The Great Atlantic & Pacific Tea Company
For decades The Great Atlantic & Pacific Tea Company (A&P) had dominated the US food and grocery market. However, with its size had come increasing managerial inefficiencies and an inability to respond to demands of changing market. A very crucial error was made in the 1950’s when A&P failed to follow customers in their move to suburbs. The result, which plagued the supermarket chain into the 1980’s , was a large number of small and inefficient stores serving declining urban neighbourhoods.
In 1971, William J Kane took over as chairman and CEO of A&P. This was a time when company sales had leveled off and profits were declining. In an effort to overcome this slide, Kane ordered the conversion of thousands of regular A&P units to “WEO” supermarkets, which were described as super –duper discount stores.
The average WEO store looked much the same as an old A&P and was about the same size (which was rather small and cramped by industry standards). The big difference between WEO’s and company’s conventional units was lower prices on 90% of the merchandise and a reduction in the variety of production offered from an average of items (SKUs) to as few as 8000.
Chairman Kane summed up the company’s philosophy regarding this move as a “Tonnage recovery Program”, which emphasized volume business. He hope to attract many former customers by employing low prices, unfortunately the food costs began to skyrocket about the same time as WEO was instituted . The pressure caused by the price cuts was too much for the company to bear during this period. Therefore, prices were increased and the resulting market response was influential in causing further deterioration of the food giant. In 1973, the retail chain lost its number one market position to Safeway. Jonathan Scott took over Kane’s position in 1975 recognizing that the retail chain had far too many deteriorating stores in declining urban neighbourhoods. Scott embarked on...
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