July 31, 2015
Dear Valued Client Partner,
As you are aware, on July 19th A&P filed for Chapter 11 bankruptcy protection… their second filing in five years, likely beginning the process of total dissolution of the supermarket chain. Although this comes as little surprise to industry professionals who have observed first-hand the unrelenting deterioration of the A&P and Pathmark shopper franchises and receding sales revenue base, it’s still upsetting considering the negative ramifications impacting employees, supplier-partners, customers and communities.
Immediately on the heels of the filing, A&P announced agreements to divest a significant number of stores and planned store closures, to include:
- 76 stores sold to Acme Markets, the eastern Pennsylvania-based division of Albertsons Companies
- 25 stores sold to Ahold USA, for re-branding to Stop & Shop Supermarkets Co.
- 19 stores sold to Key Food Stores Cooperative
- 25 stores to cease operations in the near future
- Approximately 140 stores to continue operating as part of A&P, pending possible future divesture or closure
We anticipate that the store closures will begin in September, and the bankruptcy proceedings to review and rule on divestitures will continue for the balance of the calendar year. A&P has secured debtor-in-possession financing to provide adequate liquidity to continue store operations during the transition period.
Should the A&P store divestitures proceed as planned, Acme will again become a significant player in Metro New York grocery, with approximately 85 locations spread across the marketplace, $2B in sales and a 6% market share. An additional 25 Stop & Shops in Metro New York will increase their store count to 216, add $600 M in revenues and an additional 1% market share to approximately 13% ACV. The addition of 19 Key Food stores will continue to fuel their recent growth, with store count now eclipsing 200, over $2B in retail sales, market share of New York City over 11% and significant new penetration on Long Island with 20 stores. Finally, although Wakefern Food Corporation hasn’t been mentioned in any official communications to date regarding store purchases, we anticipate that they will be an active bidder for select properties moving forward.
Be advised, the entire RDD team, from leadership through to retail services, is monitoring the A&P situation daily, and we will expeditiously share with you all relevant information and our insights. As far as we can tell, currently all stores (approximately 290) continue to operate normally, albeit under a dark cloud of uncertainty and concern. Given that multiple stakeholders are involved in the process, we anticipate a stream of communiques will flow for the next several months.
Although adapting to major changes and disruptions in the marketplace are never easy, RDD is fully prepared to adjust our go-to-market strategy and resource deployment to progressively react as the A&P situation continues to unfold. Over the last two years, we have experienced more dramatic changes in the Metro New York marketplace, relative to retail store re-bannering and wholesale supply arrangements, than we have in the proceeding decade. During this period, RDD has redeployed retail merchandising and headquarter sales associates to reflect shifts in store counts and procurement practices, and has significantly increased our headquarter penetration at C&S Grocers and Bozzuto’s, with both wholesalers’ businesses growing as a result of White Rose closing.
Last year I shared with you the exciting news that RDD had expanded our regional service footprint by fielding a comprehensive and integrated Ahold Service Solution. By formalizing a collaborative arrangement with our New Freedom, PA-based sales agency partner STAR/Pro-Star Sales & Marketing, and Cumberland, RI-based MATRIX Sales & Marketing, Inc., RDD has orchestrated an operating alliance with the partners pooling retail merchandising resources to field a vertical, Ahold-directed retail merchandising team with 65 “perishables-exclusive” representatives and a shared reporting platform. RDD can now support client manufacturer brands across the entire Metro New York, Mid-Atlantic and New England region, and several leading clients have appointed RDD to service them with a seamless Ahold solution. As you are likely aware, last month Ahold and Delhaize announced that they have agreed to merge their global businesses, creating a supermarket company blanketing the eastern U.S. with approximately 2,000 stores and $44 B in sales. Although they haven’t shared with trading partners their merged operational roadmap, RDD is in active discussions with a number of perishables-focused, southeast U.S.-based sales agencies to provide network retail coverage for Ahold Delhaize if appropriate.
With supermarket industry merger and acquisition activities heating up, it is critically important that RDD continues to expand our regional capabilities to serve client-principals with the “perishables-exclusive” service portfolio that provides competitive sales and merchandising advantage. Working in collaboration with our alliance partners STAR/Pro-Star and MATRIX, RDD is now introducing RSM – Regional Sales Solutions. Building from our successful Ahold Service Solution platform, RSM provides clients the opportunity for seamless regional sales agency coverage at Ahold (Stop & Shop and Giant), Albertsons (ACME, Safeway and Shaw’s), Wakefern (ShopRite and Price Rite), C&S Wholesale Grocers and Bozzuto’s Inc., with continued deep and impactful penetration of local market chains and independents. In the coming months you will be hearing more about RSM, and I encourage you to schedule a visit so that we can share our vision and unique service solution.
Industry leadership takes years to achieve, constant reinvestment and a genuine willingness to adapt to changing environments. The RDD leadership team remains fully engaged and totally committed to sustain our leadership position by delivering client and customer trading partners innovative solutions that address industry challenges and capitalize on marketplace opportunities. We have the talent, tools, traditions, aspirations and energy to succeed!
Thank you again for your continued support and business.