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Published: Saturday, 2/15/2003

Grocery wars could prove fatal

BY JANE SCHMUCKER
BLADE STAFF WRITER
Farmer Jack opened a new store in Toledo at the corner of Cherry and Bancroft streets near downtown in 2001. Farmer Jack opened a new store in Toledo at the corner of Cherry and Bancroft streets near downtown in 2001.
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A shakeout in the Toledo grocery store wars appears likely this year with either Food Town or Farmer Jack being sold or closed, predicted Ryan Mathews, a Detroit grocery industry analyst.

If that happens, the reduced competition probably would mean fewer food discounts.

Mr. Mathews' bet is a change with Food Town, because its parent, Spartan Stores, Inc., has fewer resources than Farmer Jack's parent, Great Atlantic & Pacific Tea Co. and its parent, the Tengelmann Group.

But Farmer Jack's problems seem so systemic that, even if Food Town would sell or close, Farmer Jack might not be able to survive, said Mr. Mathews, a Detroit analyst with FirstMatter, of Westport, Conn. Conversely, he said, if Farmer Jack would close, Food Town might benefit.

Farmer Jack and its parent are in financial trouble, experts say. A&P's stock prices are less than $5, down from $25 last spring; management appears to be in turmoil; and its Eight O'Clock Coffee division is for sale. Some analysts have suggested that A&P will have to sell or close the 109-store chain in Ohio and Michigan to stem the red ink, but Farmer Jack spokesmen did not return repeated calls yesterday.

Spartan has said it is exploring options for its 39 Food Town stores, citing an intensely competitive grocery market in the Toledo area that has hampered the ability to make money. Sources have told The Blade the company has pursued potential buyers for the Maumee-based chain it bought in 2000.

But how easily either chain could be sold is not clear.

“This is a bad time to be selling a food company, because their valuations are way down,” said Howard Davidowitz, chairman of Davidowitz & Associates, Inc., a retail consulting firm in New York.

Wal-Mart, with its megastores that have groceries, is building new stores in many markets and that scares would-be competitors.

“Wal-Mart will ultimately become the retailer of the nation as far as groceries are concerned and I don't think the regional grocers have a chance,” said James McTevia, whose McTevia & Associates, in Eastpoint, Mich., has been a receiver for bankrupt groceries.

Farmer Jack and Food Town problems are more related to poor management than larger competitors, Mr. Mathews said. But Farmer Jack's owners might hold out longer than expected, he said, in part because A&P is owned by a European company and such businesses tend to keep unprofitable units longer than U.S. companies.

In the metro Toledo market, Food Town has a 24 percent market share, second to Kroger's 32 percent share, in the latest industry report. Farmer Jack, which has six local stores, has a 12 percent share.



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