Weak Tea

The U.S. grocery bill last year rose to a record $80 billion, and the big supermarket chains walked away with 45% of the total. Safeway Stores, the second biggest U.S. chain, increased its sales 6.3%, and third-ranking Kroger Co. made a 10.7% gain. Last week the Great Atlantic & Pacific Tea Co., the biggest and oldest (106 years) of them all, rang in with a report that sounded slightly sour amid all those sweet cash-register tunes. A. & P.'s 1964 sales of $5.08 billion represented a slight decrease, and its earnings dropped 10% to $52 million. The chain, which last year lost its proud title of the world's biggest merchandiser to aggressive Sears, Roebuck & Co., is clearly still stuck on the sales plateau where it has languished for six years.

No one is more sensitive to A. & P.'s predicament than cigar-smoking President Byron Jay, 60, a 38-year A. & P. veteran who took over as chief executive only two months ago to face the continued bad news. "Not what I hoped for, but about what I expected," said Jay, who as top man in A. & P.'s committee-type management oversees 4,585 stores in 39 states. "I'm not going to present a flock of alibis. I will say that we are on the way to a good job."

Mistake in the West. The way is pitted with potholes. The "Tea Company," as old employees call it, has long been slowed by aging management. The two chiefs before Jay were 67 and 68 when they took over; Chairman John D. Ehrgott is 69. The company was noticeably lax in meeting strong postwar competition and following the shift to the suburbs: Although it has opened 1,184 new stores in the past four years (almost all A. & P. stores are leased, a fiscal tradition that costs $85 million in rents each year), it is continually forced to close or renovate old ones.

Renovation, financed out of a comfortable $114 million cash reserve, has kept A. & P. from moving in force from the over-stored East to the lucrative West. Says Chairman Robert A. Magowan of Safeway, which is concentrated in the West: "I doubt that A. & P. will come West in any force until it has shored up some of its weak spots. And then I still doubt it." Admits Jay: "We may have made a mistake in the West." Another mistake was A. & P.'s disastrous involvement with trading stamps, which not only failed to halt a slide in its share of the market, but forced it to cover stamp expenses with a price rise that hurt its reputation as a price leader.

Inviting Complaints. Because acquisitions of other chains by giant A. & P. would undoubtedly meet Justice Department opposition, Jay must improve earnings (1.03% of A. & P.'s sales) through lower costs and higher sales. The company is closing small warehouses and plants, replacing them with regional superplants. At Horseheads, N.Y., it is completing a $25 million, 35-acre center, the biggest yet, that will both pack the private brands that represent 11% of A. & P.'s shelf items and make cans and containers for them as well. Jay has also undertaken a chain-wide courtesy campaign, faithfully answers every letter of complaint that comes to him--and invites more.

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