If Nash Finch was a plant, it might be a cactus.

The recession has dried up spending for most businesses, including Nash Finch's competitors in the grocery business. But it hasn't spoiled business at this Edina-based food wholesaler. Sales are up. The CEO is looking for new acquisitions. And thanks to a new line of organic products launched in recent weeks, Nash Finch now imagines a day when it will sell food through supermarkets other than its own.

That's a long ways from the company that CEO Alec Covington inherited when he took over in 2006, a year that saw two quarters' earnings slide into the red as the SEC investigated Nash Finch for insider trading.

Even analyst David Livingston, a frequent critic of Nash Finch when it was run by Ron Marshall, had good things to say about Covington's handling of the company.

"We're sitting back and we're not finding a whole lot to criticize him about," Livingston said. "He has realistic goals and realistic ideas."

The $4.7 billion food wholesaler reported its 10th straight quarter of positive earnings last week. Sales for the quarter ended June 20 were up 19 percent, a figure that includes sales from three military distribution centers acquired in January. Excluding those centers, sales were up 1.9 percent from the same period a year earlier.

Earnings before interest, taxes, depreciation and amortization were $33.6 million for the quarter, or about 2.8 percent of sales, the company reported. Debt leverage is at 2.3 times EBIDTA, down from more than three when Covington took over.

So how did the company that traces its beginnings to a 19th-century North Dakota candy and tobacco store turn the corner?

"They're focused," said Dale Riley, a supermarket industry veteran and owner of Fresh Seasons Market, a Nash Finch independent retailer with locations in Victoria and Minnetonka.

Covington unveiled his plan late in 2006 after conferring with managers. Since that day, Covington said, "we have not deviated one centimeter from that plan."

'A very difficult business'

Some pieces of the plan include the expansion of the company's food distribution business for the military, the introduction of everyday low pricing and the rollout of an organics label that, unlike a private or house label, would function more like a company within the company.

Not everything worked as planned, however. Covington said the pricing program can't move fast enough, and that the famously thin margins of the supermarket business make this recession all the more precarious.

"This is a very difficult business," Covington said in an interview last week. He said he doesn't remember a more difficult time in 35 years.

Yet Nash Finch says it's ready to buy anything valuable that a competitor may cast off. A Supervalu property could be a target, as the much larger Eden Prairie wholesaler and retailer struggles with a heavy debt load brought on by its 2006 acquisition of Albertson's Inc.

"If Nash Finch was a private equity or hedge fund, we would be known as value investors," Covington said. "We're not interested in paying outrageous multiples for anything."

Two years ago, easy credit and robust private equity pushed many deals to eight to 10 times EBIDTA, while something more like six times EBIDTA seems reasonable to Covington.

A major acquisition in January saw Nash Finch snap up three former Grocery Supply Co. distribution centers in Pensacola, Fla., Junction City, Kan., and San Antonio, Texas.

Military business

"It was a marriage made in heaven for us," Covington said, with the San Antonio location giving Nash Finch's military distribution business, MDV, its first foothold in Texas. The price for all three distribution centers was so low that if Nash Finch had simply auctioned off the property and land it would've turned a profit, he said.

Some 29 percent of Nash Finch's annual revenue now comes from food distribution on military bases, a business that supplies some of the 284 U.S. military commissaries around the world, as well as supermarkets where soldiers, sailors, Marines and others buy groceries at cost plus 5 percent.

The Nash Finch military business performs at about 4 percent EBIDTA, said Covington -- slightly higher than wholesale or retail.

Covington's push for a change away from the traditional supermarket pricing model, which relies on frequent deals and promotions, has proven more difficult. He's adopting the pricing model used at the nation's No. 1 food retailer, Wal-Mart, where everyday low prices are the rule.

Today, Nash Finch has 5,000 items in its Lima, Ohio, distribution center that are considered part of the everyday low pricing program. These items sell for a 10 to 12 percent spread against Wal-Mart prices instead of a previous spread of 21 to 25 percent.

"The juice was worth the squeeze," Covington said. Eventually, such programs should cover a third to 45 percent of the business, he said.

In another long-planned move, the company recently unveiled a new line of organic products under the Nash Brothers Trading Co. label, a brand that will eventually have its own CEO and vie for space on shelves at any supermarket, even Nash Finch's competitors. The label has 54 products today, including vegetables, waffles and peanut butter, and plans to grow to 420 by 2011.

More than half of Nash Finch revenues comes from the wholesale business, supporting independent supermarket operators like Jeff Maurer, who plans to open his Fresh Urban supermarket in Madison, Wis., this fall. The partnership was finalized Thursday. Maurer said he chose Nash Finch after meetings with wholesalers Supervalu and Affiliated Foods Midwest.

"I really felt comfortable with Nash Finch," he said. The company helped him design the store and draw up plans for displays and marketing.

Livingston said Nash Finch could draw in more customers like Maurer in the coming months. He said he knows of a major food retailer in the Fargo, N.D., area who's currently a Supervalu customer but is considering a switch to Nash Finch because of Supervalu's disappointing economic performance.

Matt McKinney • 612-673-7329