Associated Food's 2013 results signal rebound complete
Independent grocers in eight Western states got more good news on Friday when their cooperative, Associated Food Stores, posted its second profitable year in a row after stumbling for a time with the purchase of Albertsons stores in Utah.
Associated has generated $8.4 million in fiscal year profits for the past two years, compared to losses of $6.5 million in the year before that, about 450 stakeholders were told Friday during its annual convention at the Little America Hotel in Salt Lake City.
Associated CEO Neal Berube said independent grocers can survive competition from conglomerates because they are part of local communities and can quickly adapt to their customers' changing shopping habits. Historically, "we've fought off other attacks" from giant chains, he said.
This year's profit for the period ending March 30 was $2.5 million, compared with almost $6 million in the prior year. Most of the dip for fiscal year 2013 was attributed to higher rebates paid to member-owners (based on how much they purchased from the cooperative's warehouse in Farr West), which totaled $18.4 million. The amount is nearly 37 percent more than in 2012, and 76 percent more than in 2011, said Chief Financial Officer Bob Obray.
"This is the most we've paid in rebates ever," he said. "This has been a good year."
Higher levels of profitability have allowed Associated to make investments. The cooperative spent $14.9 million on store remodeling, technology upgrades and other capital improvements, compared with half that amount spent the prior fiscal year.
In addition, bonuses to employees increased 50 percent, and $40 million was prepaid to reduce debt principal, taking down overall obligations by 25 percent.
Even with these payments, Associated posted an overall cash balance of $105.6 million, compared with $105.8 in 2012.
The results indicate that the cooperative is on a path to recovering from the Great Recession and from the Albertsons purchase.
Jeff Nederhauser, owner of The Store Fine Foods Market & Deli in Salt lake City, attributed the turnaround to Associated's CEO, a strong management team and members' willingness to work together.
Said Philip Child, owner of Wangsgards Market in Ogden, "There's an excitement among retailers. The management team has brought that back."
The Albertsons acquisition in 2009 accounted for most of the nearly $2.5 million in losses that fiscal year, although lower sales also were a factor. Since then, some of the renamed Fresh Market stores have been shuttered, sold or consolidated with other Associated supermarkets. Twenty-two Fresh Markets operate today, down from 34.
Among the former stores, three Fresh Markets in Bountiful, Centerville and Riverton have been consolidated to Dick's Market and Peterson's, two stores changed banner names to Macey's in Lehi and Clinton and two to Rancho Markets in Salt Lake City catering to Latino shoppers. Three locations, in Salt Lake City, Provo and Cedar City, are occupied by other businesses, and two are closed in West Valley City and Midvale.
Many Associated stores are in rural areas and are dependent on the buying power of the grocery cooperative. Associated is the only independent wholesale distributor based in the Intermountain West, employing more than 1,400 people and shipping more than 750 truckloads of groceries each week.
Salt Lake City-based Associated was founded in 1940 to help independent grocers compete with national chains while operating on razor-thin profit margins. Among its members are Harmons, Winegar's, Ream's and Kent's. Today, stores affiliated with Associated make up nearly 40 percent of Utah's grocery market.
Operation Â» The Salt Lake City-based firm is an independent retailer-owned warehouse and grocery cooperative
Services Â» Distributes to 400 independent grocers in the Intermountain West, including Harmons, Winegar's, Ream's, Kent's
Stores Â» 43 corporate-owned supermarkets do business under the Fresh Market, Macey's, Dan's, Lin's and Dick's banners
Sales Â» $2 billion annually
Associated Food Stores owns and operates 43 stores. Here's the breakdown:
Fresh Market • 22 stores, in Salt Lake, Davis, Summit, Weber, Cache, Utah, Carbon, Sevier counties
Macey's • 11 supermarkets, in Salt Lake, Davis, Weber, Cache, Utah and Tooele counties
Lin's • Four stores, in Cedar City, St. George, Hurricane and Overton, Nev.
Dan's • Four stores, in Salt Lake City and Cottonwood Heights
Dick's • Two stores, in Bountiful and Centerville