International analysis: The beginning of the end for grocer A&P?

It filed for Chapter 11 bankruptcy in July and is looking for buyers for most of its 334 stores, which include the Food Emporium and Food Basics fascias.

Despite the apparent bleak future for the retailer it has had a colourful journey to get where it is. At the end of the 1970s, Tengelmann acquired a majority stake in A&P.

But Tengelmann has lost its magic touch for grocery in recent decades. The multi-brand retailer is selling its remaining food business in Germany, the Kaiser’s Tengelmann supermarket chain, just a few years after letting go of its international discount empire Plus.

One might ask why a European retailer was interested in a US company that was already on the decline.

Part of the answer is that then Tengelmann chief executive, Erivan Haub, believed that having a grocery pillar in the US would help to secure the business in the times of the Cold War amid concerns about living so close to the Russians.

However, the Haub family was unable to alter the route of A&P – a company which had more than 16,000 stores in the middle of the 1930s and was known back then for being tough for suppliers in terms of trade negotiations.

A moderate or even continued decline can probably be considered part of the life cycle of a business.

Life without A&P

But maybe the lesson to learn from A&P is that increasing one’s store portfolio by simply acquiring further heterogeneous retail chains is not the answer. It mainly leads to an unstreamlined and unfavourable patchwork rug.

But what will happen to the northeastern US retail landscape if A&P does fail?

A&P, a rare instance of a business that can claim to have been operating over three centuries, needs to deal with a $2.3bn (£1.49bn) debt burden, its old stores are in desperate need of renovation and it faces stifling labour contracts and pension costs.

At present, A&P has tentative bids for nearly 60% of its stores, from Ahold, Albertsons and Key Food. Wakefern Foods, whose members operate the ShopRite stores, have also mooted interest.

Again, the question arises why do other market players think they will be able to handle the situation more successfully than their predecessor. Or simply: why do they still want to buy the stores?

An easy answer would be that although A&P’s market share has been decreasing over the years, it still generated sales that are too good to leave to someone else.

• Tatjana Wolff, analyst at Planet Retail