Supply Scan

News and Trends from Across the Food Supply Chain


Supervalu To Consolidate Network In The East

Supervalu Inc. plans to enhance its logistics network in the eastern United States by consolidating distribution centers. The retailer will merge its Easton, PA, Harrisburg, PA, and Perryman, MD, operations into its Lancaster, PA, facility.

In conjunction with this effort, Supervalu, Minneapolis, has identified the Lancaster distribution center as the newest location for automated technology.

By consolidating warehouse volume and incorporating automation technology into the seven year old, 1.4 million-square-foot Lancaster facility, Supervalu says it will be positioned to optimize its distribution network and leverage technology for improved efficiencies.

"Our overall vision is to deliver the best supply chain services to our corporate and independent retailers. Leveraging the efficiencies of the combined company is one of the inherent benefits of our expanded network," says Janel Haugarth, Supervalu executive vice president, and president and COO of the company's supply chain services group.

Start-up costs associated with implementing the supply chain automation technology are expected to be minimal in fiscal 2008 and are not included in the one-time transaction costs. Capital costs associated with the technology installation are included in Supervalu's total $1.2 billion fiscal 2008 capital program.

Supervalu expects the entire project will take approximately three years to complete. During this time, customers will be serviced from existing facilities while the Lancaster facility is modified, which will include system standardization and technology installation and testing.

Commenting on this important initiative, Jeff Noddle, Supervalu chairman and chief executive officer, says "One of our publicly stated milestones of the acquisition is to optimize our expanded supply chain infrastructure. The decision to combine the consolidation with the installation of the supply chain automation technology represents an additional opportunity to deliver long-term strategic benefits.

"Supply chain optimization is a component of our overall synergy range identified with the acquisition. We still expect our total synergies of $150 to $175 million pretax, to be at their full run rate by the end of the third full year following the acquisition or fiscal 2010.

A&P To Acquire Pathmark

The Great Atlantic & Pacific Tea Co. Inc. (A&P) and Pathmark Stores Inc. have reached a definitive merger agreement.

A&P, Montvale, NJ, will acquire Pathmark, Carteret, NJ, for $1.3 billion in cash, stock and debt assumption or retirement, creating a 550-store, $11 billion supermarket chain operating in the New York, New Jersey and Philadelphia metro areas, as well as in Baltimore/Washington, Michigan and Louisiana.

The transaction is expected to be completed during the second half of A&P's fiscal 2007 year.

Under the terms of the transaction, The Tengelmann Group, currently A&P's majority shareholder, will remain the largest single shareholder of the combined entity. Christian Haub, executive chairman of A&P, will continue as executive chairman of the combined company; Eric Claus, president and CEO of A&P, will also maintain the same position in the combined company.

A&P summarized the key benefits of the transaction as follows:

  • Ability to better serve customers in the New York, New Jersey and Philadelphia metro areas.
  • Annual integration synergies of approximately $150 million within two years, through cost reductions in overhead, greater efficiencies, increased utilization of support facilities and the adoption of mutual best practices between the two companies.
  • Retention of the Pathmark banner, format, customer appeal and sales productivity.
  • Combined information systems integration into A&P's modern technology platform.
  • Corporate management/administrative consolidation of A&P and Pathmark employees in Montvale.
  • Platform for investment in existing and new stores to better compete in the Northeast retail food industry.
  • Benefits to the customer through the breadth of offerings available from the combined companies, and the continuation of community outreach efforts.
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