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A&P’s fall seen as opening for rivals

Great Atlantic & Pacific Tea Co., which owns A&P and other grocery stores, headed to bankruptcy court yesterday. The nation’s oldest grocer filed for bankruptcy protection Sunday. Great Atlantic & Pacific Tea Co., which owns A&P and other grocery stores, headed to bankruptcy court yesterday. The nation’s oldest grocer filed for bankruptcy protection Sunday. (Mel Evans/ Associated Press/ File 2007)
By Sarah Skidmore
Associated Press / December 14, 2010

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PORTLAND, Oregon — The fall into bankruptcy court by the Great Atlantic & Pacific Tea Co. is the culmination of years of decline but creates an opportunity for its competitors and could mean further consolidation in the supermarket industry.

The nation’s oldest grocer filed for Chapter 11 bankruptcy protection Sunday after years of struggling with enormous debt, falling sales, and rising competition from low-priced peers.

The company, which owns A&P, Pathmark, Super Fresh, and other grocery stores, was scheduled to head to court yesterday.

The lack of a prenegotiated bankruptcy plan leaves it unclear who will wind up owning the company or how creditors will be paid under this arrangement, though common shareholders probably will see their stakes lose all value.

A&P can come back as a viable competitor because it has good locations in the densely populated Northeast and strong brand names, retail consultant Burt Flickinger said. He expects competitors from discounters and supermarkets to large retailers will be evaluating A&P’s assets.

The move could be good for the industry if it speeds up consolidation in the saturated sector, Citi analyst Susan Anderson said. She expects Royal Ahold, which operates Stop & Shop markets, and Delhaize Group, which operates Food Lion, may be contenders for some of the company’s real estate. Safeway Inc. may also look to acquire some of its stores to complement its Genuardi’s business in the Northeast.

Anderson said she expects the company probably will emerge from bankruptcy as a stronger player with better management, real estate, and cost structure.

The company’s good relationships with its labor unions could also be a plus, Flickinger said. A&P has one of the most heavily unionized workforces in the business, with 95 percent of its workers covered under collective bargaining agreements. It said in its filing it would seek to work with the unions to lower costs.