Decline and demise
After initial merger pains, Farmer Jack rose to prosperity, becoming A&P's most profitable division through the 1990s. But in 2002, the chain began losing money. Former executives attributed this to several reasons:[6]
Market Scope projected that Farmer Jack led metro Detroit in market share with 27.5% at year end 2001. It began a free fall in 2002; by the end of the year, Kroger led the market while Meijer climbed to 16.1% from 10.1% in just one year.
In 2003, Farmer Jack announced its first round of store closures and that it would seek voluntary buyouts among its most senior employees.[7] In June, in a move made by the company to ‘get its consumer base back,’ but attributed by the media as a marketing gimmick, each store was closed for 37 hours so that they could be thoroughly cleaned; when the stores reopened, employees debuted with new uniforms and the loyalty card and weekly sales were discontinued in favor of everyday low pricing. Additionally, a new marketing program titled "We’re Thinking Fresh" promoting ‘it’s fresh or it’s free - guaranteed’ was launched.[8] An analysis by the Detroit Free Press among a basket of commonly purchased items concluded that Farmer Jack's price had indeed gone from most expensive to least expensive among its peers; however, journalists also noted that "in spite of the surface shine, some areas of the store (where journalists shopped) needed a scrubbing. The coolers looked old, a frozen food area had bent and crooked shelves, and some inner cooler door frames were dusty and dotted with bits of paper." The paper speculated that competitors would match Farmer Jack's prices and it would suffer from the same problems it had before the makeover.[9] In early 2004, ten Farmer Jack locations were converted into A&P's Food Basics format in an attempt to compete with discount chains such as Save-A-Lot.[10] Less than a year later, nine were closed while the other—a new-build store in Dearborn Heights—was converted into a Farmer Jack. Simultaneously, the closure of 15 Farmer Jacks was announced;[11] four more closures were announced later in the year.[12]
In early 2005, A&P placed Farmer Jack for sale, seeking an estimated $250M (~$ in ) for 71 core stores; the remaining locations were offered individually.[13] Later that year, workers approved wage cuts conditional on a sale to Spartan Stores—which was led by several former Farmer Jack executives, including its CEO Dennis Edison who led Farmer Jack until his dismissal in 2002, but the deal fell through. Workers then approved a similar package of cuts in exchange for A&P guaranteeing to keep the stores open through May 2007. A&P, which was unable to find a buyer for Farmer Jack, said the chain would break even for the year and therefore A&P—which had just received a cash injection from the sale of its Canadian division—was in no hurry to sell it. A&P also admitted that because it had anticipated a quick sale, Farmer Jack had been poorly managed for over a year; therefore, the company was returning to loyalty cards and "It's Savings Time" marketing.[14]
By April 2006, Farmer Jack was once again profitable.[15]
In August 2006, Farmer Jack announced it would convert three stores into a prototype mixed discount-upscale market featuring warehouse-type shelving, fewer product offerings and higher stacking in the produce department while featuring lower prices. Plans were scrapped by October, with then A&P CEO Eric Claus saying "we're not pleased with our lack of sales momentum in Michigan".[16]
In March 2007, A&P announced plans to sell or close Farmer Jack by July.[17] In May, its distribution warehouses closed.[18] The remaining Farmer Jacks closed on July 7. "For all practical purposes, those stores were closed anyway," supermarket analyst David Livingston told the Detroit News. "Farmer Jack was doing such a low volume. The existing stores were barely even doing that -- existing." "Farmer Jack was stuck in the past in terms of quality, merchandising and pricing," said Ken Dalto, a Farmington Hills-based retail consultant. "A&P never gave its Michigan stores the type of attention they needed to do well. Customers noticed they didn't move beyond 20 years ago."[19] While Kroger was aggressively remodeling or rebuilding its stores with designer interiors, full service meat & seafood counters, sushi and extensive prepared food bars, most Farmer Jacks retained A&P's late 1980s/early 1990s interior design package.
Of the remaining 66 Farmer Jacks, the company announced that it sold 20 to Kroger, 10 to smaller local chains and 15 to independent grocers.[19] However, some of the deals with the independent grocers collapsed. In an October 2007 SEC filing A&P revealed that it received approximately $110 million for 41 former Farmer Jack sites, and that 2 warehouses and 25 stores remained for sale.[20][21]
In June 2010, A&P ended lease payments at vacant Farmer Jack stores; affected property owners responded with 24 lawsuits against A&P.[22] In December 2010, A&P filed for bankruptcy citing dark leases from discontinued operations like Farmer Jack as a factor in its decision.[23]
- The decision to expand the chain beyond metro Detroit; stores in the Toledo, Flint, Saginaw and Lansing markets were unsuccessful and proved to be a major financial drain.
- The lack of capital improvements within its existing stores. In 2001, Kroger committed to a five-year, $345M initiative to remodel or replace its existing metro Detroit stores. In 2002 to 2003, Farmer Jack committed just $50M. Analysts blamed the discrepancy on A&P's financial woes and its need to conserve cash.
- A delayed response to the price war launched between Meijer, Kroger, Costco and Super K-Mart.
- The discontinuation of awarding Northwest Airlines mileage for purchases in late 2001, which alienated many of its affluent consumers.
- A&P's decision to lay off most local executive management, merchandising operations, accounting, advertising and marketing positions, consolidating and performing these operations from its Montvale headquarters instead. "You really, truly need someone in the organization who knows the market, who knows the customer, [but there was] nobody left," a former executive told the Detroit Free Press. While A&P panned local management for accounting irregularities that affected the company, former executives blamed the breadth of the layoffs on the company's desire to cut costs.
