Taking Stock

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Clock Ticking On Future of AWI/White Rose 

It’s been more than two months since AWI announced it was attempting to sell its Carteret, NJ  based White Rose business while also naming Matt Saunders as the wholesaler’s new CEO. Saunders replaced the suddenly “retired” Chris Michael.

While there’s been much behind the scenes strategizing and planning, including the consideration of a possible sale of the entire AWI enterprise, the Robesonia, PA co-op still has nothing tangible to report to its members – and that’s not a particularly good thing.  And, just before presstime, we learned that Joe Fantozzi, president of the wholesaler’s White Rose unit, has left the company after 33 years of service. We’ve also learned that Doug Booth, along with Saunders, has played a key role in managing AWI through this crisis. Booth is a partner at Carl Marks Advisory Group LLC, which is serving as the de facto outside restructuring firm consulting with AWI.

In the past six weeks in more than a dozen conversations with White Rose customers and AWI members/owners, almost all have expressed frustration in getting a deal done. The same vibe is also being felt among the many associates employed at both companies.

Certainly this is a complex situation, hastened by much untended baggage left behind by Michael, who led AWI for 34 years. AWI’s board also bears some responsibility for allowing the problems to become so deeply rooted that it took a patronage shortfall to galvanize the owner/members to demand change.

But time is of the essence to get a deal done. Competing wholesalers, particularly Bozzuto’s, C&S and Supervalu, have been aggressively targeting AWI and White Rose customers, urging them to consider switching suppliers. One White Rose customer – White Plains, NY based wholesaler Krasdale Foods – has announced it will move its dairy and frozen business to Bozzuto’s in October and another account, RMG (Thriftway/Shop ‘n Bag), has reportedly made contingency plans to change suppliers should things descend to a situation in which service levels become threatened (those Delaware Valley retailers were burned by Fleming a decade ago).

At AWI, some members have confirmed to us that at least one wholesaler has offered to forgive/make good any potential debt that those operators may face in light of the outcome of the attempted sale process if they change to that distributor and sign a long-term deal.

However, several AWI owners have noted that their biggest concern has been the lack of communication between the members and those handling the potential sales process (that group includes AWI’s senior management, the special committee formed to explore of sales and Lazard Middle Market, the investment firm overseeing the process).

There are other issues to ponder, all with negative ramifications, if AWI cannot successfully resolve its problems in a timely manner. Those include: How much of a factor is the company’s under-funded retirement plan when analyzing a possible sale? Will AWI’s creditworthiness with its suppliers ultimately become a significant factor? And if the enterprise can’t be sold at the number that AWI needs to make itself whole, will Chapter 11 bankruptcy become a consideration?

The situation becomes more critical every day.