LOS ANGELES -- The key to the successful merger of Certified Grocers of California here and Portland, Ore.-based United Grocers was the fact the directors of each company got to know each other during the pre-merger discussions, Alfred A. Plamann, president and chief executive officer of Unified Western Grocers, the successor company here, said last week.
"I'm not aware of any other successful merger between two retailer-owned companies, and I believe our merger will serve as a template for additional consolidation in the industry," Plamann said.
He made his remarks at a meeting of the Food Industries Sales Managers Club of Los Angeles here. Certified and UG merged to form Unified last fall.
Questioned by SN after the meeting, Plamann explained that the merger came about -- where others failed -- "because both groups found they were equally committed to integrating the two companies and had the same interest level in getting together."
Discussing whether Unified has plans to expand beyond its California and Oregon marketplaces, Plamann said, "We won't bite off any more large acquisitions until we've finished stabilizing this merger. But once we've done that, this format offers benefits to other Western retailer-owned companies.
"So whether we do another merger or, more likely, some kind of affiliation, we should be able to utilize our strength to help other retailer-owned companies, and we will look at pursuing that aggressively at the right point in time."
Although the merger was formally completed last September, integration was put on hold until early January to avoid interfering with warehouse activity during the Thanksgiving and Christmas holidays, Plamann said, "so we're probably three months behind schedule. But we've already merged our two warehouses in northern California, where the two companies overlapped, into one facility, and we're beginning to realize some synergies."
He said Unified's northern California region is operating at a higher rate of efficiency than either of the two companies would have achieved independently, with synergies likely to amount to about $5.1 million this year and to rise to $8.8 million and $8.2 million, respectively, in the next two years.
Overall, synergistic benefits should reach a modest $3.4 million this year but increase to $18.5 million in 2001 and $21 million in 2002, Plamann said.
For Unified members in southern California, little has changed, he noted, while in northern California overlapping organizations have been combined. He said members in Portland, Ore., will begin seeing changes over the next six to eight months as the company aligns its sell plan there with its southern California regions.
In response to a question, Plamann said Unified does not plan to operate more than a handful of corporate stores, though it is keeping an open mind.
"Most retailer-owned companies and voluntary wholesalers own retail stores to realize the kind of deal levels they can't get as a wholesaler. And ownership also allows wholesalers to cross-train employees in retail operations to make them more useful to their retail customers.
"At Unified we will keep our minds open about opportunities for ownership, but there's nothing on the horizon."
Phil Smith, senior vice president for procurement, said Unified plans to maintain both Certified's Springfield private label and UG's Western Family label. "Both have more than 50 years of brand identity and customer loyalty, and the dilemma is that there's nothing broken."
