What began as an effort to sell a piece of its business may result in the entire company being sold. Associated Wholesalers, Inc. (AWI) told its board of directors on July 14 that it is now considering selling the entire enterprise – not only its White Rose unit based in Carteret, NJ, but also its core business, the AWI co-op which operates distribution centers in Robesonia (784,000 square feet) and York, PA (225,000 square feet) and supplies nearly 1,000 independent retail stores in Pennsylvania, New Jersey, West Virginia, Maryland and Ohio.
The company initially announced on June 13 that it was attempting to sell its White Rose business, the large voluntary wholesale grocer it acquired in 2006 in attempt to diversify and expand its business into the large Metro New York market. From almost the outset, integrating AWI’s member-owned customer base and more disciplined go-to-market style into the more free-wheeling “street oriented” approach utilized by White Rose proved to be a challenge that the Robesonia, PA co-op could never seem to tackle successfully.
At the same time that the White Rose announcement was made, AWI also stated that long-time president and CEO J. Christopher Michael had retired from the company after 41 years of service. He had served as chief executive of the Robesonia, PA co-op since 1980. Simultaneously, AWI named veteran wholesale executive Matthew Saunders president and CEO.
AWI also announced that the rationale behind attempting to sell White Rose was a key part of steps it is taking to set a strategic direction that will provide the cooperative with the opportunity to refocus on AWI’s core legacy business – a business that was built on the entrepreneurial spirit of AWI’s members.
Regarding the White Rose decision, AWI chair and vice chair of the board Joyce Fasula and Mike Rothwell respectively noted that “after extensive analysis, our board has determined that this is the right time to identify a suitable buyer for White Rose. Through this sale process, we intend to position White Rose for a fresh beginning under a new owner. A sale of White Rose will give AWI the opportunity to get back to our co-op roots, with a sharp focus on growing the core business.”
AWI also announced that it formed a special committee to pursue a sale of the White Rose business and had retained New York financial firm Lazard Middle Market as its investment banker to assist in the process.
To many trade observers, the sale of White Rose and potentially AWI was not surprising given the current economic climate and challenging market conditions, especially for independent retailers.
“I believe the plan was to utilize the proceeds from a prospective White Rose sale to pay the remainder of last year’s dividend (White Rose paid 50 percent of the rebate owed its members in cash; a new Class “B” stock was issued for the remaining 50 percent of the rebate) and to also help seed some future capital investment at AWI,” said a Central PA independent retailer with knowledge of the AWI situation. “My guess is that once the interested parties signed the non-disclosure agreement and received the prospectus (“book”) from Lazard, the response level in both inquiries and possibly in price were not what AWI was hoping for.”
Another Northeast PA retailer, who also was familiar with the current state of events agreed with that assessment, adding, “The White Rose business by itself has trended downwards since AWI acquired it, so retention of key customers (Fairway, Associated, Kings/Balducci’s, Thriftway/Shop ‘n Bag) will play a major role on what the market value of the White Rose business really is. However, when you look at the facility alone you have to consider that the Carteret distribution center does not handle produce, meat or HBC/GM, is fully unionized and operates in a market where the cost of business is probably 15 percent higher than other nearby areas. And, all the other major wholesalers who supply independent retailers in the New York market (Krasdale and General Trading, based in the Metro NY market, and Bozzuto’s, Burris, C&S and Supervalu, based outside Metro NY) could conceivably service White Rose’s customers with their existing depots.”
AWI/White Rose, which did slightly more than $2 billion in sales last year, would still control the marketing/advertising banners under its umbrella such as Pioneer, Compare, Superfood and Met Foods which remain a substantial part of White Rose’s business.
Another source opined, “By adding the core AWI piece to the mix, the view changes substantially. Suddenly you have a much larger (in terms of numbers of conventional supermarkets) and more uniform customer foundation based in a great geographic location that can operate more efficiently than White Rose. I can think of at least one wholesaler who’d love to have a somewhat turnkey distribution facility that could serve both its current retailers and potential new independents in a region that could range from Philadelphia through North Carolina.”