The Great Atlantic & Pacific Tea Company Essay Example for Free

The long Atlantic peaceful teatime come with Essay callers briefly introductionOnce 1 of the biggest baggers of groceries in the US, The Great Atlantic Pacific teatime Compevery (AP) has been reduced to a shrinking portfolio of regional securities industry filaments. It now runs about 300 supermarkets in young island of Jersey, New York, Pennsylvania, and three other eastern states. In addition to its mainstay 80- stock certificate AP chain, the follow operates vanadium banners Pathmark, Waldbaums, Superfresh, diet Emporium, and Food Basics. AP acquired its longtime rival in the Northeast, Pathmark Stores, for about . 4 billion, but the purchase fai urinate to bump APs lagging fortunes. Indeed, AP in 2012 emerged from 15 months bankruptcy after a fiscal restructuring and closing 75 depots.to a greater extent from WikipediaThe Great Atlantic Pacific Tea Company, better cognise as AP, is a supermarket and liquor store chain in the United States. Its supermarkets, w hich argon under six different banners, be found in Connecticut, Delaw ar, Maryland, New Jersey, New York, and Pennsylvania. APs liquor stores, kn experience as Best Cellars, are found in Connecticut, Massachusetts, and Virginia.2 APs corporal headquarters are in Montvale, New Jersey.3 Supermarket News ranked AP 19 in the 2010 Top 75 Food Retailers and Wholesalers based on 2009 fiscal year estimated gross revenue of $9.1 billion.4 Based on 2009 revenue, AP was the 34th largest retailer in the US.5 From 1915 done 1975, it was the largest food retailer in the nation (until 1965, the largest US retailer of any kind).6 AP is considered an American icon.7 The Wall Street Journal, in an editorial on December 10, 2010, said that AP was as well known as McDonalds or Google is today and that AP was Wal-Mart before Wal-Mart.8 What is now AP began in 1859 it established a small chain of retail tea and coffee stores in New York City and a study mail regularize business.It grew to 70 store s by 1878. In the late 19th century, AP, still a tea and coffee company, became the countrys set-back grocery chain. At the turn of the century, it operated almost 200 stores. The company grew dramatically after introducing the economy store innovation in 1912, outgrowth to 1,600 stores in 1915. After World War I, the company receptive stores fling warmheartedness and produce. In 1930 the company, now the worlds largest retailer, put acrossed $1billion in sales with 16,000 stores.9 In 1936, AP adopted the self-serve supermarket concept and opened 4,000 larger stores by 1950.10 APs decline began in the 1950s when it failed to keep pace with chains which opened larger, freshly supermarkets with features demanded by nodes. By the 1970s, AP stores were out of date its efforts to combat high operating(a)(a) addresss resulted in poor customer service. In 1975, the company hired outside management, closing older stores and building modern ones. When these efforts failed to turn the company around, the heirs of the original owners, and foundations that owned a major(ip)ity of the stock, sold to the German Tengelmann Group.AP then projected a store-closing program financed by the surplus assets of its pension plan.11 Starting in 1982, AP acquired several chains these stores operated by their call rather than AP. While AP regained profitability in the 1980s, in 2002 it operated at a record loss because of new rival, especially Wal-Mart. AP closed more stores, which included the sale of its large Canadian division. In 2007, AP purchased Pathmark, one of its toughest competitors AP over again became the largest supermarket chain in the New York City area. Highly leveraged after this acquisition, the company experienced financial difficulties because of the recessional and filed for Chapter 11 protection in 2010. In late 2011, AP implemented a restructuring plan to emerge from bankruptcy.1213 On March 13, 2012, it was announced that AP had emerged from ba nkruptcy and was now a snobbish company.HistoryMore than 150 historic period ago, The Great Atlantic Pacific Tea Company, Inc. (AP) began operations as The Great American Tea Company. Its prototypal store on Vesey Street in New York City sold tea, coffee and spices at prise prices. Soon after, stores sprung up all around the New York metropolitan area, and salesmen took their wares to the road in horse-drawn carriages curtail for New England, the Midwest and the South. In 1869, the Company was renamed The Great Atlantic Pacific Tea Company, commemorating the beginning transcontinental railroad. In 1936, AP became the stolon national supermarket chain in the United States, one of many another(prenominal) advanced concepts that radically changed the way consumers shopped. Itsvast advertising and promotional activities happen uponed so many consumers that AP became an American icon. Below are select milestones from the Companys rich history 1859-1899 Becoming a Grocery Pi oneer* 1859 The Great American Tea Company is founded as a mail order business by tea and spice merchants George Huntington capital of Connecticut and George Gilman. The selfsame(prenominal) year, the stolon store-warehouse operation opens in New York City at 31 Vesey Street. * 1869 The Company is renamed the Great Atlantic Pacific Tea Company, or AP. * 1880 AP begins trade its own brand of baking powder, its first toffee-nosed cross out product. It also pioneers the use of refrigerated railroad cars to transport fruit, and becomes the first to bring fresh seafood to the Midwest. * 1881 AP becomes the first grocery chain to operate 100 stores and expands to 5,000 deli very routes. * 1880s With the publics taste for coffee growing rapidly, AP establishes its own brand, Eight O measure Breakfast Coffee, packaged in a red bag. George Huntington Hartford names the product after the time of the day that he believed the most coffee was consumed. * 1887 Sales hit $1 million.* 1890s AP introduces premium checks to be redeemed for cups, saucers and other goods, marking the first original customer-loyalty program with premiums and savings coupons. 1900-1959 Becoming an Innovator and American Icon* 1912 John Hartford convinces his father and brother to launch the first no frills grocery format in America with the opening of the AP rescue Store in Jersey City, N.J. The cash and carry store, with plain furnishings and fixtures, unfolded no character reference, no deliveries and no premiums just pure tone groceries at very low prices. * 1920 The AP Economy Store concept flourishes and catalyzes an extraordinary period of growth, resulting in 4,638 stores, from about 350 stores in 10 years prior. * 1924 The AP Radio Hour launches as Americas first national radio program. Soaring in popularity through the 1930s, it featured popular artists such as Kate Smith, Harry Horlick and the AP Gypsies. * 1929 AP more than triples its store count to 15,418 stor es and increasessales five-fold to reach the $1 billion mark.* 1930s AP expands to California, Washington and Canada. * 1933 AP participates in the Worlds Fair in Chicago. Housed in a 2,000-seat amphitheater, the AP carnival draws thousands of visitors with the AP Marionette Revue, Harry Horlick and other entertainment. * 1936 AP opens the nations first supermarket, a 28,125-square-foot store in Braddock, Pa., that enables customers to select their own groceries without the assistant of a clerk.* 1937 AP launches Womans Day magazine through a wholly-owned subsidiary, The Stores Publishing Company. The magazine features articles on food preparation, crustal plate decoration, needlework and childcare, mete outing for two cents a copy exclusively in AP stores. * 1941 Eight O Clock coffee becomes the trounce-selling brand of coffee in the world. * 1958 Sales grow to $5 billion and 4,252 stores. AP go past the industry, with volume exceeding that of its closest competitor by more than $1 billion. * 1959 AP celebrates its 100th anniversary.1960-1999 Becoming a Supermarket Family* 1963 With its new Plaid Stamps redemption program, AP brings back the premium concept. With every purchase, shoppers scram plaid-colored stamps, which can be posterior redeemed for popular household items, such as snack trays and Lazy Susans. * 1971 AP opens its first Warehouse Economy Outlet (WEO). This low-price warehouse concept, featuring displays of fast-selling grocery items in the original cases, is rolled out to 1,500 stores. * 1979 The Hartford Foundation and family members sell the majority of AP functions to The Tengelmann Group of West Germany in the face of declining sales and profitability, as competitors follow consumers to the suburbs.* 1980 James woodland is elected Chairman, President CEO. Under his die hardership, the company closes operations in several markets, including hundreds of older stores and the majority of its manufacturing operations. * 1981 first gear a new growth via acquisition strategy, the Company purchases 17 Stop Shop supermarkets in New Jersey. * 1982 The Company launches the Superfresh banner in the Philadelphia area, emphasizing product freshness and strong customer service. * 1986 AP acquires the Bronx, N.Y.-based Shopwell Inc., which includes 26 upmarket stores named The Food Emporium. It expands further in New York withthe acquisition of Waldbaums, Inc. that fall. * 1994 AP in the U.S. launches a new cloak-and-dagger scar program, introducing four new brands across all of its banners Americas Choice, Master Choice, Health Pride and Savings Plus.2000-Present Innovating and Restructuring for the Future* 2000 The Food Emporium opens its unique Bridge Market store, located at 59th Street and First Avenue down the stairs New York Citys landmark Queensborough Bridge. * 2001 AP opens its first U.S. Food Basics store in Passaic, N.J. * 2003 To reduce debt and lower operating costs, AP exits Nort hern New England, sells Kohls stores in Wisconsin (which it acquired in 1983), closes all remaining Kohls operations, and sells the Eight OClock Coffee division. * 2005 The Great Atlantic Pacific Tea Company, Inc. sells AP Canada to METRO INC., a supermarket and pharmaceutical operator in the Provinces of Quebec and Ontario Canada.* 2009 The Great Atlantic Pacific Tea Company celebrates its 150th Anniversary as the oldest grocery retailer in the United States. * 2010 The bestride elects Sam Martin as President CEO. Under his leadership, the Company embarks on a turnaround plan and files for Chapter 11 to enable it to restructure its operations and financial obligations. * 2011 AP launches Woodson James, a new line of premium-quality Angus beef featuring steakhouse-quality meat at affordable supermarket prices, exclusive to all AP, Pathmark, Superfresh, Waldbaums and The Food Emporium stores. * 2012 AP exits Chapter 11 as a semiprivate company with 320 stores.SWOT ANALYSIS The Great Atlantic Pacific Tea Company (AP or the company) is assiduous in the retail food business. The company offers a strong portfolio of private judge brands. one thousand Way, a new private tag launched in 2009, features over 200 wellnessy, organic fertiliser and eco-friendly products. In the current economical environment, consumers are tending to choose private adjudicate brands due to their quality and competitive pricing. Given the growing demand for private label products, the companys portfolio of private brands offers a competitive advantage. However, the sluggish US economy could disgrace purchasing power of consumers bear uponing the sales of the company.StrengthsWeaknessesRobust private label portfolioDeclining market share operative and financial issues led to bankruptcy filingMultiple store formatsCoupons portfolioOpportunities ThreatsEconomic downturn in US affects consumer spendingOnline retail channel offers opportunities for revenue growth Increasing demand for organic productsIntense com supplicantRising labor earnings in the US likely to increase the operating cost Remodeling of stores allow for lead to incremental salesStrengthsRobust private label portfolioAP offers a strong portfolio of private label brands including Americas Choice, Hartford Reserve, Live Better Wellness, Americas Choice Gold, Smart Price and Via Roma. APs Americas Choice brand presently stands among the best selling private brands in the industry. In addition, in 2009, the company launched Green Way, a new private label line featuring over 200 healthy, organic and eco-friendly products. The company launched The Food Emporium Trading Company private label brand of international persuasiveness items, in November 2010. In the face of macroeconomic closets, consumers are increasingly opting for private label products. According to industry watchers, private label sales have change magnitude in the US in the recent years. In the current economic environme nt, value-oriented consumers are choosing private label brands due to their competitive pricing. Also, strong push from retailers and improvements in both quality and selection has been influencing the shopping dilutes. This trend is expected to continue even after the economy recovers as consumers consider the quality of private label brands to be as high as name brand products.In addition to providing savings to consumers, private labels supply higher operating margins than national brands to AP thereby improving profitability. Increasedpenetration of these private labels exit improve the margins of the company. Additionally, they offer a competitive advantage and will enable the company to develop a niche customer base. Multiple store formats AP operates multiple store formats. The companys store formats vary from full-service supermarkets featuring fresh produce, seafood, meat, deli, groceries, floral, and pharmacies, to upscale gourmet stores (The Food Emporium), to limited variety stores featuring everyday low prices (Food Basics). Through its broad base of supermarkets, AP has grow and diversified within the retail food business.The company operates stores with merchandise, pricing and identities tailored to appeal to different customer segments, including buyers seeking gourmet and ethnic foods, a across-the-board variety of premium quality private label goods and health and beauty aids along with the range of handed-down grocery products. The wide variety of products offered to take in the needs of a diverse customer base will drive footfall and also provide immense opportunities for cross selling. This in turn will contribute to higher revenues by increasing the come ticket. Coupons portfolio Consumers drastically cut back on spending during the recession as unemployment rose and lending slowed. They are looking at generating more value for the money spent. AP, keeping this in view, launched a comprehensive coupon portfolio of innovations in 2009, to provide shoppers with more savings and convenience.The company partnered with Zavers, a pioneer in digital couponing, to launch the first paperless, clipless and completely digital coupon service unattached by a supermarket chain in the Metropolitan New York area. This service allows nine-spot card members at AP, Pathmark, Waldbaums and SuperFresh to go online and save the coupons directly onto their club card. The savings are automatically deducted off the customers shopping order once the club card is scanned at the checkout. Subsequently, AP introduced the Rewards Online Mall, allowing club card members to earn rewards by making purchases at over 1,000 online retailers including eBay.com, Best Buy, Home Depot, Macys, Barnes and Noble, Travelocity, Staples, 1-800-FLOWERS and many more. For every purchase made, customers can receive an average of 3% back.Once the total reaches $10, customers will receive a Rewards Certificate in the mail to be used towards their next in- store purchase at any AP, Waldbaums, SuperFresh, The Food Emporium or Pathmark store. To complement its couponingprograms portfolio, AP also premiered an innovative new online coupon trend available via its banner websites. This service which helps customers save more money while shopping for groceries, was made available through APs partnership with Coupons.com. Each of the companys banner websites features a special coupon gallery with hundreds of dollars of savings on all departments. Besides offer savings this service is convenient and saves time. Such extra benefits offered by the company will help attract customer visits.WeaknessesDeclining market shareAP has been losing its market share to the bigger discount retailers and wholesale clubs including Wal-Mart, Costco, Target, and BJs. These companies have expanded into the grocery business and yielded to the economic downturn by lowering prices, thereby attracting the value-driven consumers. The big-ticket consumers, on the other hand, preferred higher-end retailers such as Whole Foods and principal Joes. AP by sticking to its consistent pricing, lost its customers to these companies in the difficult retail climate, while the other grocery retail chains lowered prices considerably, endorsed value proposition, and attracted sales. The company recorded a decline in revenues of 8.3% and 7.4% in FY2011 and FY2010 respectively. The sales declined primarily due to a decrease in comparable stores sales and store closures, partially offset by sales from new stores. The overall decline in sales was primarily caused by a decrease in customer count. The loss of market share to competitors has affected the company financial results significantly.Operational and financial issues led to bankruptcy filing AP, in December 2010 filed a voluntary petition under Chapter 11 of the US Bankruptcy Code with the US Bankruptcy Court for the Southern partition of New York to facilitate its financial and operational restructur ing. The company experienced severe financial and operational issues which led to this move. At the end of the terce quarter of FY2011, the company had cash reserves of $92.4 million compared with $281.8 million during the same period, the previous year.The company had long-term debt of $816.8 million at the end of the third quarter of FY2011. The current distribute of long-term debt increase to $171.5 million at the end of the third quarter of FY2011 compared with $191,000 at the end of the thirdquarter of FY2010.The company has also experienced several other issues that contributed to its bankruptcy filing, including large pension funding requirements and union agreements. Approximately 92% of the companys employees are represented by unions and covered by collective talk terms agreements. Furthermore, the company had about 70% of inventory tied to one supplier in an unfavorable contract. The company also had obligations, including the payment of rent on stores that were not s ubleased or leases terminated. The rent expenses for the mostly empty stores were estimated to be substantial next year. All the above factors put the company at a competitive detriment and rendered its business unsustainable in the current scenario. The bankruptcy filing and the subsequent financing will significantly affect the investors confidence in the company.Online retail channel offers opportunities for revenue growth The online retail market in the US is growing at a fast pace and the trend is expected to continue. Online sales contributed to 6% of the retail sales in 2009 and are estimated to contribute 8% of the total retail sales by 2014. Online sales grew by 11% in 2009 compared to a total retail growth of 2.5%. Online sales while offering convenience to customers, also improve a companys margins by cutting down operating costs. AP is well gathered to benefit from the expected increase in online sales. Increasing demand for organic productsNatural and organic food pro ducts segment is one of the fastest growing categories in food retailing. Increasing consumer awareness about health and environmental issues, along with an increasing resistance towards genetically modified (GM) food products and GM farming, has led to a rapid increase in the demand for organic food. According to industry estimates, the organic product sales in the US reached $26.6 billion in 2009, an increase of 5.3% over 2008. Of the total, organic food accounted for $24.8 billion and organic non-foods, the remaining $1.8 billion. In comparison, the total food sales in the US increased by 1.6% in FY2009.The growth trend of organic foods is expected to continue. The company offers over 200 healthy, organic and eco-friendly products under its Green Way brand. The company could leverage its presence to exploit the increasing demand fororganic products.Remodeling of stores will lead to incremental salesAP has been investing in re-modeling its stores to offer a unique shopping experie nce to its customers. These remodeled stores offer an expanded selection of deli, bakeshop, floral, meat, seafood and organics departments and many specialty sections. The Pompton Plains AP store, located in Pompton Plains, New Jersey, besides offering traditional food categories, also introduced new departments including the kids and toddler aisle featuring all the products needed by mothers in one area an enhanced pet selection expanded mens offerings featuring an extensive array of specialty products for men and a special section dedicated to gluten-free packaged products. Apart from offering a wide selection of quality groceries, fresh produce, breads, seafood, and meats, APs new Port Jefferson Pathmark store features a full-service pharmacy department which provides numerous benefits to customers including, all major prescription drug plans including Medicare Part D accepted health screening services complete diabetic supply circle round patient counseling and information ser vice mail order and online prescription replenish and Live Better Wellness club.The new Pathmark is designed with a bright, open layout with modern decor and dyed artwork and signage, further enhancing the overall experience for shoppers. APs Woodcliff Lake AP store offers expansive departments that feature a wide selection of fresh and gourmet foods. This is complemented by a full-service bakery, Starbucks Cafe, floral department and pharmacy, along with a center store department that presents a complete line of specialty items for men, children and pets.The company also re-opened the New parsimony AP store with expansive departments offering a wide selection of fresh and gourmet foods, a full-service bakery and floral department and an expansive center store department with a complete line of specialty items for children and pets. The remodels with redundant departments attract more consumers and offer cross selling opportunities, therefore contributing incrementally to the sal es increase. These additional services will also help the company differentiate itself from its competitors.ThreatsEconomic downturn in US affects consumer spendingThe US, the worlds largest economy, shrank 4.1% from the fourth quarter of 2007 to the turn quarter of 2009. Household spending fell 1.2% in 2009, doubly as much as previously projected and the biggest decline since 1942. The US economy slowed in the second quarter of 2010 as scarcity of jobs eroded consumer spending. GDP in the second quarter of 2010 grew at a 2.4% annual rate less than forecast. Consumer spending, which accounts for about 70% of the economy, rose at a 1.6% pace in the second quarter, compared with a 1.9% rate in the first quarter of 2010. Job gains have been slow to take hold, curbing household purchases.US retail sales rose a meager 0.1% in July 2010 from June 2010, harmonise to industry watchers. In addition, the US economy grew 2.6% in the third quarter of 2010. The World Bank forecasts the US eco nomy to grow at a sluggish rate of 2.8% in 2011. High unemployment rate which is estimated to reach 10%, sluggish wage gains and credit crunch are all expected to keep consumers comparatively cautious. The unemployment rate remained significantly high at 9.4% towards the end of 2010. Rising unemployment further reduces the consumer spending as customers observe unsecured. Thus, slowdown in US economy would depress purchasing power of consumers which could result in a decline in sales of the company.Intense competitionAP conducts its retail merchandise business under exceedingly competitive conditions. Although AP is a large regional department store chain company, it has numerous competitors at the national and local level that competes with its individual stores, including specialty, off-price, discount, and internet and mail-order retailers. Competition is characterized by many factors including location, reputation, fashion, merchandise assortment, advertising, price, quality, service and credit availability. AP anticipates intense competition to continue with focus on pricing. Some of the companys competitors have substantially larger marketing budgets, which may provide them with a competitive advantage. If AP is unable to maintain its competitive position, it could experience downward pressure on prices, lower demand for products, reduced margins, the inability to take advantage of new business opportunities and the loss ofmarket share.Rising labor wages in the US likely to increase the operating cost In recent times, tight labor markets, increased overtime and government mandated increases in minimum wages resulted in an increase in labor costs, which could materially impact the companys results of operation. The Fair Labor Standards Act (FLSA) has increased the federal minimum wage rate in the US from $6.55 an hour in July 2008 to $7.25 an hour in July 2009. This was further increased to $8.25 an hour in July 2010, revising the labor rates for the f ourth year in a row. Many states also have minimum wage laws. If an employee is subject to both state and federal minimum wage laws, the employee is entitled to the higher minimum wage. Increased labor costs could increase the operating costs for the company.