HOUSTON -- Randalls Food Markets here said last week it has signed a transition supply agreement with Fleming Cos., Oklahoma City, that will enable the chain to move to self-distribution by next August.
Randalls has been negotiating a transition supply agreement with Fleming since July, when an arbitration ruling enabled the retailer to break its supply agreement with the distributor. Fleming has been Randalls' supplier for more than 30 years, and its contract with the retailer was scheduled to expire in 2001.
Randalls also took further steps towards self-distribution by hiring a new group vice president of logistics.
In addition, the company said it has agreed to lease a distribution center in Roanoke, Texas, near Dallas, to supply its Tom Thumb stores there and is moving ahead with a major expansion of its local facility.
Randalls operates 116 stores -- 54 in Dallas under the Tom Thumb name, plus 50 here and 12 in Austin, Texas, under the Randalls name.
According to Randall Onstead, chairman and chief executive officer, "The move to the facility in Roanoke, coupled with the expansion of our distribution center in Houston, will allow us to move forward on our plans for self-distribution. "Our customers and employees will benefit from the lower cost structure that will result from the expansion of our distribution system."
Fleming officials declined comment last week.
Ted Bernstein, a high-yield securities analyst with Grantchester Securities, New York, said, "For Fleming, the agreement probably makes the pain of losing Randalls' business easier to bear, and it also signals that Randalls is definitely taking steps toward self-distribution."
Randalls said the transition agreement with Fleming, dated Sept. 25, will expire no later than Aug. 29, 1999. Randalls said it calls for generally the same terms as those in place before Randalls initiated the arbitration with Fleming.
Randalls said both parties agreed to work together to ensure a smooth transition out of Fleming's grocery facilities here and in Garland, Texas, and its general merchandise distribution center in Dallas.
Randalls already self-distributes 40% of its needs, including high-velocity grocery items and all perishables except frozen foods. It had been Fleming's second largest customer, with $450 million in annual purchases.
The retailer said last week it has agreed to lease a 975,000-square-foot distribution center in Roanoke that was previously leased by Food Lion, Salisbury, N.C., before it closed down its Southwest retail operations a year ago.
Randalls said the Roanoke facility will supply grocery and perishables to the Tom Thumb stores in the Dallas/Fort Worth metroplex and supply general merchandise to all stores. Randalls also said it hopes to complete a major expansion of its 200,000-square-foot grocery distribution facility here during the first half of 1999 -- a 470,000-square-foot addition that will include new freezer capacity plus additional dry space. The completion of the expansion will coincide with the closing of a locally-based 150,000-square-foot perishables facility. To oversee its distribution efforts, Randalls said it has named Larry Cooper group vice president, logistics.
Cooper, who was vice president, distribution, at Ralphs Grocery Co., Compton, Calif., will report to Frank Lazaran, senior vice president, sales and merchandising.
Cooper succeeds Jerome Pesec, whose title was vice president, warehousing and logistics.
Pesec was named to the newly created position of vice president, equipment/supply procurement and fuel operations. He will report to Tye Anthony, group vice president, non-perishables.
