RICHMOND, Va. (FNS) -- Richfood Holdings here said last week it would close its frozen-food distribution facility in West Point, Pa., and restructure its frozen-food operations in that state.
Richood will sell the building for an undisclosed price, and West Point's operations will be transferred to the company's Harrisburg, Pa., distribution facility, officials said. In a separate announcement, the wholesaler said it wrapped up its acquisition of Farm Fresh. John Stokely, president and chief executive officer of Richfood, said during a conference call that the restructuring will keep costs down.
"We live and breathe costs," he said. "We attack it with a vengeance."
Stokely said the West Point facility has excess capacity. The facility, which can handle $400 million to $500 million in capacity, saw its volume drop dramatically last year by $165 million when Richfood's contract with Acme Frozen Foods expired.
The 165,000-square-foot facility was running about $120 million in volume after the contract loss, he said. Because West Point had higher fixed costs than other distribution facilities owned by the company, Stokely said, dropping the West Point center was the best way to handle the company's excess capacity.
"We're making some changes to our infrastructure that will be best for our customers," Stokely said.
The Harrisburg facility is set up to handle the additional volume and there is enough land to expand if needed, Stokely said.
The company has already begun moving the West Point operation into the Harrisburg facility. Richfood customers should not see a change in their service while the transition occurs, Stokely said.
It will take the company 60 days to fold the West Point facility. The company plans to pay a pretax charge of from $22 million to $24 million in its 1998 fourth quarter due to the restructuring.
Richfood also announced last week the completion of the acquisition of Farm Fresh, the Norfolk, Va., chain that operates 45 stores, predominantly in the Tidewater, Va. market. Stokely said a new ad campaign, price structure and logo have been designed for Farm Fresh and will be launched immediately.
As reported in SN, Richfood paid $221.7 million in cash, plus $29.5 million in assumed capital leases and 1.5 million warrants for the purchase of shares of Richfood common stock at a price of $25 per share.
Farm Fresh, which has been operating under bankruptcy protection, will operate as a separate subsidiary of Richfood. The parent company plans to spend $80 million in capital improvements for Farm Fresh in the next three years.
