New Associated CEO Eyes Return to Profitability

SALT LAKE CITY — Neal Berube, the incoming president and chief executive officer of Associated Food Stores here, said he intends to make value merchandising one of the top priorities for the member-owned cooperative and expects the company to return to profitability this year. Right now we're going through a value mapping stream to determine what is and what is not a value, Berube told SN in an interview

SALT LAKE CITY Neal Berube, the incoming president and chief executive officer of Associated Food Stores [4] here, said he intends to make “value merchandising” one of the top priorities for the member-owned cooperative and expects the company to return to profitability this year.

“Right now we're going through a ‘value mapping stream’ to determine what is and what is not a value,” Berube told SN in an interview last week. “We are identifying value-enhancing ideas and prioritizing them according to what adds to or detracts from value.

“Then it's our intention to put together a plan that continues to enhance the financial stability and capabilities of our membership.”

Berube said he deployed the value mapping concept when the cooperative's board asked him to outline some of his ideas as a preliminary step to naming him as successor to Rich Parkinson, who has headed Associated since 1994.

He said he expects to have a plan ready to present to Associated's board for its approval at the board's meeting on Nov. 10 meeting — the day he will officially succeed Parkinson — and he hopes to begin implementing the plan early in 2012, he added.

Berube has been with Associated for 21 years. A certified public accountant by training, he has been the cooperative's chief financial officer and most recently was executive vice president and chief operating officer, and president of the company's retail division.

He said his background in finance and accounting will enable him to bring “an accountability factor to the membership that's essential in a low-margin business, where being efficient and effective in what you do is so important.

“I believe my professional background gives me a set of lenses through which to identify ways to serve members in an efficient manner and to recognize business principles that can be applied quickly and effectively.”

While acknowledging that he and Parkinson have different personalities, Berube said the two executives have worked together for so long “that we see things the same in terms of what we want for Associated and its members to accomplish.”

Associated has about 300 members operating 410 stores across an eight-state area encompassing Utah, Arizona, Colorado, Idaho, Montana, Nevada, Oregon and Wyoming. It also operates 48 corporate stores in Utah called Fresh Market, including 34 that were acquired from Albertsons in late 2009.

Sales for the fiscal year that ended in late March were $2 billion, with a loss of $6.5 million. Berube said he anticipates the company will have positive net income this year.

“We anticipate a very good year after a couple of years of losses that resulted from adjusting to additional competition and absorbing the Albertsons units into our corporate store base and changing them to meet customer needs,” Berube explained.

Sales are increasing among the company's independent and corporate-owned stores,” he added, “with the increases in our 48 corporate stores exceeding the rate of inflation, despite increased competition from companies like WinCo.

“Our attitude is, competition makes us better, so we try to optimize opportunities and concentrate on our strengths.”

Associated closed seven corporate stores earlier this year, including five of the former Albertsons, but combined two of those units.

“That consolidation occurred in Richfield, Utah, where a corporate Fresh Market combined operations with a corporate Lins Market, and the resulting operation is one of the company's highest-volume units,” he said.

“We will continue to look at the corporate stores to see where consolidation might work.”

He also said he does not expect Associated to further add to its corporate base, “but we do plan to invest in those stores. And hopefully we can help our independent retail base grow using the corporate stores as a tool.”

One of Berube's responsibilities was overseeing development of the company's 1.2 million-square-foot distribution center in Farr West, Utah, a decade ago. That facility, located 43 miles north of here, is “one of the most efficient warehouses in the U.S.,” he said, “and there is room for it to handle additional business.”

Berube said he sees “untapped” possibilities for member-owned cooperatives. “I believe independent businessmen is the core of this country. They are passionate about what they do, and the retailer-owned system is an incredible organization that helps them be as successful as they are.”

However, he said he sees changes coming in the cooperative system, mostly in terms of flexibility, “because members are so different from each other in terms of company size or the demographics they serve that one size no longer fits all.

“A lot of coops still maintain that approach, but we think the coop has to know how to help each member segment be successful.”

As a result Associated introduced share groups among its membership 18 months ago, starting with one and now overseeing three.

Associated buys private-label goods, plus meat and produce, through Western Family, a consortium based in Tigard, Ore.

Associated competes with two co-ops that are also members of Western Family — Unified in Nevada and Colorado and URM in Montana and Idaho. It also competes with two Minneapolis-based voluntary wholesalers — Nash Finch along the Montana and Colorado borders and Supervalu in Montana.

“Supervalu has announced it wants to use its legacy Albertsons distribution centers to serve independents, but our goal is to continue to meet the needs of our members so they don't look elsewhere,” Berube said.