by Terrie Ellerbee/associate editor
Ask Randy Arceneaux, president and CEO of Amarillo, Texas-based Affiliated Foods Inc., about his concerns for the grocery industry as a whole, and he will tell you that what keeps him up at night sometimes is “the fear that the independent operator, No. 1, loses the passion for the business.
“Part of our job as the wholesaler is to continue to work with them for succession planning, making sure there’s someone coming up that can continue the independent segment of this business,” he said.
As Affiliated Foods Inc. celebrates 65 years in business, it continues to promote strength through unity. The proof of its success is in annual sales of more than $1 billion. In the company’s arsenal are a 1.2 million-s.f. distribution center, a fleet of tractor-trailers, a milk plant, a bakery and a potato storage and packaging facility.
Arceneaux has brought his own passion and an inclusive leadership style to Affiliated Foods since taking over as CEO a year ago. Affiliated Foods has developed “a perfect triangle” of teamwork that includes an executive management team, a retailer advisory council and a vendor advisory council, with each council comprised of 13 members. (See more on page 58.)
As the company readies for 2012, it will devise a battle plan to take on the big box, drug and dollar stores that continue to proliferate and encroach on the independent grocer. A large part of the plan will be about winning the center store. That’s where the challenge has been, Arceneaux said.
“I believe 100 percent that our independent operators in all of our markets are the best in the meat department; they are the best in the produce department, bakery, deli and customer service,” he said. “The independent has won that battle and will continue to win that battle because that’s what we do well.
“But we all face center store sales growth or center store sales erosion,” he said. “We’ve taken categories like paper, detergent—which we’ve for years allowed the mass merchandisers, the dollar stores, to take from us—and used an EDLP hybrid program that closes the gap.”
The EDLP hybrid takes a product, say, a 100-oz. bottle of Tide, which retails in independent stores for $16 to $17.99 a bottle, and cuts the price significantly. Members of Affiliated Foods now offer it for $11.99.
“You know, the first obstacle to overcome is helping the retailer understand that 28 percent of nothing is still nothing, rather than 20 percent, as far as the margin was concerned,” he said. “We had to look at whether the penny profits were delivering to the profit of the operation of that store.
“It goes back to the fast nickel, slow dime theory. You would rather sell three 100-oz. bottles of Tide and make a buck every time we sell it vs. selling one and not having the consumer come in as often because it’s no longer a destination category,” Arceneaux said.
In the eight weeks that the liquid detergent was on the EDLP program, volume increased 37 percent, he said.
The initiative has been implemented for other key items, like condiments, orange juice, yogurt, canned vegetables and across the paper category. On Oct. 1, a new pet program was launched.
“We’re not going to give up on any category, absolutely not,” Arceneaux said.
Not giving up is the exact reason why the company was founded in 1946. When the hometown grocer faced extinction after World War II, a group of retailers banded together to create what today is Affiliated Foods Inc. It was about strength through unity then, today and what it will continue to be.
“I believe this company will be here for 65 more years. We have a great program for the independent operator, we give them a great return at the end of the year and we take care of their business all 365 days of the year.”