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A&P Jettisons U.S. Distribution Ops

MONTVALE, N.J. -- As was widely expected, The Great Atlantic & Pacific Tea Co., Inc. here said yesterday that it would transfer its U.S. distribution operations, including some warehouse facilities and related assets, to C&S Wholesale Grocers.

The transition of property and operations to the Keene, N.H.-based wholesaler is expected to begin next month and end in the autumn, the company said. "The facilities included in the transaction are in Central Islip, N.Y; Dunmore, Pa.; Baltimore; and New Orleans," A&P spokesman Richard De Santa told Progressive Grocer. "The 'other assets' refer primarily to equipment in the facilities."

The deal with C&S is the latest move by A&P to pare down its operations, coming in the wake of the chain's announcement last month that it will concentrate on future Northeast U.S. retail development by selling its Canadian arm, divesting its Midwest operations, and making supply chain and other cost cuts.

According to the retailer, the new long-term supply and logistics arrangement is expected to lead to $40 million in annualized savings, due to C&S's logistics expertise and purchasing efficiency, and the removal of internal costs related to self-distribution.

Said A&P chairman and c.e.o. Christian Haub, "It is a key step in our ongoing effort to reduce costs overall, and specifically to align our infrastructure to the 'New A&P' that will result from the completion of our announced restructuring plan. In addition, C&S's best-in-class expertise will enable our management to focus exclusively on the development and expansion of our fresh and discount retail formats."

The company said that because of the scope of C&S's existing distribution network, A&P's Edison, N.J. and Bronx, N.Y. facilities are scheduled to close. Progressive Grocer reported on the planned closing of the Edison facility earlier this month. A&P is also selling its Michigan warehouses separately, as part of its Midwest divestiture plan.

The grocer noted that it expects to spend $65 million to $75 million in connection with the distribution changeover during the first half of this fiscal year. Including a one-time reduction in working capital and the sale of certain assets as a part of this transaction, the company expects an immediate positive impact on cash.

Haub said that while the company regretted that this strategy would likely put some employees out of work, it was necessary for A&P's "long-term viability." He added that the move furthered the company's goals of being once more profitable by fiscal 2007 and of "growing our business in our core Northeast markets going forward."

De Santa declined to provide figures on how many associates would lose their jobs, citing a company policy against releasing employee numbers or commenting on personnel matters.

A&P currently operates 650 stores in 10 states, the District of Columbia, and Ontario, Canada under the A&P, Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, Farmer Jack, Sav-A-Center, Dominion, The Barn Markets, Food Basics, and Ultra Food & Drug banners.

C&S is the second-largest food distributor in the United States, after Supervalu.
-- Bridget Goldschmidt
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