A&P is considering filing for bankruptcy, Bloomberg reports.
The 156-year-old chain was once America’s largest grocer with more than 15,000 locations.
Now, it has fewer than 400 stores and it’s struggling to stay in operation.
“Bids for A&P were due last month as part of an auction for the company, but no viable offers for the entire chain were received,” Bloomberg reports, citing sources familiar with the situation. “That means the stores could be sold piecemeal, marking the end of what was once the largest U.S. grocer.”
A&P told Bloomberg, however, that “No decision has been made regarding a particular outcome, and it would be inaccurate and irresponsible to suggest otherwise.”
The possible end to A&P is another sign of the dramatic changes happening in the grocery industry.
In A&P’s heyday, Americans shopped at one grocery store for all their food and beverage needs. Today, consumers are buying groceries across more than a dozen retail channels, including drugstores, warehouse clubs, dollar stores, and on the Internet.
On average, Americans shop at five different types of stores to fulfil their grocery needs, according to Deloitte’s 2013 American Pantry report.
Consumers are also now demanding a wider selection of organic foods and private label options than ever before, which has led to the success of chains like Whole Foods and Trader Joe’s. Consumers also want fewer processed foods and more produce and freshly prepared meals for lunch or dinner on the go.
“In the 1990s and the beginning years of this century, the greatest threat to supermarkets and grocery stores came from supersized ‘one-stop shopping’ venues like supercenters and warehouse clubs,” the market research firm Packaged Facts wrote in a report last year on emerging grocery trends. “Today the threat is spread out among all retail channels, including drugstores, dollar stores, limited assortment chains, and — the elephant in the room — e-commerce.”
In addition to organics, private label, and fresh foods, consumers want more product curation. That hurts chains like A&P that carry tens of thousands of items.
“When a customer walks into a store of 40,000 items and only wants to buy 30 of them, that’s a terrible customer experience,” said Chad Arnold, president and CEO of the online grocery service Door to Door Organics. “Companies are now scaling back stores and getting them more focused to specific customers, instead of a one-store-fits-all approach.”
The average square footage of supermarkets in the U.S. has been falling since 2006, and is now roughly 46,000 square feet, according to Packaged Facts.
“The pendulum definitely is swinging back to smaller store formats,” analysts wrote, noting that Wal-Mart is expanding its smaller-format stores.
Some traditional grocers, like Kroger, have been expanding their organic and private label selections and making other changes to meet consumers changing needs. Kroger also has a small-format store called Turkey Hill Market, which averages about 6,800 square feet.
But A&P failed to keep up.
“The company’s stores came to seem dated, and A&P became increasingly saddled with the burden of high pension costs and other labour expenses,” according to Bloomberg.
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