When I was a child, my paternal grandfather ran a small food store – more a convenience store/deli than anything else – in New York City’s Chelsea neighborhood. When news came that an A&P would be opening up almost directly across the street from his Chelsea Pure Food Market, my grandfather was apoplectic, realizing that the Goliath that was the Great Atlantic & Pacific Tea Co. (A&P) could easily annihilate his David of a mom-and-pop store.
How the mighty have fallen.
From its previous perch as one of the most ubiquitous and successful supermarket operators in the nation, A&P’s collapse and departure from the retail scene offers the timely reminder that no company – in or out of the grocery industry – is too big to fail.
True, Montvale, N.J.-based A&P’s filing for Chapter 11 bankruptcy protection in July 2015 – its second such action in five years – wasn’t exactly a shocker, given ongoing reports of financial difficulties and an inability to meet the twin challenges of dogged competitors and consumer demands for an enhanced shopping experience – but the company’s reveal a month later that it wanted to sell off all of its stores placed A&P’s implosion on another footing entirely. Instead of a drastically reduced business, the region was now confronting the complete eradication of one of its most venerable grocers, which over the decades had built up its portfolio of store banners to include such familiar names across the Northeast as Waldbaum’s, Pathmark, Superfresh, The Food Emporium and Food Basics.
Jumping into the breach to take over many of A&P’s prime sites were regional rivals Acme Markets and Stop & Shop, but other local players like Key Food benefited as well. One group of grocers potentially able to capitalize on A&P’s demise is that of ethnic retailers such as Buena Park, Calif.-based Tawa Supermarket Co., which operates 39 99 Ranch Market stores in California, Washington, Nevada and Texas, but currently has no presence on the East Coast. The company has purchased leases for former A&P stores in Edison and Jersey City, N.J., which would be its first locations in the Garden State.
“Tawa’s move is emblematic of ethnic grocers’ efforts to seize opportunities in areas whose demographics are appropriate for their offer,” said Ron DeLuca, CEO/principal of Old Bridge, N.J.-based real estate firm R.J. Brunelli & Co. LLC, in early December. “We suspect that some of A&P’s remaining locations throughout [New Jersey] could go to ethnic operators in the months ahead.” DeLuca added that among the more mainstream smaller players considering the acquisition of former A&P sites were The Fresh Market, Best Market and Kings Super Market.
Fifty-odd stores are still unsold as of this writing, however, which has led A&P to seek permission from the bankruptcy court for a third-party joint venture to help it unload most of its remaining locations, while the grocer’s attorneys are pushing store buyers who haven’t yet completed their respective sales transactions to do so. In the meantime, all unsold A&P stores shut their doors by Thanksgiving, leaving thousands of employees out of work during the holiday season and sending union locals into panic mode. Fortunately, many of the employees at stores sold to other operators were hired by the new owners; indeed, many of these stores now have more associates than previously, since, as a United Food & Commercial Workers official remarked to an area newspaper, A&P tended to understaff its locations.
All of those unsold locations are naturally having a detrimental effect on the region’s economy. In central New Jersey, for example, an annual real estate market survey by Brunelli found that the A&P bankruptcy was a major contributor to the big-box vacancy surge in that region. “Clearly, the A&P bankruptcy was the big story for New Jersey retail real estate in 2015,” said DeLuca, director of the firm’s survey. “While the bankruptcy process is still being played out, along the 10 central and northern retail corridors alone, recent closures of five A&P and three Pathmark locations that remain unclaimed placed more than 438,000 square feet of space on the market. Indicative of the impact of the closings, had those stores remained occupied, the aggregate vacancy factor for the two regions would have edged up 20 basis points to 7.6 percent.”
As industry observers sift through all of the fallout related to A&P’s exit from the Northeastern grocery scene, the marketplace will have to wait and see whether the void left by the once powerful chain will be satisfactorily filled by its erstwhile challengers and now current successors.
In the meantime, I know of at least one person who’d view the grocery chain’s end as an unambiguously positive development, were he around to see it: my grandfather.