel many customers left. Today Trader Joe’s is hopping and A&P is selling fill-in. Any retailer living in the past is in trouble.

Richard J. George, Ph.D.
Guest
6 years 10 months ago

As noted, A&P’s demise was not unexpected. At one time it was America’s largest retailer with a Wall Street Journal article proclaiming that every corner in America would have an A&P.

Unfortunately, the downfall of A&P began years ago and any efforts in the past decade could not stop its death spiral.

A&P suffered from complacency, stayed stuck in the middle and failed to recognize the changing consumer and competitive landscape. This is a recipe for a slow but predictable death for any retailer or company for that matter. Success leaves clues. Failures leave fatal clues.

Gordon Arnold
Guest
6 years 10 months ago

Change is good! Refusing to make the changes needed to address the evolution of a market segment or category is, as we see in the case of A&P, suicide. The cost of staying the course and implementing damage control management practices is clearly pictured in a study of this and similar retail giant fall offs. The only differences from one company to another is the type and time span for the end. What boards of directors and ownership needs to do is to spend more time learning how to find leadership and evaluate the ones in charge. Step one should include eliminating golden parachutes and contract termination payouts. This would enable quick recovery from bad decisions made in the selection process.

vic gallese
Guest
6 years 10 months ago

Absolutely. Management seemed insulated from the changing market and declining customer perceptions. There are probably many smaller chains that should look in the mirror, but the one that comes to mind is Winn-Dixie.

Jan Kniffen
Guest
Jan Kniffen
6 years 10 months ago
I stocked my first shelf (at an IGA) in 1964. By 1968 I was standing at the grand opening of the 26th Walmart store (in Sikeston, MO). Twenty years later in 1988, when I walked out of the first Walmart SuperCenter, I picked up the handset on my carphone (remember those days?), called my former boss and friend and said, “I have seen the future of grocery retailing, and it is not your neighborhood IGA store. You are 70 miles from the epicenter of an earthquake. Sell and retire.” A&P’s mistakes were legion, but then again so were the mistakes of the 95 department stores that folded or were bought out over my career, as were the mistakes of all those discount stores (remember Gold Circle, Venture, Caldor, Grampa Pigeons, W T Grant, E J Corvette, Kmart…oh, that is right, that one is not gone…yet.) Retailing, whether it is grocery, apparel, mall based, off mall, discount, full price, or off price, is a deadly game, and always has been. The department store destroyed the mom… Read more »
David Livingston
Guest
6 years 10 months ago

A&P only did what other mediocre chains are doing, and that is to keep acquiring other mediocre chains to keep from disappearing. Bad times bad will never equal good. The fact A&P is still in business right now at this very moment is a miracle. Despite having most of their problems self inflicted, they have survived about 20 years beyond expectations. Therefore I will not second guess all those missed opportunities because A&P has survived long enough to see others come and go.

BI-LO/Winn Dixie will probably be my guess for the next big regional chain to follow A&P’s footsteps. They have all qualifications of past bankruptcies, poorly performing stores, and competitors who will play cat and mouse with them for sport.

wpDiscuz
Braintrust
"Who else to blame but senior management? The customers? No. The economy? No. The competition? No. The lesson here is the same as it always is for retailers."
"Oh, A&P. Where I first pushed the grocery cart — after riding in it for too many years. Where I had my first screaming blow up because I could not get candy during check out. Where I watched my mom grind coffee each time we went to the store."
"Shortly before the last filing, I was hired by a group of bondholders to interview the CFO and others and determine the viability of the company. Several issues led me to report that it wasn’t a question of if A&P would file but when."

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