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As previously reported on MNB, the Great Atlantic & Pacific Tea Company has instituted a hiring and salary freeze. To provide a sense of how the conditions faced by A&P are being communicated by management to employees, MNB would like to reprint the internal memo sent out by CEO Christian Haub, as provided by an MNB user:

    To: All U.S. Management and Administrative Associates
    From: Christian Haub, Chairman and Chief Executive Officer

    We are all keenly aware of the problems that continue to plague the U.S. economy. You only need to pick up a newspaper or watch the evening news to see its impact on so many industries and companies. The soft economy and the deterioration in consumer confidence continues to erode overall retail sales and grocery sales in particular. This trend is reflected in declining financial results for food retailers throughout our industry.

    These continuing economic and competitive conditions require us to take immediate steps to reduce costs in the near-term and leverage opportunities for sustained, profitable growth. Therefore, under my direction, the senior leadership team is implementing the following actions:

    • Identify and suspend any non-essential spending planned for the remainder of fiscal year 2002.
    • Immediately suspend hiring and salary increases for all U.S. management and administrative associates.
    • Re-prioritize initiatives planned for the remainder of this year and fiscal 2003 and postpone or cancel projects that do not directly support our operations and drive improved business results in the short term.

    Let me assure you that my decision to suspend salary increases was not easy. I know you are working hard to revitalize this great Company and I fully understand the personal sacrifice this will require . I remain confident in the long-term outlook for the economy, our industry, and our Company and I firmly believe we will regain the positive momentum we experienced last year. However, as I said earlier this year, there are no indications that conditions will dramatically improve in the near future.

    In the current economic environment, consumers are more price-sensitive, which drives food retailers to increase marketing and advertising, run more aggressive promotions, and lower prices. Our Company is particularly vulnerable in this environment because our high-cost structure inhibits our flexibility to compete without significantly reducing our profit margins.

    We have made progress in reducing our overall cost structure through our Strategic Sourcing Initiative, improved cost-of-goods procurement practices, and improved labor productivity. And, we will complete the everGReen initiative as planned at the end of this year to enable us to reduce costs and leverage the investment we’ve made to support the business and drive improved results.

    Unfortunately, these steps alone are not enough to safeguard us from the impact of a weakened economy and additional cost reductions have become unavoidable.

    Our Company history has taught us that cost reductions alone cannot deliver sustained growth and profitability. So while we must further reduce costs, we will not abandon our customer-focused business model and the investment it requires, including:

    • Completing the work that we began this year to strategically position each of our store banners in the markets they serve.
    • Remaining committed to improving store conditions and supporting the customer service excellence program being implemented now in every banner.
    • Intensifying our focus on key elements of the business that can deliver profitable sales growth. Our test of the Food Basics format in the U.S. is now moving ahead the results have been positive to date.
    • Completing the process of revitalizing our highly profitable line of corporate brands by improving the quality of the products and marketing them more vigorously in our stores.

    All of these initiatives are fundamental to the success of our Company and I will not let us lose sight of their importance.

    As we implement the actions outlined above, I will keep you updated on our status and progress. In the meantime, I ask that you review the scope of your responsibilities and look for innovative ways to reduce costs without compromising quality or the contribution you make to our operations. I urge you to partner with associates in your area and across the Company to identify cost saving opportunities and present your recommendations to your manager.

    It continues to be a challenging time for our industry and our Company, but I remain convinced that we will succeed if we stay the course and remain focused on our customers, our operations, and the improvements that will provide short-term benefits and long-term growth.

KC's View: