EDISON, NJ—Classic grocer A&P, which also owns Pathmark, Superfresh, and Waldbaum’s filed for bankruptcy protection from its creditors on July 19, saying it planned to close three stores in Middlesex County, and sell two others to competitor ACME Markets Inc.
The Edison, East Brunswick and Old Bridge Pathmark stores, as well as seven other A&P-owned supermarkets in New Jersey are set to close if the company cannot find a buyer, but some are being bought up by competitors already.
A&P also agreed to sell its locations in South Plainfield and Old Bridge to Acme Markets Inc. under the bankruptcy procedure.
The Montvale-based parent company, officially known as Great Atlantic & Pacific Tea Company, received a $100 million loan as part of the bankruptcy filing.
The organization hopes to auction 120 of its 296 supermarkets and may close another 25, according to published reports. If it can not sell certain stores, then it will be forced to close them.
It marks the second time in ten years that the 156-year-old company has filed for bankruptcy.
A&P said that it considered many alternatives but concluded that a “sale process implemented through chapter 11 [was] the best way for [the company] to preserve as many jobs as possible.”
“We are pleased that the Court has granted these motions promptly, which allows us to continue operating in ordinary course during this process — continuing to pay employees, work with suppliers and serve customers,” said Paul Hertz, president and CEO of A&P, in a news release.
“We are confident that pursuing a sale process implemented through chapter 11 will enable us to preserve as many jobs as possible and ensure that we achieve the best possible outcome for all stakeholders. I want to thank our employees for their hard work and commitment to our company, as well as our suppliers for their help in guaranteeing that our stores are fully stocked and that we are able to continue meeting the needs of our customers and their families without interruption.”
A&P has about 28,500 employees, of which 90% are union members.
Company officials say they have been seeking bidders for nearly half of the 296 stores, and that it will continue the search for buyers.
Recent reports cited 120 “deals in place” to sell stores to other operators.
Key Food Stores Co-operative Inc., which is gearing up to open a store in downtown New Brunswick on August 21 in the space formerly occupied by the FreshGrocer, is reportedly one of the bidders, as is Stop & Shop and Acme.
A spokesperson for Key Foods did not respond to a request for comment on the bidding.
According to Key Foods, the Hub City store will provide customers with an extensive variety of fresh food, including a large and varied produce section.
The store will sell both organic and conventionally grown produce grown on farms in New Jersey, California, Florida and Texas.
Customers will also be able to purchase organic meat and poultry, as well as fresh seafood.
Stop & Shop has already picked up two Pathmark’s in NJ, plus one A&P, in the bankruptcy proceedings. Those stores are in South Orange, Butler, and Closter, respectively.
But now A&P is facing resistance to selling and closing its stores so quickly from the pension benefit guaranty corporation (PBGC), a U.S. government agency, and several landlords.
The PBGC wants the auction procedures to encourage proposed buyers to assume pension liabilities, according to a report in the Wall Street Journal.
The report says that, according to an August 5 filing with U.S. Bankruptcy Court in White Plains, N.Y., PBGC, “said the grocery chain should change its auction procedures to ‘encourage assumption’ of pension liabilities by a proposed buyer.”
According to the filing, “Pensions for 25,815 A&P workers under multi-employer plans are currently underfunded by $302.5 million,” reads the Journal report.
“The global bidding procedures should require all bidders to expressly state their intention with respect to the pension plans,” PBGC lawyers were quoted as saying in their filing.
A hearing on the recent objections will take place on August 10.
Landlords are also unhappy with the auction procedures and selling of the company’s supermarkets. The Journal report says that “one group of landlords of stores being sold said it is concerned that it won’t be adequately informed about its prospective new tenants ahead of a hearing next week.”
“ ‘The landlords have two simple requests: information and time,’ lawyers for a group of several landlords said in the filing. The landlords said they are working with A&P counsel to resolve their concerns. They added they are ‘cautiously optimistic’ they will get the information they need in time. Several other groups of landlords for stores being sold or closed also had minor objections,” writes the Journal.
A&P has been up against declining sales for more than two decades. The climate in the supermarket industry has become increasingly competitive. Gourmet grocery stores like Whole Foods and Fairway offer shoppers a premium experience. Other food store concepts, such as Trader Joes, which offers discounted prices and value, but less selection, have targeted millenials and other segments of the market looking for convenience.
Whole Foods has announced that it will be opening its own new chain of stores, starting in the second half of next year, which it will call “365 by Whole Foods Market.” The new stores will average 30,000 square feet.
On the local level, Whole Foods has announced that it will open a “Whole Foods Market” in Metuchen, just two stops North of the Hub City via the Northeast Corridor railroad line.
There’s been no indication from Whole Foods that the Metuchen store will be converted to a 365 — it recently converted a lease in development from a Whole Foods Market to a 365 at a site in Los Angeles. That store will be the first 365 unit to open.
“We are excited to introduce 365 by Whole Foods Market to bring healthy foods to even more communities with a fresh, quality-meets-value shopping experience that’s fun and convenient,” Said Jeff Turnas, 20-year Whole Foods veteran who was previously president of the company’s North Atlantic region.
“A modern, streamlined design with innovative technology and a carefully curated product mix will offer an efficient and rewarding way to grocery shop.”
Turnas will be president of 365 by Whole Foods, and said the company plans to open five 365 by Whole Foods Market stores in the second half of 2016, “with the expectation of doubling the number of openings in 2017.”
Walter A. Robb, Whole Foods co-CEO, said 365 will allow the company “to address the value-quality proposition in a new way while maintaining the integrity the Whole Foods Market brand represents in the marketplace.”
Other retailers now in the grocery business include Walmart-Stores Inc., and its sister chain, Sam’s Wholesale Club.
But in addition to Sam’s there are other warehouse clubs including BJ’s Wholesale Club, and Costco, a highly successfull club in terms of profitability.
Target offers groceries as well and has been increasing the number of locations which have mini supermarkets inside its stores.
Then there are dollar stores and the discount grocery chain Aldi Inc., which has a location in New Brunswick, have also syphoned off business from traditional supermarkets.
“When you have your biggest trouble, you’re getting a lot of money to allow you to restructure, or in A&P’s case, to liquidate efficiently,” Peter Gilhuly, of the law firm Latham & Watkins, told Marketplace.org.
“The company has been on a slow decline since the 1950s, says Marc Levinson, author of ‘The Great A&P and the Struggle for Small Business America,’ ” wrote Market Place reporter, Tracey Samuelson.
“At its peak in the late 1920s, A&P became the first retailer anywhere to sell $1 billion worth of merchandise in a single year,” Levinson told Marketplace. “It was truly a giant.”
A spokesperson for A&P declined to comment.
Many readers of supermarketnews.com offered comments on the bankruptcy and store closures, captured here:
- Why do they keep talking about the “Shareholders”? Them plus the greedy executives are why this company is where they are. How about focusing on the people who make these stores run?
- Did they disclose of how much of the 50 million is going towards their bonuses?
- Why is it that shop rite has the same union and pension contracts as the A&P yet they are doing rather well with remodels and opening of new stores.Nobody can beat there prices either, maybe its because they know how to do business.
- These sales aren’t beneficial for the store level workers or consumers. Pathmark is an urban supermarket. Yes they have some suburban stores but high revenue stores are in urban areas. How many of those stores does Acme or Stop and Shop have. They are better suited for the A&P and their other banner stores. Pathmark needs someone with urban experience to run their former sights. Sell the Pathmark banner (100 stores) to someone who knows what to do with them. 600 million is a bargain price.
- I have been a loyal employee of ANP for 27 years during the last bankruptcy we Lost one weeks vacation three personal days one sick day my pension has been frozen since 2008 we agreed to not take a raise for five years our medical And optical doesn’t cover with a used to the upper management and corporate destroy this company and the workers are the ones that are suffering after we gave all that back we were supposed to get $600 in December When our contract is up we definitely can kiss that goodbye we are all afraid of losing our jobs this used to be a great company to work for we are all very sad
- The balance of these stores will be picked up by independent chains or closed completely . Government regulations and astronomical rentals in the strip malls along with Union benefits have rendered these this chain unprofitable. And again poor management decisions at the top is a major factor.
- The ageing of America’s middle-class is changing the future profile in the food businesses and true grocers will adapt .
- Waldbaums , when it was run by the family, was a powerhouse in NY. Pathmark was by far the sales muscle in the NY,NJ area. As they opened mega stores and gave in to higher union contracts ,which were reasonable for the times , they opened themselves up to failure . They lost the old grocer creed ,” the customer is always right”!
- Stop and Shop will be next . Shop-Rite because of franchising and terrible customer relations isn’t far behind.
- What is going to happen to the employees of these stores?
- Are they being kept by the new owners or are they terminated with opportunities to re-apply at lower wages and benefits? I believe the latter is the case…….what are the unions doing about it?…..is there anything they can do?…….kiss the high paid people goodbye!!……many employees were disgruntled with the givebacks and their attitudes showed!!……..now they’ll wish they had a job!!!….complacency and entitlement attitude ruined it for the hard working people!!…….Good luck everyone!!