So, in 2010, A&P hired President and CEO Sam Martin, the previous COO of Office Max. Martin, together with a new management team, developed a multipronged plan to turn the company around. The new team would steer the company while it embarked on a fresh plan and represented the first piece to the puzzle. Liquidating some of its assets was the next piece, and the third included renegotiating vendor and union contracts that would create significant cost reductions for the company.
Although the first two adjustments were taken in stride, the third encountered a major hitch. A&P, however, was determined to move forward with the plan and chose an alternate route to do so. One year after celebrating its 150th birthday, A&P filed for Chapter 11 bankruptcy.
“When I got here, we had no intention of filing for bankruptcy,” Martin explains. “The trigger factor was some issues around the cost reduction and we were not able to achieve those negotiations outside of bankruptcy. That was the exact linchpin. But in reality, over the course of several years, the company had been poorly managed for the long run, and short-term actions had been taken – selling off divisions, taking out dividends. We had legacy debt and obligations that we couldn’t meet.”
A&P renegotiated its vendor and union contracts, and with the help of the Yucaipa Companies, Mount Kellett Capital Management and investment funds managed by Goldman Sachs Asset Management, it was able to secure the $490 million in debt and equity financing needed to implement the rest of its turnaround plan. In March, A&P emerged from Chapter 11 as a private company with 320 stores, but most importantly, it emerged as a company with a brand-new vision. “We have completed a thorough restructuring of A&P’s cost structure and balance sheet to build a strong foundation for the company’s future,” Martin states. “With the full support of our financial partners, the new A&P is committed to delivering exceptional value and an enhanced in-store experience to all of our customers across our more than 300 neighborhood food and drug stores.”
Now, A&P is implementing the final two steps of its five-part plan: improving the value proposition for its customers and enhancing the in-store experience.
“Now that we are out of bankruptcy, we are really just getting started on fixing core pieces of the stores,” Martin explains. “We did some work during bankruptcy with testing concepts that we are now rolling out. Our vision is to become the No. 1 food and drug store in every neighborhood that we serve from an environment and cleanliness perspective, from an in-stock perspective and from a customer service perspective.”
Much Needed Upgrade
The vision to be the No. 1 food and drug store in each neighborhood it serves of course begs the question: How can A&P achieve this ambitious goal? One very important move is A&P’s comprehensive store investment strategy. In May, the company announced that it plans to upgrade the majority of its stores. “Improving our store footprint is one of our top priorities,” Martin says. “We analyzed each store and devised a tiered upgrade plan based on each store’s need. Our goal is to renew the majority of our store footprint over the next five years.”
On average, its 300-plus stores have not been remodeled or renovated in 15 years. Of course, this is just an average, as Martin admits, and some older locations have not been updated in 20, 25 or even 30 years.
Martin also explains that many of the store’s layouts lacked the logic that today’s customers expect. Instead of employing adjacencies, such as powdered drinks and water additives located next to the bottled water, new selections were placed wherever there was room.
“One of the things that happened over the years here is that the stores have been neglected,” Martin says. “We are operating stores that are almost twice as old as the competition and our customers deserve a better shopping environment than that.”
One recently upgraded store, The Food Emporium on Third Avenue in New York City, marks makeover No. 5 under this new initiative. The 16,000-square-foot location now boasts a better layout, new fixtures and an expanded merchandising assortment. More organic, natural and specialty foods grace the aisles as well as a wider selection of fresh-cut produce and a broader assortment of craft and imported beers. The revamped seafood and meat departments display ready-to-cook seafood, custom-made sushi and A&P’s exclusive brand of Woodson & James Angus Steaks.
Although “more” may be a consistent theme with this store remodel, it also speaks specifically to the on-the-go Upper East Side New Yorker.
The remodel is part of the comprehensive store investment strategy, but it’s also part of A&P’s larger strategy to be the store of the neighborhood. The Third Avenue remodel includes grab-and-go deli and bakery items and a ground floor café that includes a coffee bar and an expanded hot food section. The company says that the design changes were made with the urban customer in mind.
Martin says A&P is looking at each neighborhood and responding to the nuances of what that community needs. It’s a far cry from A&P’s early days. When it opened in 1859, the only thing a consumer could get tailored was a suit. But in 2012, iPods, personal trainers and digitally recorded TV programs are so normal that they’ve become essential, and so consumers have much different expectations. They no longer just ask, “What’s new?” Instead, they ask, “What’s for me?”
“We used to look at our stores like they had to be the same no matter where they were,” Martin says. “But when we think about our stores from a customer point of view, we operate in the most densely populated area of the country [with] the most diverse population in the country.
“And if we are really thinking about long-term placement, we need to think about things from the customer point of view,” he continues. “We have to be more relevant to the people who live nearby or shop in that store. We have a ton of data that tells us what customers buy and what categories of food they don’t buy from us.”
Armed with that data, A&P has renovated two stores that speak the same figurative languages of their neighborhoods. In Bergenfield, N.J., which has a large Jewish population, the company renovated its Pathmark store to include triple the amount of kosher food items.
“We are committed to serving kosher customers in the Bergenfield community,” Martin says about the renovated store. “This remodeled store offers added convenience, a friendlier store environment and a wider selection of items to meet the specific preferences of our neighborhood shoppers.”
The new kosher meat department is supervised by a certified Mashgiach, and the 24-hour store is staffed by specially trained associates who are knowledgeable about the store’s kosher offerings.
Additionally, in adherence to community practices, the kosher meat, deli and seafood departments close two hours prior to sundown on Fridays and stay closed all day Saturday. However, kosher meat and seafood products are still available for purchase in refrigerated cases and displays.
Earlier this year, the company completed another community-focused renovation at its Pathmark store in Weehawken, N.J., this time aimed at a growing Hispanic population. The upgrades include more than 1,400 new items in the dairy, frozen food and grocery departments, featuring foods from Cuba, Dominican Republic, Puerto Rico, Mexico, and Central and South America, as well as a refreshed layout, new wall treatments and fixtures.
More than 20 new associates were recently hired to work in this location. Both new and experienced associates have received enhanced training, enabling them to better assist customers in every department of the store. Sixty percent of the store’s associates are bilingual.
“Even in Bergenfield and Weehawken, which are not that far apart but are far apart in the makeup of the neighborhood, our vision should not be for the short term,” Martin adds. “We have to be flexible and be the right store in each neighborhood. We continue to stay on top of changing demographics of each neighborhood.
“We want to roll this out to other stores and morph with the customer in mind and be more relevant to them while maintaining clean stores that are in stock and provide a great environment.”
Answering Each Need
Within these larger cultural-based categories, A&P still recognizes that each customer has his or her specific needs on the path to becoming a better and healthier self. This is why, at the beginning of this year, the company announced its new storewide health and wellness platform – the Live Better initiative.
“A&P’s new total store health and wellness solution is designed to help customers make smart choices when they shop in our stores or online,” states Tom O’Boyle, A&P’s executive vice president of merchandising and marketing.
“It also shows our steadfast commitment to being our customers’ neighborhood store by continually providing shoppers with products that match their health and wellness needs.”
The campaign includes three key components. The Live Better Wellness Factor Tags are a color-coded food and beverage labeling system that puts clear wellness information at the customer’s fingertips while shopping. The color-coded tags mark the shelves near products that will help with four specific health areas: heart health, diabetes, weight management and prevention. An improved Live Better Wellness club is a money-saving program that gives registered customers special discounts on healthy foods and generic pharmaceutical and healthcare items.
The third component of the campaign is a website dedicated to providing valuable nutritional information, featuring wellness advisors who can answer health-related questions on the spot.
“When we say we want to be the No. 1 food and drug store in every neighborhood we serve, what does that mean?” Martin says. “It means having a pharmacy with prescription and over-the-counter drugs, fresh food and healthy options. Everyone wants to live healthier and better lives, so we bring those things together to inform our decisions of how we tag and promote merchandise.
“If someone has diabetes, they can get their pharmaceuticals and supplies and over-the-counter things to manage that condition, and the food is called out in a way that is relevant for their treatment.”
The People Factor
All of these initiatives, of course, will not implement themselves. Martin says the corporate and store-level culture at post-bankruptcy A&P has had as much of a makeover as many of its stores. Each store banner, whether a Waldbaum’s, Superfresh, Food Basics, Pathmark, The Food Emporium or the corporate namesake A&P, has retained identifying trademarks that loyal customers of each brand have come to value. However, overall, the initiatives had to be accompanied by a complete cultural shift.
“We’ve moved away from a culture of mediocrity where good enough was enough, to a culture of accountability, a culture of growth and where our team sees themselves as being business partners instead of business employees,” Martin explains. “The bar has been raised in terms of what we expect and in terms of what help there is for our associates to give them the confidence that they can achieve more.
“We’ve invested in systems and tools as part of our turnaround effort,” he adds. “They know the store and the layout and they are much more likely to offer their service because they know where everything is. And when people feel productive and connected, they are much happier.”
There is much work left to be done in A&P’s turnaround. It is only in year one of its five-year comprehensive store investment strategy, and there are many changing neighborhoods calling out for specific products just like in the Weehawken and Bergenfield communities.
The company is also interested in investing in more Northeast communities. For instance, A&P opened a new Superfresh last August in Philadelphia’s Northern Liberties neighborhood, its first new store in the state in more than a decade.
“We are concentrating our effort and involvement in the footprint we currently occupy, which is best described as the New York, New Jersey and Philadelphia corridor and the Northeast part of the country where there is plenty of opportunity to remodel but also look for acquisitions or ground up new stores,” Martin explains. “There are plenty of markets available here that we can grow in.”
In addition to possibly growing its Northeast footprint, A&P is wholeheartedly invested in growing its 30,000 store associates. Martin says the company is committed to giving its associates the continuous training they need to make sure they are equipped to serve customers. But with employees at all levels and each store aligned with the same vision and the turnaround plan well in play, Martin says that A&P is already letting the public know that it is here to stay and grow.
“All the things that I’ve mentioned, we have tied into our marketing strategy,” Martin says. “Over the last 15 months, we’ve built a new brand and changed the culture of our stores. So, we’ve launched a new campaign to say, ‘We’ve been through a lot, but you stuck with us. We’re a whole lot better now. Come take a fresh look.”