It was the first Monday in April, and there were two dudes cruising the desert just itching to engage U.S. forces in southern Iraq.

Within a short time, they neared the perimeter of Camp Adder, the Army’s southernmost resupply point, a dusty and desolate place. Their old Toyota Land Cruiser — somewhat equipped for battle, but nowhere near battle-ready — sped toward its objective.

“It was not pretty,” Craig Sewell would later say to a colleague in describing the scene.

His vehicle boasted a .50-caliber machine-gun mount, and yet, on this day, it lacked a weapon.

But looks aren’t everything, especially to troops in a war zone. All that mattered in this case was the impressive arsenal Sewell and Dennis Hatcher were packing: Gatorade, snacks, wipes, cigarettes and chewing tobacco.

The two Army and Air Force Exchange Service employees would stop several more times that day to lower the tailgate and peddle their precious products. Business went well, good will even better.

“It was an exciting time,” Sewell recalled recently from his office in Dallas, where AAFES is headquartered. Sewell is now the company vice president of the services and vending division. “We went in with gas masks strapped to our sides.”

That day of deliverance marked the debut of the Army and Air Force Exchange Service in Iraq.

A few days later, in a dingy gymnasium on Tallil Air Base, upon which Camp Adder is located, AAFES opened its first store. The effort and cost that went into this opening — and the others that followed — were significant.

“Sometimes it is more important to have that PX downrange than it is to make money,” said Army Maj. Dave Accetta, spokesman for AAFES-Europe.

And yet, despite challenges at home and downrange — from staff shortages and Iraqi insurgents to a seemingly steady diet of criticism over products and pricing — AAFES-Europe is on pace to surpass last year’s sales.

From February to October, revenues for AAFES-Europe, which oversees Central and Southwest Asia, were up 7 percent from the same period last year, according to Joe Giuffreda, vice president of AAFES-Europe. The nine-month period spans three quarters of a fiscal year that ends Jan. 31.

Key to the increase is the nearly 700 percent rise in sales revenue in Asia, notably Iraq and Kuwait. Pre-existing stores in Kuwait and the so-called “stan” nations, such as Afghanistan, were also a major factor.

As of Nov. 1, sales in Iraq had topped $102 million, while revenues from new and existing stores in Kuwait, Oman and Qatar skyrocketed from $4.1 million in 2002 to $103.4 million in 2003. The latter figures do not include three established sites in Kuwait — Doha, Al Jaber and Ali Al Salem — where sales have almost tripled.

“Obviously,” Giuffreda said, “we have a lot more stores open in Iraq” this year.

The above figures represent only sales. When purchasing, transportation, personnel, foreign currency losses, depreciation and other costs are factored into the equation, the net earnings are much less, according to AAFES.

In the case of Iraq, operating costs are so high that AAFES-Europe finished the third quarter nearly $6 million in the red for that region. Two other areas supporting Operation Iraqi Freedom operated at a loss: Turkey and Hungary.

Nonetheless, sales increases throughout Southwest and Central Asia have helped offset decreases elsewhere, particularly in Germany, where many troops, primarily of the 1st Armored Division, have been in Iraq since spring.

In Baumholder, for instance, retail sales for the first nine months of the fiscal year were down 12.7 percent, while revenue from food sales and other services were off 29 percent and 32 percent, respectively.

Sales figures in other communities, such as Giessen, Hanau and Wiesbaden, have dropped as well. And Grafenwöhr is experiencing a downturn, too, because fewer soldiers are stepping onto the training range.

Because of the war in Iraq, said Georg L. Main, the Baumholder exchange business manager, “your population base is pretty much gone.”

That’s true — to an extent.

While thousands of soldiers are gone, families and civilians remain. Over the year, AAFES has stepped up its promotional efforts not only to keep the registers ringing, but also to boost morale by giving patrons more to do or think about.

“We just tried to have a lot more things going on,” Giuffreda said.

The approach has paid off. Sales in some communities may be off due to deployments, but earnings elsewhere in the theater have increased.

Heading into the final quarter, revenues from all Europe exchanges were running 4 percent higher than last year. As of Nov. 1, sales in Europe totaled more than $884 million, according to AAFES. When operating and other expenses are taken into account, the figure is much lower: $62.5 million.

Still, that increase coupled with robust earnings downrange, due in part to tens of thousands of stateside troops, has given AAFES-Europe one of its most memorable and profitable years. During the February-through-October sales period, AAFES’ net earnings totaled more than $80 million. Money from the net profits goes toward capital improvements and payments to Morale, Welfare and Recreation programs.

As a rule, AAFES doesn’t advertise its sales figures. The reason, Giuffreda said, is that people may focus on the money without fully appreciating what goes into running such a unique and far-flung operation.

“There are a lot of challenges,” Accetta said. “Some people refer to us as a Wal-Mart, but Wal-Mart wouldn’t go to Baghdad or Kabul” to open a chain of retail stores.

Currently, in Iraq, there are 30 AAFES stores and 85 satellite shops run by units based at small or remote camps. Another 21 stores are supporting troops in and around Afghanistan.

“We would like to open more facilities downrange and stock them with more goods, but there are limits,” Accetta said.

Logistics is one of them.

On average, AAFES hauls into Iraq about 20 containers of goods a day. As a point of reference, one 40-foot container, the largest in use, can hold about 2,000 cases of soda pop.

Each shipment entering Iraq requires a military escort, which involves a degree of coordination.

And those efforts pertain only to the final leg. There is a larger matter of just getting the goods into the region. Aside from the logistical challenges, the effort can prove deadly.

Earlier this month, insurgents ambushed a military convoy south of Baghdad, killing a local contractor hauling AAFES merchandise. Another man in the truck was injured.

AAFES, Accetta wrote in a response to a query, “is trying to complete a mission that is just as difficult and dangerous as the military’s, and we face a lot of the same challenges.”

“In many ways,” he continued, “AAFES faces more [challenges] as we don’t necessarily get the same kind of support from the government. We do rely on the military for support and could not do it without them; however, we are never the priority, and we all understand that.”

Employees also understand they may end up in a war zone. The marketing mantra of going “where you go” may seem trite to some, but many workers take that creed seriously.

As of mid-December, there were 438 employees in the Iraq-Afghanistan theaters. All volunteered to go, according to Giuffreda.

Staffing is one issue that bedeviled AAFES on the home front earlier in the year, especially, again, in some 1st Armored Division communities.

Main, the Baumholder manager, said many wartime spouses left Germany earlier in the year for extended stays in the United States. Since AAFES employs a high percentage of military spouses, that momentary migration hit his staff hard. At times, it was down by as much as 40 percent, though that’s no longer the case.

The shortages, Main said a few months ago, “were stretching the work force.”

Something that hasn’t stretch very far this year has been the dollar. Since Feb. 1, the value of the dollar has dropped 15 percent versus the euro.

A weaker dollar, Giuffreda said, adversely affects many aspects of the AAFES operation, from salaries for local nationals — paid in euros — to higher costs for produce, such as the lettuce on a Burger King sandwich.

“The dollar is as weak as it has ever been,” Giuffreda said.

But that won’t kill the $2 hamburger selling like hot cakes in Iraq.

Currently, AAFES has three Burger King restaurants in Iraq, selling on average about 10,000 Whoppers a day.

“We’re taking care of their needs,” Giuffreda said.

“We’re trying our best to give them a taste of home.”

Shops change with times, environment

• A year ago, heads would have turned at the sight of German soldiers clutching plastic shopping baskets as they peruse the aisles of an AAFES-Europe exchange. Now, they are just part of the store scenery.

Since early March, German soldiers have had permission to use U.S. military facilities, such as post exchanges, commissaries and dining halls. The invitation came shortly after German troops began guarding U.S. bases.

AAFES officials say they don’t know how much German soldiers have spent in their stores this year.

• There’s an incredible amount of issues and challenges AAFES faces when it opens a fleet of stores down range. One of them is change.

Coins are weighty objects. The cardboard slugs AAFES gives out to its customers downrange solved that problem.

Transporting coins into the theater “is cost prohibitive,” said Army Maj. Dave Accetta, spokesman for AAFES-Europe. “It’s also difficult, logistically, to arrange.”

The odd thing about all this is that the paper coins are now being bought and sold on eBay.

“They’ve become collectors’ items,” Accetta said.

• AAFES is launching a new link on its Web site that will provide deploying troops and family members a glimpse of AAFES facilities downrange.

The link features store sites and facilities supporting Operation Enduring Freedom and Operation Iraqi Freedom. The link will include exterior and interior views of a store, as well as related facilities such as a food area.

The “Serving Troops Downrange” link should become available in the coming weeks.

— Kevin Dougherty

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