Marshall to Attempt A&P Turnaround
There is no doubt A&P’s parent company, The Great Atlantic & Pacific Tea.
Co., is struggling mightily. The grocery store operator comes off two quarters
where comp store sales were down nearly six and four percent respectively.
The company fired its CEO Eric Claus in October and has announced it has found
a replacement in Ron Marshall, who recently left Borders after just about a
year on a turnaround job there.
The self-styled turnaround artist, Mr. Marshall,
has previous experience as CEO of Nash Finch and before that as chief financial
officer at Pathmark, now a division of A&P.
At Pathmark, Mr. Marshall was credited
with getting the chain’s financial house in order. Later at Nash Finch, he
took early steps to reduce costs and post a profit. He left the company after
several years at a time when the wholesaler and retailer was losing ground
to grocery competitors.
“I am very much looking forward to working with Christian (Haub, executive
chairman of the company), the Board of Directors and the management team to
realize A&P’s
tremendous strategic potential. I am confident that, together, we will bring
A&P back to its leadership position,” said Mr. Marshall in a company press
release.
Mr. Haub, said in the same release, he was “very excited about the
strengths, competencies and experiences that Ron brings to A&P. He will be
the key leader in our turnaround… With Ron as our next chief executive officer
I am confident that we will realize the tremendous strategic value of the company
and capitalize on our leadership position in the Northeast.”
Discussion
Questions: What challenges must The Great Atlantic & Pacific Tea Company
overcome to get the entire company turned around? What are your thoughts on
Ron Marshall’s ability to enact the types of changes necessary to achieve a
turnaround?
A&P has lost its grip on the pulse of the consumer. It will need an entirely new go-to-market strategy to survive.
While I’m sure there are plenty of costs to cut there, this can’t be a pure cost-cutting exercise. Making a fundamentally unpopular retail offering leaner doesn’t necessarily make it more competitive.
The challenge at A&P is less about how to get the financial house in order than it is about redefining the brand in a way that appeals to somebody born after 1980.
Well, Borders isn’t exactly turned around are they? The leadership at Borders described Mr. Marshall as a ‘guy who lived and breathed spreadsheets’. Thus, pretty much admitting there was little success in that narrow view of what was considered to be the turnaround required. Further, deciding to dump and move on towards a different approach elaborates on the indication that it wasn’t quite what they had hoped for as a turnaround. Maybe their books are in order–the financial ones. But, their hopes of a position in book selling were severely diminished by the time lost in the past year, so much so that it could likely be fatal.
Mr. Mathews makes the point quite clearly. It’s going to take a lot more than spreadsheets and financial correction to turnaround A&P. Their ship has indeed been off course for decades, if not longer.
There are far too many choices in shopping for food today. Far too many. It proves that consumers want a compelling reason to make the choice to shop at any food retailer. It’s hard to believe that any customer would choose A&P by choice, moreover as mentioned, if they even know of them as a choice in the first place.
It can be argued that you can’t do compelling things about image and brand without the proper financial position. However, these guys are talking about them becoming a ‘leader’. It would seem to me that they might be better thinking about how to become a survivor. Nevertheless, it’s quite stunning that they have survived to this point, albeit a small fraction of what they once were.
I’m not so sure a ‘guy that lives and breathes spreadsheets’ is what they needed. They need a coach–a coach in blocking and tackling. They need a champion to lead and inspire the meager left behind. They need someone who can define what being a leader in food means and how they plan to become one. I’m not so sure that can be found on a spreadsheet. They need an ‘artist’ of a different kind. Mr. Marshall – not so much.
I’m not sure that Ron Marshall is the answer for A&P. When he left Nash Finch, NF was under SEC investigation. While Marshall was never charged with anything, there was a cloud over his head. He went to Borders, where they lost market share, had a horrendous 11-week holiday sales period where sales were down over 14%, and then bolted from the company just when they were about to announce additional lay-offs.
So unless someone can show the marketplace what he has done to lead companies in his last two positions, I think that 2 years from now, we will be looking at an A&P in worse shape, with Ron Marshall walking away with another large severance package, calling himself a turn-around expert.
As far as sales goes at store level, I think we will continue to see A&P have difficulties and possibly see a significant amount of stores closed. Ron isn’t a retailer and I don’t think he was hired to improve sales. His job will be to get the financial house in order and make the bottom line pretty. His skills will be used to fix the expense side of the balance sheet.
All of A&P troubles have involved Chris Haub in one way or another. A reportedly nice man, he has been the bull in the China shop. One division after another has been closing since he took charge. Acquisitions turned into nightmares. All new ideas failed. Turnover of executives is high. So it will be important that Chris step aside and let Ron do his job. I predict the stock price will rise but I don’t expect a visual turnaround at store level.
Great A&P has indeed had its share of problems in recent decades, failing to stick with a successful merchandising and marketing plan.
One bright glimmer of hope during the 150th anniversary celebration year was the launching and relaunching of over 2,500 SKUs of “own brand” products, private label offerings that have won over customers, foodies, and critics alike.
Take Via Roma, authentic Italian food products, that allows the customer to experience Italy and its great food without the costly airfare. Google, “via roma”, and you’ll find dozens of entries about this reasonably priced and delicious food product line with items such as take-n-bake pizzas, imported pastas, pasta sauces, imported extra virgin olive oils, imported cheeses, sparkling waters,rich Italian cookies, bread sticks, and fine crackers.
Likewise Great A&P sells exclusively in its family of banner supermarkets Hartford Reserve gourmet coffees,deli meats and cheeses; GreenWay organic poultry,produce, dairy, canned vegetables,and cleaning items; Live Better OTC drug products; America Choice Gold Quality premium poultry seafood,bakery products and produce;Preferred Pet full line of dog and cat products, America’s Choice Baby line; and Market Spa shampoos, lotions and beauty products which are all part of the ever growing private label segment that originally was just America’s Choice.
This is how Great A&P is reaching out to young value shoppers in their 20s and 30s, with growing families, a new twist on private label foods their parents purchased from A&P when they were young, like Ann Page and Jane Parker.
What better way to revitalize a company with a 150 year tradition, than to offer the highest quality private label products at prices more than 30 percent lower than national brands?
Savings cost is one issue and may be the easier one. Creating a distinctive appeal and creating a differentiation in this market is not easy but is critical for success. What can A&P offer that is distinctive, different, AND of value to a group of consumers?
It isn’t going to happen. A&P has been trying to turn itself around for as long as I can remember. Soon somebody is going to pull the plug and take it off of life support.
This company needs a new playbook. They have to go back to basics, and it will cost a lot of resources to develop a loyal consumer. Great products, at great prices, with incredible customer service should be their mantra, while eliminating OOSs and shrink should be their chorus!
I guess Mr. Marshall is lucky THIS group isn’t on the BOD, isn’t he?
In the book “Main Street to Miracle Mile” it is recounted how (in the 1930s) A&P did battle with an upstart called Streamline Stores for market share in the Pittsburgh area, and how “Streamline” represented everything modern, while the A&P represented the 19th Century; suffice it to say (based on the comments here) the perception is that A&P is STILL in the wrong century. I wish Mr. Marshall well, but there’s nothing in his resume that screams “success”…sort of a General McClellan of the retail world.
Ron Marshall is a financial expert. His track record shows that when he comes in, he can cut costs, but when the time comes to make true retail improvements based on customer insight, innovation, competitive share gains, Mr. Marshall cuts and runs. He is now teamed up with Ron Burkle. Together in the short run they may make some money for themselves, but unless they bring in some top merchants and operators, this will be failure for A&P Great Renewal #3578.