Associated Food Stores Inc., a seven-state cooperative of independent grocers, is planning to build a 750,000-square-foot $60 million warehouse in the Salt Lake Valley that will allow the company to consolidate its operations at four locations.
The announcement came Friday during the company's annual shareholders meeting in the Little America Hotel and was approved by the board of directors Thursday.Richard Parkinson, president and chief executive officer said the old warehouse at 1850 S. Redwood Road has become obsolete and the new building will allow the company to distribute its products to retailers in the immediate area. The company also has warehouses in Boise, Idaho, and Billings and Helena, Mont., to service its retailers in several states.
Construction of the warehouse is necessary, said Parkinson, for AFS to become more efficient so that it can compete with larger grocery chains. He called building the new warehouse at one of two proposed sites "a significant event" for the company.
In giving his annual address to the retailers, Parkinson said gross margin for the retailers increased slightly in the 12 months ending March 28 compared to the same period a year ago, but net sales declined 2.8 percent. In the same period, operating expenses increased, mainly because of high salaries and the purchase of new technology.
Parkinson said AFS members need to pull together more than ever before because of increased competition from large grocery chains. He said Albertson's has changed direction from building new stores to purchasing existing ones and Fred Meyer recently purchased Smith's Food & Drug, giving that company $13 billion worth of buying power.
In addition, Parkinson said, Wal-Mart and Super Target Stores are moving into many areas selling the same products as AFS members so the pressure is on independent grocers to be as efficient and competitive as possible.
Jack Shaum, chairman of the AFS board of directors, said independent grocers have seen major changes in the past and will face other changes in the future. "We wouldn't still be here if we hadn't changed."
Businesses are looking at the Intermountain Area to expand because of population increases and Salt Lake City hosting the 2002 Winter Olympics, so AFS must change to maintain its position, Shaum said.
In order to remain in business, the chairman said, AFS must be efficient in the warehouses and the retailers must be efficient in running their stores. He said the company also must capitalize itself so enough money will be available to "move into the future."