Associated Food Stores Inc. is going into the grocery business -- the retail grocery business.
A grocery wholesaler since 1948, the company announced Thursday that it has agreed to buy its first retail grocery stores: eight Macey's supermarkets along the Wasatch Front and four Lin's MarketPlace stores in central and southern Utah.It's a move on the part of Associated that Richard A. Parkinson, president and chief executive officer, said is necessary to "preserve the integrity and future of the retailer-owned system."
Associated is a cooperative owned by the independent supermarkets it supplies. It has been supplying Macey's and Lin's with wholesale groceries for more than 40 years.
"This is a bold, pro-active step for us," said Parkinson.
Associated spokesman Marc Purles said the deals were made for competitive reasons. Both Macey's and Lin's had been approached by competitors with buyout offers. Macey's owner Ken Macey and Lin's president Rod Orton were both interested in selling but wanted to keep the organizations intact, so they asked Associated to buy them out and the deals were struck.
Associated has about a 37 percent share in the Utah grocery business in terms of the stores it serves and to lose Macey's and Lin's would have seriously eroded that share. The company's other members include Dan's Foods, Ream's and Harmons, among other independents.
Purles said Associated's decision to go into the retail end of the business is unusual but not unprecedented.
"It's something we'll see more of as merger mania continues in the grocery business and pressure mounts on retailers and wholesalers to extend their market and market share," said Purles.
Management teams at both Macey's and Lin's will stay on board, and "no significant layoffs" of current store employees are planned.
Associated will continue to operate the stores under the Macey's and Lin's names and the two chains' "time-proven marketing plans."
Though the ownership of the 12 stores will change, it will be business as usual for the stores' customers.
The Macey's stores that will be owned by Associated are in Sandy, West Jordan, Provo, Orem, Spanish Fork, Clearfield, Ogden and Logan. The Lin's stores are in Richfield, Cedar City, Hurricane and St. George.
Parkinson said no other store acquisitions are being considered, but he would not rule out future deals. Terms of the Macey's and Lin's acquisitions were not revealed.
Associated said it will create a new subsidiary to integrate Macey's and Lin's into the company. "Accordingly, any value created by the retail operations of these stores will flow back into the corporation and benefit all retail stores that comprise the co-op." said Purles.
"This is a new challenge for Associated Foods, because they just have not done this before," said Macey's president Ken Macey. "But I think, for the future, it has to happen so these grocery wholesalers have a guaranteed base of distribution and their retailers are not being picked off by other chains."
He said Macey's 1,700 employees probably will not notice the change in ownership. But he hopes the Associated Foods purchase will help the chain expand and be beneficial in the long run to his workers, managers and customers.
"By 2005, I think Macey's should grow to have at least 12 stores and be doing close to half a billion dollars a year in volume," Macey said. "That's aggressive, but it can be done."