Taking Stock

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AWI Issues Exacerbated By Challenges Facing Many Independent Retailers 

Over the past few years it became increasingly obvious that many of AWI’s financial issues stemmed from the inability of the leadership at the Robesonia, PA co-op to successfully blend its 2006 acquisition of White Rose into what it believed could be a successful and diverse wholesale grocery model.

Even after eight years of marriage, former CEO Chris Michael never seemed comfortable dealing with the differences and nuances of playing in the large and diverse Metro New York market and those of serving small groups of independents who were all joined together by the structure of a co-op. That disconnect was part of the reason that White Rose lost several high-volume independent retailers and also witnessed the departures of some senior White Rose managers.

Now new chief executive Matt Saunders has a very difficult challenge on his hands. He’s attempting to sell White Rose’s distribution center in Carteret, NJ and hopefully persuade important customers such as Fairway, Kings/Balducci’s, Krasdale (perishable business) and Thriftway/Shop ‘n Bag to remain loyal to both AWI and potentially to a new White Rose buyer which may in fact turn out to be an AWI competitor.

And if what several sources are telling us is true – that all of AWI is being considered for sale – then you can understand just how complex Saunders’ task is.

Beyond the dysfunctional relationship that existed between Robesonia, PA and Carteret, NJ stand other market realities. First and foremost is the state of the grocery industry and specifically the health of the independent retailer as a whole.

Business is as tough as it’s ever been. The overstored, diverse makeup of virtually every market in the U.S. has been well documented, as have other day-to-day challenges – a still unsettled economy, an 11 percent reduction in SNAP benefits, rising health care costs, $4 per gallon fuel prices and low price inflation.

All of those factors have made food retailing no place for the meek. And among all retailer segments, none has felt the pain more than the independent retailer. For me to report this is painful because I learned the business from some of the best independent retailers in the country while starting my career in New England (which once was a haven for great independent retailing) in the early 1970s.

And I don’t want to throw all independents into the same bathtub, because surely great independent retailing can and will continue to survive and prosper. The 50 member/owners of Wakefern (ShopRite), Redner’s, Stew Leonard’s, McCaffrey’s Market, Darrenkamp’s, Karns, Boyer’s, Pennington Quality Market, Food Bazaar and Corrado’s remain strong and viable entities that have survived several generations of leadership and tremendous industry change. And part of their success has stemmed from an ability to adapt to changing consumer habits and also use their inherent street skills to continue to make themselves meaningful. People like Ron Murphy at Murphy’s Markets, Morel Estevez at Estevez Family Foodtown and George Endrigian, owner of the Dreshertown Shop ‘n Bag, are not only great entrepreneurs, they’re also terrific merchants who have intangible connections with their customers that most larger retail organizations would never be able to replicate.

But the facts don’t lie and the number of independent retailers is shrinking both in the Northeast and nationally. Sure, perpetuation issues remain a major factor in the long-term survival of the independent retailer. However, today this issue is more acute given the fierce level of competition and the growing unwillingness of future generations to enter the fray. And capital investment is still a hurdle that will always challenge the independent operator more than a chain store merchant. But the amount of capital investment needed to stay competitive has escalated significantly over the past decade and so have the stakes to keep an independent store relevant on the technology side. There are no more weak sisters to battle – today, everyone is in the heavyweight division.

Let’s hope that AWI can successfully sell its White Rose operation where the customer base remains its strongest asset. And let’s also hope that a successful sale will allow the co-op, whose roots go back to 1919, to repair its financial problems so it can regain the positive momentum it enjoyed until recently.

It won’t be easy because as I’ve said too often recently: “There are no more lay-ups – every shot is contested today.”

And while there will always be opportunities for great independent retailing, the herd has clearly been thinned in recent years. That in itself is sad when you consider that it was truly the independent merchant that provided the foundation of this great business.