NEW YORK -- Executives from regional supermarket and wholesale companies identified growing competition from supercenters as perhaps the principal challenge they face. The executives made their remarks at the annual food and drug retailing conference here sponsored by Donaldson, Lufkin & Jenrette. SN previously reported on presentations at the conference, including those on how the larger national companies are handling the integration of their recent acquisitions.
Nash Finch Cuts Back Wholesale and Expands Retail
Nash Finch Co., Minneapolis, said reports of its demise have been greatly exaggerated, and it is on the road to revitalization, according to Ron Marshall, Nash Finch president and chief executive officer.
Speaking in New York at the annual food and drug retail conference sponsored by Donaldson, Lufkin & Jenrette, Marshall said Nash Finch anticipates boosting sales in its wholesale segment by 3% and expanding corporate retail to 50% of total sales, compared with 40% at present.
On the wholesale side, Marshall said Nash Finch has reduced the number of buying centers from 20 a year ago to three; reduced inventory by 10%; increased cube utilization in its truck fleet by 40%; boosted on-time deliveries to 96% -- from 66% a year ago, he noted -- "on our way to 98%," and reduced average case costs by 10%, with another 10% improvement anticipated this year.
The driving force in expanding corporate retail sales will be convenience, outstanding perishables execution and service, Marshall said. "The confluence of those three factors is a compelling competitive strategy, especially in markets driven by supercenters, which don't address any of the three," he noted.
Through the first three quarters of 1999, sales per customer rose 2.4%, corporate sales increased 1% and retail earnings climbed 163%, Marshall said, while sales per labor hour rose 20% -- from $80 an hour a year ago to $98.
He said Nash Finch has reduced the number of corporate trade names from 17 a year ago to three: Econofoods, SunMart and Family Thrift Centers.
Nash Finch is introducing two new formats that are expected to drive sales over the next few years, Marshall said:
Buy n Save, a limited assortment format with 1,100 stock-keeping units in stores of 13,000 square feet "that will provide quality groceries to inner-city customers at 40% savings."
The wholesaler has three Buy n Saves in operation in Minnesota -- in Maplewood, Brooklyn Park and Albert Lea -- with annual sales expected to average $2.5 million to $3 million per store, Marshall said.
He said Nash Finch plans to open five more Buy 'N Save units during the first half of this year and eight more by year's end.
Wholesale Food Outlet, a price-impact Hispanic format that is being tested at a single store in Greeley, Colo. According to Marshall, WFO was an existing conventional format that was converted to the new format; since the conversion, he said sales are up 13.1%, with average weekly sales of $303,800, despite competing with Albertson's, Safeway, King Soopers (Kroger), Wal-Mart Supercenters and Super Kmart stores.
He said the company expects to open additional Wholesale Food Outlet locations in Omaha, Neb.; Austin, Minn., and Sioux Falls, S.D. Each store is expected to account for total sales of $15 million, with a 15% return on sales, Marshall said.
Asked about the impact of competitive store openings, Art Keeney, vice president, corporate retail stores, said three supercenters opened against Nash Finch corporate stores late last year, with five more due this year. "But we are prepared for them and we should be able to regain any market share we lose. A year after they open, we've found we end up in better condition but we have to fight for our share in the first six to eight months."
Marshall said supercenters generally cause an immediate 25% to 30% drop in a store's sales. "We lost about 20% of our business early on, but we're getting better at competing," he said, noting that a store in Dubuque, Iowa, lost only 8% to 9% of sales when a supercenter opened.
"But it's important that you hold first or second place in each community," Marshall said, "because when a supercenter comes in, the third-, fourth- and fifth-place players are taken out and only the top one or two in the marketplace benefit."