Unified Grocers' Balancing Act in the Western U.S.

Unified Grocers' Balancing Act in the Western U.S.

Top retail executives paint a grim picture for the near-term business outlook in this week’s SN roundup story. That forecast seems to cut across all U.S. regions.

Arguably, however, there isn’t a tougher region than the West, including California. The long list of challenges there include budget deficits, housing problems, unemployment and lackluster consumer spending.

“It’s not a rosy picture, it’s a tough economic environment,” said Al Plamann, president and CEO, Unified Grocers, the large cooperative wholesaler serving Western U.S. retailers in 10 states. “In the states in which we operate, there are some really significant unemployment ratios.”

It would be a mistake, however, to view the Western U.S. as a uniform block in terms of economic impact. Instead, the conditions are varied based on locality.

“It’s almost a neighborhood by neighborhood economic impact,” Plamann explained to me. A good example of local impact is Seattle, one of Unified’s market areas, where the continued retreat of Boeing to other parts of the country has created uncertainty, Plamann observed. Meanwhile, a number of Unified retail members in its market areas have run into serious financial problems that resulted in store closings.

Despite this, many of the wholesaler’s independent retailers have managed to grow. In the prior fiscal year, members opened some 47 new stores, and this year that number should still be in the 30s, Plamann said. Those openings are a result of taking spinoff stores from chains and building ground-up units.

“Our retailers are holding their own in market share,” he said.

Unified’s retailers have pursued various format strategies. The price-impact group, for example, has focused on cost-structure and keeping shelf prices sharp, while the more upscale operators have added some private label merchandise and price-oriented items.

Those moves are in response to the changing buying patterns of consumers, who have been embracing more value-oriented merchandise.

“We’re seeing the same or even a larger number of cases moved through the warehouse at a lower average case value,” he said. “So the activity is there, but the consumer has changed buying habits. This will continue well into next year if not through all of 2011.”

The cooperative has helped retailers on the cost side. “We’ve been successful in not raising prices on products to help retailers maintain a competitive edge at shelf level,” Plamann said.

Unified has also guided independents to conserve cash because of the difficulty for these retailers to obtain financing now. It has also added borrowing capacity to help retailers that may need to purchase or remodel stores.

Let’s not forget that Unified also has helped members in recent years by strengthening its base through initiatives such as the acquisition of Associated Grocers, Seattle.

These are all beneficial moves for the membership. But many of the solutions to current challenges, like the problems themselves, hinge on the dynamics of local markets.

“The retail grocery business is so dependent on factors such as local consumer taste and changes in demographics,” Plamann said. “It varies almost on a ZIP code by ZIP code basis. I maintain there isn’t a checklist of solutions, but rather you must be focused on what’s happening at the neighborhood level.”

Plamann makes a crucial point here that applies to more than just the Western U.S. While the economy creates broad challenges, the specific hurdles and the likely solutions will differ by locality. There’s no single retail playbook that applies. The answer is to have a strong sense of local conditions and preferences.

And isn’t that what independent operators do best anyway?

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