The second major shake-up in the grocery industry in Montana this month will result in the loss of more than 100 jobs in Billings and Helena.
Utah-based Associated Food Stores announced Wednesday that on April 14 it will close food distribution warehouses in Billings and Helena that serve more than 100 independent grocery stores in Montana and Wyoming.
The retail stores will be supplied from a much larger warehouse in Farr West, Utah, just north of Salt Lake City.
Because Associated Food is a cooperative, the retail grocery stores that it supplies own the company and will share in the efficiency savings, said Kelly Atkins, senior vice president in Helena.
“This decision will ultimately allow our independent grocers in Montana to continue to be strong competitors in their markets,” he said.
The closures will eliminate jobs for 56 people at the Billings warehouse at 332 S. Plainview St., off Monad Road, and 50 at the Helena warehouse at 2705 Airport Road.
The food cooperative will retain six drivers in Billings, four in Helena and 25 retail service workers. These employees, specializing in produce, meat or other products, work with the retail stores.
Even with adding about 550 miles of one-way travel from the Utah warehouse to Billings, Atkins said improved efficiency will cut costs to its retail grocers by 3 percent. That is significant in a intensely competitive grocery industry operating on net margins of 3 percent or less, he said.
“The upside is significant or we would not be putting our team through the pain we have,” Atkins said.
The Farr West warehouse has one million square feet, compared with 180,000 square feet in Billings, so retailers will have more product choice, said company spokesman Kris Romeril in Salt Lake City.
Associated Food provides wholesale groceries to more than 400 independent stores in eight Western states and owns 43 grocery stores in Utah and one in Nevada.
The wholesaler is privately owned and doesn't report its finances publicly. Last June, the Salt Lake Tribune reported that Associated had $5.9 million in profits last year, compared with a loss of $6.5 million in 2011. Those profits were shared with retailers, Romeril said.
No interviews with Billings warehouse employees were allowed.
“Generally in Montana, our profits have been strong,” Atkins said, including this fiscal year, which is 75 percent complete.
The closures of the Associated Food warehouses means the Supervalu warehouse in Billings is the only food wholesaler left in Montana, Atkins said.
Three weeks ago, Minnesota-based Supervalu announced that it was selling 877 U.S. grocery stores, including all of its Albertsons stores. The buyer is a company owned by Cerberus Capital Management, a private equity company in New York City that buys distressed assets.
When asked what he thinks will happen to the local Albertsons, Atkins said everyone is waiting to see.
“Cerberus is known as a company that buys assets and spins them off," he said. "Who knows what could happen."