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Preparing for the Future

Associated Grocers, Seattle, has been in play to some degree for at least seven years.

Associated Grocers, Seattle, has been in play to some degree for at least seven years.

That's when the company began evaluating strategic alternatives as part of an effort to prepare its retail customers for the future.

Robert Hoyt, president and chief executive officer of AG at the time, told SN in 2000 the company would consider a sale if it got the right offer.

That was also the year AG reported its first-ever earnings loss as it dealt with a trio of challenges, Hoyt said: lending money to members whose owners were poor operators or whose stores were in poor locations; installing a new information system that seriously malfunctioned; and losing a large portion of its revenue base when Kroger Co. acquired 80 QFC stores.

Although AG was able to replace the QFC volume with 74 former Fleming customers in eastern Washington, those stores were a greater distance from the company's western Washington distribution facilities and cost the company money to service, Hoyt indicated.

In 2001, AG went through a financial restructuring to strengthen its market position by focusing on revenue-enhancement initiatives and investments to gain new operational efficiencies — moves that included closing a nonfood distribution center in Kent, Wash., and outsourcing nonfood to Unified Grocers.

AG hired Robert P. Hermanns as president and CEO in mid-2002 while it continued to consider possible merger scenarios.

In 2003, AG replaced its Teamster drivers by contracting with an outside transportation company.

When Hermanns abruptly left AG in September 2005, he was succeeded by John Runyan, whose mission was “to ensure that our members stay competitive for the next 10 years and beyond,” according to Ron Brake, chairman of AG's board.

“The company is in phenomenal shape — the best financial condition we've been in for at least 20 years and maybe longer,” he told SN at the time. “But the board decided we needed to turn over every leaf to prepare ourselves for the future, because in five years or so, the major manufacturers are not going to call on a company of our size.”

Earlier this year, AG completed a four-year sale-leaseback of its headquarters and 1-million-square-foot distribution center, which freed it to reach a preliminary agreement last May on the sale of the company.
— E.Z.

Gathering Steam

For years, Unified Grocers — in its earlier incarnation as Certified Grocers of California — did not butt heads with any other wholesalers.

It had its home base of Southern California to itself, with distribution to virtually all of the area's independents and several medium-sized chains — pretty much blocking entry by any voluntary wholesalers that might have had an eye on the market.

But as it's expanded up the West Coast — and as industry consolidation has expanded the scope of other wholesalers — Unified has gone head-to-head with C&S Wholesale Grocers, Keene, N.H., in Northern California and, with its acquisition of Associated Grocers, Seattle, also with Supervalu, Minneapolis.

As it pursues potential retail growth options in the Southwest, Unified is likely to bump up against Associated Food Stores, Salt Lake City — like Unified, a member-owned cooperative — and possibly Nash Finch, Minneapolis.

Although Unified dominates West Coast wholesaling, it's only a small player on the national scale, with post-acquisition sales of $4 billion.

But $4 billion is sufficient for Unified to wield some clout, Al Plamann, president and chief executive officer, told SN.
— E.Z.