Can IT save A&P, the granddaddy of grocery chains?

By Susannah Patton, CIO |  Business

Store banners: A&P, A&P Super Foodmart, the Barn Markets, Dominion, Farmer Jack, Food Basics, the Food Emporium, Kohl's, Sav-A-Center, Super Fresh, Ultra Food & Drug, Waldbaum's

Employees:24,400 full time, 56,500 part time

Annual sales:$10 billion

Profits:$14 million for year ended in February 2000, up from loss of $67 million in 1999. (1999 figure includes $118 million charges for first "Great Renewal" project.)

CEO Christian Haub embarked on a supply chain overhaul soon after joining A&P in 1998.

The company has struggled for the past decade to remain competitive with such grocery giants as The Kroger Co., Safeway and Ahold USA, a unit of the Netherlands' Royal Ahold, posting stagnant sales and neglecting its network of cobbled-together legacy information systems. In the late 1980s and early 1990s, the company made several large, ill-advised acquisitions that put a further drag on profits. In 1998, Christian Haub, the then 34-year-old scion of the family that owns Germany's Tengelmann Group, which owns 53 percent of the company, took over as CEO. He quickly closed more than 100 stores and opened "superstores" in an effort he optimistically called "Great Renewal." Results weren't as "great" nor was the "renewal" as swift, as some on Wall Street had hoped, and Haub soon embarked on the plan to overhaul the company's stumbling supply chain, which was severely handicapped by outdated technology and ineffective business processes.

A&P, which operates 750 stores in 16 states, the District of Columbia and Ontario, Canada, and includes the A&P, the Food Emporium and Waldbaum's marquees, is far from alone in its decision to invest heavily in IT in an attempt to turn its struggling business around. Other industries, including manufacturing and airlines, are also making full-scale, public efforts to use IT to get closer to customers and Web-enable their supply chains. For the grocery business, which struggles with razor-thin margins and increasing competitive pressures, an integrated, ERP-like system could bring even more marked benefits, Ioli says. Still, A&P's complex IT plan for the traditionally non-techy grocery industry poses great risk.

Those in the industry are watching closely. "If A&P does succeed, it will reinforce the inclination of grocery chains and their senior management boards to bet their thin margin businesses on IT investments," says Greg Girard, an analyst at AMR Research in Boston.

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