Christian Haub on the demise of A&P
It is certainly remarkable how the Great Atlantic & Pacific Tea Co., a household name in America with more than 15,000 stores, eventually crumbled into a small regional multiple only to file for Chapter 11 again this year.
Although the Haub family exited A&P for good in 2012, their name had been inextricably linked with the company for over three decades. The owners of Germany's seventh-largest retailer Tengelmann Group have long gone on to pastures new and are currently reinventing themselves as an important investor in internet start-up companies.
So theoretically they could just wash their hands of A&P and refuse to comment. However, our newspaper judged Tengelmann partner Christian W. E. Haub rightly in that he did have something to say about the fate of the proud company he once presided over.
The Montvale/New Jersey-based retailer, had been fighting for life after emerging from Chapter 11 bankruptcy and going private in 2012, but took a big blow when CEO Sam Martin threw in the towel last year.
Currently a number of larger rivals are in a feeding frenzy and are cherry-picking its 296 stores in six north-eastern US states. It will be interesting to see whether German discounter Lidl, who intends to enter the States by 2018 at the latest, will try to scoop some up. The rest will go to the dogs, and many of its 34,000 staff will soon be looking for a new job.
"It's all very sad"
The new insolvency at A&P comes as no surprise for those who know the US trade. The reorganisation of the company in 2012 was only done half-heartedly. The new investors held on to too many loss-making outlets and kept all of the head office open. They also neglected to reduce cost structures, such as logistics and wages.
Pay structures had been negotiated with the unions so that wages would have reached their original level again in three years. For all these reasons, and also because price levels were too high in the stores, A&P wasn't able to withstand the competition. So, despite $500m in fresh investment capital, the company didn't have enough strength to rejuvenate itself.
Last but not least, the change of CEO after only 18 months at the helm had a negative effect.
How do you see the future of A&P?
Now all that remains is an orderly liquidation with the sale of the best outlets to Ahold, who will take 25 stores; Acme (a subsidiary of SuperValu), who will take around 80 outlets; and a further 20 stores to Key Food, a local chain based in the greater New York area. Many of the remaining 175-odd stores probably won't find a buyer, and 25 closures have already been announced.
I expect the whole company to exit the market by the end of the year. The final demise of one of America's most traditional food retailers is very sad and particularly for those who work there.
You criticise the mistakes of the current management, but didn't Tengelmann's long ownership of A&P also end in a double-digit million loss when you wrote the company off your books after the first insolvency in 2010?
The facts are that Tengelmann was able to achieve a positive return on invested capital for the whole 30 years it owned the company. During this time we also came to really understand the American consumer market, which is proving very advantageous today for our new investments in young consumer goods companies.
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