Certified Grocers sees market share slipping away.

Alpha Beta-Ralphs merger could open up opportunities

Revenues are slipping at Certified Grocers of California Ltd. because several major retail grocery chains have established their own warehousing and distribution arms, and no longer need Certified Grocers' services, industry sources said.

But Certified Grocers, which wholesales and distributes foodstuffs to grocery chains, may be able over the next year to pick up many more customers, sources added.

Certified Grocers, the largest privately held company in L.A. County, reported 1993 revenues of $2 billion. That's down 15.6 percent from 1992 revenues of $2.378 billion.

The company predicted further revenue erosion this year, projecting 1994 revenues of $1.9 billion, according to the Business Journal's List of private companies.

Many of its buyers are independent grocery retailers because most major supermarket chains, such as Lucky Stores Inc. and Vons Cos. Inc., have their own warehousing and distribution arms, which buy directly from manufacturers or producers.

Certified defections

Certified Grocers has lost customers in recent years, however, because a growing number of grocery chains have either established their own warehousing and distribution arms, acquired grocery companies with warehouse distribution operations, or switched to another wholesaler or distributor altogether, said Don Beaver, president of the California Grocers Association, a Sacramento-based trade group.

Certified Grocers officials were not available for comment last week.

The tendency of Certified Grocers' biggest customers to grow through acquisition has been a major factor contributing to Certified Grocers' declining revenues, said one industry source who wished to remain anonymous.

For instance, La Habra-based Food 4 Less Supermarkets Inc. used to be one of Certified Grocers' biggest customers until it bought the Alpha Beta chain in 1991 from Salt Lake City-based American Stores Co.

At that point, it also absorbed Alpha Beta's warehousing/distribution arm for its own use, said Tom Dahlen, senior vice president of sales and marketing for Food 4 Less.

Teaming up

But a pending merger that would create the grocery chain with the largest marketshare in L.A. County will not hurt Certified Grocers. Century City-based Yucaipa Cos. -- which owns the Alpha Beta, Boys, Viva and Food 4 Less chains -- announced in September it is acquiring Compton-based Ralphs Grocery Co. Since both entities now already have their own warehousing and distribution facilities and are not customers of Certified Grocers, the merger would not affect the company, Beaver said.

In addition, Irwindale-based Hughes Family Markets Inc. used to be one of Certified Grocers' biggest customers. But that chain built its own warehousing and distribution facility, which opened in 1993, Beaver said.

Up north, Sacramento-based Raley's, which also operates the Bel Air grocery chain, joined forces with Modesto-based Save Mart Supermarkets in 1980.

The two retail grocery companies have been gradually weaning themselves off Certified Grocers' services since then, said Raley's President and CEO Charles Collings.

In 1980, the two companies jointly opened a milk processing plant, and in the mid-1980s, they opened a plant to produce ice cream and cultured dairy products, he said.

Then, in 1990, the pair opened an 800,000-square-foot warehousing and distribution center for dry groceries, and this year expanded it to include frozen foods, Collings said.

Gilroy, Calif.-based Nob Hill Foods is among those companies that merely switched to another wholesale/distribution company.

It abandoned Certified Grocers in late 1992 for Oklahoma City-based Fleming Cos., the largest wholesaler and distributor of grocery products in the country, said Nob Hill spokeswoman Lynda Trelut. She would not comment on why her chain switched to Fleming.

Glimmer of sunshine

But Certified Grocers might soon have up to 50 potential new customers to serve, one industry source said.

Vons and Alpha Beta might each close 30 to 40 stores during the next 12 months, the source said. Vons has closed 17 stores since 1993 and plans to close more.

Meanwhile, unprofitable Alpha Beta stores are likely to be closed in the aftermath of the Yucaipa-Ralphs merger, the source said.

Most of these closed stores are likely to be in smaller spaces, less than 25,000 square feet, that are ideal sizes for independent grocery stores.

Also the stores would already have the necessary fixtures in them and would likely have existing leases with relatively low rents.

Thus, Certified Grocers could serve the independents that would lease these spaces, the source said.

And that is just what Certified Grocers President Al Plamann is poising the company to do, the source said.