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Issues Summit targets retailer-supplier relationship

BY Antoinette Alexander

NEW YORK Key executives from several leading suppliers and retailers gathered here on Tuesday to attend Drug Store News’ Ninth Annual Industry Issues Summit.

The lively supplier-retailer panel discussions—which centered on industry issues and challenges among retailers and suppliers and how to overcome those challenges—were held in Manhattan’s Flatotel.

The event, which attracted more than 100 attendees, kicked off with a keynote presentation by Peter Hoyt, executive director and founder of the In-Store Marketing Institute. His presentation centered on the progress to-date of the ongoing Pioneering Research for an In-Store Metric project and some initial top-line findings.

The P.R.I.S.M. Project is an initiative to establish a global metric for evaluating the in-store environment as a marketing medium. It allows in-store traffic to be measured by product category, such as in the cereal aisle of a food retailer or in the hair care aisle of a drug store.

Top-line findings have, for example, unearthed some potentially untapped opportunities with regard to adjacencies, but Hoyt said the P.R.I.S.M. Consortium is still wading through the plethora of data. “How we are going to harness it so it will be of greatest use to everybody is still being determined,” he added.

Following Hoyt’s presentation, panelists gathered to discuss, among other things, the challenges and opportunities facing retailers and suppliers and how the two groups can better work together to drive traffic, boost sales, enhance shopper loyalty and enhance the overall shopping experience.

Retail panelists included Chuck Fehlig, vice president of health and OTC for Wal-Mart; Todd Vasos, executive vice president of marketing for Longs Drug Stores; David D’Arezzo, senior vice president and chief marketing officer for Duane Reade; Dan Funk, vice president of GM and HBC for center store at Supervalu; Jerry Kuske, executive vice president and chief marketing officer for Katz Group; Bryan Shirtliff, senior vice president of category management for Rite Aid; and Charles Burnett, senior vice president of Costco.

During the panel discussion, retailers and suppliers both agreed that innovation and data is key to bolstering the bottom line, and pointed to health and wellness, skin care and natural/organic as some high-growth areas going into 2008.

“Obviously it is going to be a big year for allergies on the front end. As we look beyond 2008 … the baby boomer category is going to continue to do well whether you look at diabetes, home medical equipment, incontinence or reading glasses. Those type categories will continue to grow,” Fehlig told attendees. “Long-term, I think it is going to depend on what happens with some of the prescription-to-OTC switches that are on the horizon. If those come to fruition we may not only have growth in existing categories but may have new categories.”

Added Vasos, “I think the whole natural and organic side still has a lot of legs to it; as a matter of fact, it not only has a lot of legs but is now becoming more mainstream. As that happens, the consumer is going to be looking to both manufacturers and retailers to understand what natural is all about. It is really starting to blur a little from the consumer standpoint. … When you say natural today it is not only products but the buildings that we put together, the paper that we use, the packaging and I think this has a lot of legs.”

Panelists also discussed, among other topics, the appropriate amount of time for chains when it comes to determining the success of a new product introduction as some industry observers have argued that retailers don’t give such products enough time on shelf. However, judging by the responses, it remains clear that there is no easy cookie-cutter response. There are many variables that much be taken into consideration such as whether it is a me-too item, a line extension, the ad support, the purchase cycle of the category, etc.

“I think the thing as a retailer that we can do better is everybody is about being first to market and I think we have to be more about being best to market. How do we sustain that frequency and how do we sustain that level so it is not just a one peak wonder and try to elongate that curve when a product reaches its maturity in terms of its lifecycle?” said Shirtliff.

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A&P completes Pathmark purchase for $1.4 billion

BY Antoinette Alexander

MONTVALE, N.J. A&P has completed its acquisition of Pathmark Stores, forming a 450-store chain—including 260 pharmacies—with $9.4 billion in annual sales volume.

The deal, valued at $1.4 billion in cash, stock and assumed or retired debt, calls for Pathmark shareholders to receive $9 in cash and 0.12963 shares of A&P stock for each Pathmark share.

The company stated that it plans to maintain the Pathmark name and will retain substantially all Pathmark store operations personnel and about 175 corporate associates.

The combined company has leading market share in the New York metro area, as well as significantly increased market share in greater Philadelphia and Baltimore.

“Our goal now is to efficiently integrate the businesses based on the comprehensive plan developed over the last eight months under the direction of senior management and outside experts. We look forward to the future of our combined company will full confidence in the long-range success we will achieve and the value and benefits we will create for all of our key stakeholders,” stated Christian Haub, executive chairman of A&P.

In announcing the completion of the merger agreement, the grocer highlighted the following key aspects of the deal:

  • The addition of the Pathmark brand and its high volume, price impact operating format, which complements A&P’s Fresh, Discount and Gourmet operations, provides the most diverse range of targeted food retail formats in the Northeast, according to the company.
  • An expanded portfolio of real estate and store locations across the Northeast’s most densely-populated markets.
  • The retention of 97 percent combined company EBITDA from store operations, based on historical financials proforma for required divestures.
  • An improved financial profile based on $150 million in integration synergies that are anticipated to be achieved within 18 to 24 months.
  • The merger of A&P’s and Pathmark’s respective technology strengths.
  • The retention of key Pathmark management personnel to support integration activities and operate the combined business going forward.

With the deal complete, A&P operates 450 stores in six states and District of Columbia under the trade names A&P, Pathmark, Waldbaum’s, The Food Emporium, Super Foodmart, Super Fresh and Food Basics.

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Ahold sale of Tops finalized

BY Allison Cerra

AMSTERDAM, Netherlands Ahold announced Monday that it has successfully completed the sale of Tops Markets to Morgan Stanley Private Equity.

This follows the agreement announced on Oct. 11, 2007, at a purchase price of $310 million, though the final purchase price is subject to customary price adjustments. Closing of the transaction was subject to the fulfillment of customary conditions, including anti-trust clearance and a financing condition.

Capitalized lease obligations will remain with Tops, although Ahold will retain dependent liability for the majority of these lease obligations.

The divestment of Tops is part of Ahold’s strategy resulting from its retail review announced in November 2006.

Tops operates stores in western New York, mid-state New York including the Rochester area, and northwestern Pennsylvania under the banners of Tops Markets and Martin’s Super Food Stores. In 2006, the company closed its northeastern Ohio stores. Several were simply closed, while others were purchased by supermarket chain Giant Eagle.

Tops was acquired by Ahold, an international group of quality supermarkets based in the United States and Europe, in 1991. Tops Markets currently operates in over 70 locations and currently employs approximately 10,000 full- and part-time employees.

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