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RESTORING THE IMAGE

Repairing Fleming's battered public-relations image is one of the first tasks facing Mark S. Hansen, the wholesaler's new chairman and chief executive officer -- and, in his estimation, a very important task.mall chain in Texas.David's claimed that Fleming promised to charge it for products on a cost-plus basis, but failed to disclose true product-acquisition costs: costs after inside margin and similar

Repairing Fleming's battered public-relations image is one of the first tasks facing Mark S. Hansen, the wholesaler's new chairman and chief executive officer -- and, in his estimation, a very important task.

mall chain in Texas.

David's claimed that Fleming promised to charge it for products on a cost-plus basis, but failed to disclose true product-acquisition costs: costs after inside margin and similar factors.

The chain won a judgment of some $211 million. Soon thereafter the judgment was vacated when the judge acknowledged he had financial dealings with the plaintiff. Then, at the end of a protracted appeal process that went on until 1997, Fleming ended up paying just 10 cents on the dollar of that judgment.

But that was far from all. Other companies filed complaints against Fleming, many alleging similar overcharges, although Fleming posits that many murky agendas were in back of some of them. Included in the roster of companies suing Fleming were Red Apple Cos., Furr's Supermarkets, Randall's Food Markets, Storehouse Markets and a group of 20 independents in Kansas and Missouri.

The same law firm that filed the David's suit brought all the subsequent suits, except for the one by Red Apple. The law firm itself was the object of a defamation suit brought by Fleming in 1997. That suit was ultimately dismissed.

Fleming maintains that, in all instances, it committed no wrongdoing. And, all the suits except for the one brought by the 20 Midwestern independents and the one by Storehouse Markets have been settled. The Randall's suit was settled by arbitration and the retailer recovered $1 and early termination of its supply arrangement with Fleming. The Red Apple suit was dismissed with prejudice and Fleming was awarded attorney's fees.

But regardless of the outcome of the legal wrangling, it all battered Fleming's image. Every permutation of suing, dismissing, arbitrating, appealing and countersuing caused Fleming's name to be further associated with allegations of overcharging, no matter how unwarranted such a connection might have been.

And that's the persistent negative image Hansen acknowledges must be turned around. "[Fleming's image] is important and we're absolutely concerned about it," he said. "But I'm absolutely convinced that the worst events are way behind us. I personally lament that we have a group of people who look at our company and want to live three years ago and not talk about what's going on today. Part of it is we're living through the final disengagement from that. So maybe it seems contemporary, but it really isn't. It's old history and this is a new day."

Hansen said there are copious numbers of success stories about Fleming that just don't see the light of day, another factor that could be undermining Fleming's image.

"Fleming is a very proud company, and with cause. This business feeds an enormous number of people in this country through our corporate and the independent stores. It's very effective, if not the most effective, in terms of physically moving product. There are a ton of things that go right every day in this business that we don't talk about.

"The press, including [SN], has talked a lot about the things that went wrong, but very little about the things that went right. And we, for reasons that were historic, didn't spend much time talking about the context of what was going wrong, or talk about what was going right."

Asked what would have to happen to restore Fleming's image, Hansen said success would do it.

"A lot of it is to create victories. Victories are created when you earn them. There are financial victories, business victories and cultural victories. We have to win all of these concurrently.

"We'll focus on big things that are drivers of our business. We'll help customers succeed, help them profitably grow the top line, we'll improve the value equation, we'll work on speed to market and we'll develop a winning attitude. That will get us there.

"This is an organization that internally is very excited about that. Externally, there's ample evidence that a number of retailers we serve today want to expand their relationship and a number now served by our competitors are anxious to hear our proposition."

Asked why retailers should view Fleming in a better light now than in the past, Hansen said new messages are already going to market.

"We're taking two messages to the market now," he said. "One is that we're focused on the success of independents. We're acting in alignment with their best interests. Secondly, as a result of the [restructuring] initiatives we've put forth, it's a different company with a different capability than we had just months ago. We've had as much interest [from retailers] looking at Fleming as at any time in recent history. And a fair amount of it is unsolicited."

Hansen also pointed out that the recent plan to allow all board members to stand for re-election annually also tells a good story. (A change from the staggered-term arrangement now in place must be approved by shareholders at Fleming's May 19 annual meeting.)

"The new board re-election plan is a bold step that says we're confident about the future of this business. We're saying that [holders will be] confident with their board and happy with the board. And we're willing to be vulnerable. It's a bold statement and it's the right thing for us to do. And it's important as a tonality statement about how we'll run this business. This too will change some minds."

Asked what attributes Fleming needs to enhance or develop to ensure the success of the restructuring and image-rebuilding campaigns during, say, the next five years, Hansen said: "Fleming will be a company more focused on retail and on strategic development of marketplaces. It will be a growth-oriented company, in terms of sales and earnings, a business that's regarded as best of class in many ways. Management will be regarded as having extraordinary talent. It will represent a good, solid investment in a stable industry. It will be a good place to work, and a good place to trade. It will be a company of impeccable values that stands for the right things at a right time. And, hopefully, it will be a place where we can have some fun."