ABINGDON, Va. -- K-VA-T Food Stores here said last week it has reached agreement to acquire seven units of Winn-Dixie Stores in the Knoxville, Tenn., market, a deal that marks Winn-Dixie's exit from the area.
The deal, which is part of K-VA-T's aggressive growth plans in the region, is expected to be completed in October.
Winn-Dixie, Jacksonville, Fla., has operated in the Knoxville market for over 20 years. It will continue to operate stores in other parts of east Tennessee, including Chattanooga. The Knoxville stores, originally part of Winn-Dixie's Greenville, S.C., division, became part of the chain's Charlotte, N.C., division a couple of years ago when the two divisions were merged, and the 250 miles between the Charlotte distribution center and Knoxville were a major factor in Winn-Dixie's decision to sell the stores, a Winn-Dixie spokesman told SN.
He also said the company felt it didn't have the penetration it needed to remain in Knoxville, "and we didn't see that situation changing in the near future. We believe our resources can be better applied to areas where we have greater penetration."
K-VA-T said it would retain all former Winn-Dixie employees.
K-VA-T currently operates 82 stores, including 50 in east Tennessee, 21 in Virginia and 11 in Kentucky, all of which operate under the Food City name except for two in Tennessee and one in Kentucky that are called Super $.
The proposed acquisition of the seven Winn-Dixie stores is K-VA-T's second purchase deal in the last 12 months, following the purchase last August of 11 Piggly Wiggly stores in southwest Virginia.
Jack C. Smith, chairman and chief executive officer of K-VA-T, said the addition of the seven Winn-Dixie stores is part of the company's overall plan of controlled growth in east Tennessee. "Our continued growth is certainly a positive step for Food City as we head into the next century," Smith said.
Besides expanding its store base, "this growth allows us to bring added value in the form of competitive pricing, quality products and customer service to our customers," he added.
Steven C. Smith, president and chief operating officer, told SN the company plans to close three of its existing Food City stores in the Knoxville market and relocate to larger Winn-Dixie units nearby. He said Food City stores of 28,000, 30,000 and 33,000 square feet would be closed and their operations transferred to Winn-Dixie stores of 35,000, 45,000 and 55,000 square feet in Marysville, Knoxville and Morristown, Tenn., respectively.
Of the seven stores being acquired, five are Winn-Dixie Marketplace stores, including two larger than 50,000 square feet that would become Food City's largest units, Steven Smith said.
He said K-VA-T would fill the additional space with expanded groceries and perimeter perishables, including bakery-deli, service meat and seafood, and melon and salad bars, and it contemplates adding pharmacies, photo departments and video sections as well.
"Basically, we'll keep what Winn-Dixie Marketplace had and add the other varieties that we carry, like video," he explained.
Steven Smith said Food City has the No. 2 market share, behind Kroger Co., in the Knoxville market and the No. 1 share in the Tri-Cities area (Bristol, Johnson City and Kingsport, Tenn., on the Virginia border), 100 miles east of Knoxville.
Even after Winn-Dixie leaves Knoxville, the market will remain "extraordinarily competitive," he said, with two everyday low price operators \m-\ Food City and Food Lion \m-\ competing with Kroger Co., Ingles Markets, Bi-Lo (an Ahold company) and Wal-Mart supercenters.
Asked if the company is seeking additional acquisitions, Steven Smith told SN, "We're always keeping our eyes and ears open for stores that can strengthen us in our markets."
However, he said, K-VA-T still has "plenty of room" to expand and backfill within the states of Kentucky, Virginia and Tennessee. "We want to stick to markets covered by the reach of our existing TV advertising," he explained.
The company's growth plans include the following, he told SN:
Three new stores in the Knoxville area: a 36,600-square-foot unit in the Strawberry Plains section of the city, due to open next spring; a 42,000-square-foot store in nearby Sevierville, Tenn., also scheduled to open next spring; and a 45,000-square-foot store in nearby Gatlinburg, Tenn., due to open in August 2000 with a two-story design.
Steven Smith said the Gatlinburg store will feature parking at street level and the store itself on the second level because of limited space in the Smoky Mountains resort area. Four store expansions in the Knoxville area, with 10,000-square-foot additions at a 35,000-square-foot store in West Knoxville and at three 30,000-square-foot stores in Knoxville, Alcoa and Oliver Springs, Tenn.
Two new stores in the Tri-Cities area: a 36,600-square-foot unit in Church Hill, Tenn., and a 42,600-square-foot store in Bristol, Tenn., both of which are scheduled to open next spring. The company already opened five new stores in the Tri-Cities area earlier this year, Steven Smith noted.
A single new store in Kentucky \m-\ a 36,600-square-foot store in Louisa, Ky. \m-\ in addition to a 42,600-square-foot unit in Corbin, Ky., that opened earlier this year. He said the company also plans to add 10,000 square feet to a 40,000-square-foot store in South Williamson, Ky.
