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Published: Friday, 6/13/2003

Farmer Jack changes plan

BY JON CHAVEZ
BLADE BUSINESS WRITER

Farmer Jack supermarkets, which entered the Toledo market about two years ago, is expected to close temporarily its six area stores Wednesday to cut prices storewide as part of a new strategy designed to set it apart from competitors.

The stores will reopen the next day, with the price changes and some other differences, such as new employee uniforms and a reduced role for Farmer Jack's Bonus Savings Club card.

The same changes are planned at the chain's stores in metro Detroit. Industry analysts are mixed about whether the changes will make the financially struggling Farmer Jack more competitive.

``Whatever we're doing here, we will be doing in Toledo,'' said Renee Koss, a spokesman for Farmer Jack, a unit of the Great Atlantic and Pacific Tea Co. She declined to provide details of the changes, except to say no stores are closing or being sold and the company is not reorganizing.

Managers at the six Toledo area Farmer Jacks said changes are planned next week, but they would not elaborate.

However, some employees said yesterday they have been told that the Toledo area stores may close early Wednesday evening for an overnight round of price adjustments and other changes.

The employees, who spoke on the condition they weren't identified, said there are indications the price changes will be accompanied by new uniforms and name tags.

Jeff Stephens, president of the union which represents Farmer Jack workers in the Toledo area, said there have been rumors the company would close stores, possibly for a day, and reopen them with a new format.

``They said they wanted to do something to make their stores work in the Toledo area,'' said the leader of Local 911 of the United Food and Commercial Workers.

Another UFCW president, Robert Potter of Local 951 in Grand Rapids, Mich., recently told a Detroit newspaper that Farmer Jack had a meeting this week in Dearborn, Mich., for managers. They were told the chain intends to implement a new business strategy to become more competitive in terms of pricing, marketing, and media campaigns.

The strategy is to provide everyday low prices on all products, rather than low prices on selected advertised items and regular prices on other items. Nearly all grocers in the Toledo market currently use the second approach.

``Given the market [in Toledo], I'd be surprised if Farmer Jack is able to make that switch and not have to do something else to maintain their customer base there,” said Jeff Hershey, a grocery industry consultant with Market Insite Group, of Troy, Mich.

Wal-Mart has made everyday low pricing work, but other chains, such as Kmart, have struggled with it, Mr. Hershey said. Farmer Jack will find it hard to eliminate advertised specials and establish a new identity when rivals like Kroger promote advertised specials frequently, he said.

The parent of Farmer Jack, which has more than 100 stores in Michigan and Ohio, lost nearly $200 million last year and $72 million the year before. Industry experts have said that A&P likely would have to do something drastic to shore up its Farmer Jack operations.

Ryan Mathews, a Detroit-based grocery industry analyst with FirstMatter, of Westport, Conn., said an everyday low price might be just what Farmer Jack needs.

His firm interviewed 30,000 shoppers and found people overwhelmingly liked everyday low pricing compared with the few heavily discounted items.

For the new pricing strategy to work, Farmer Jack will need to also fix other problems, including product inventories, customer service, and store cleanliness.

Business writer Gary T. Pakulski contributed to this report.



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