ANNUAL MEETING 2003-05-26 (1)

David Ghitelman

SHEBOYGAN, Wis. -- Fresh Brands here said acquisitions remain an essential part of its growth strategy, even though it failed to make any in 2002.

At the company's annual meeting, Elwood Winn, Fresh Brands' president and chief executive officer, told shareholders that the company's "No. 1 objective in 2003" is to make an acquisition that will boost its revenues by 10%. Last year's annual revenues were $619.1 million.

Winn said the company has evaluated many candidates so far, but they either "have not measured up to our strict criteria" or came with prices that "do not reflect the reality of the circumstances."

He noted that acquisitions are essential to meeting the company's goal of doubling its size in five years.

At the meeting this month, Michael Houser, Fresh Brands' vice chairman, executive vice president and chief marketing officer, outlined several of the company's ongoing and upcoming competitive initiatives.

He said the company plans to expand its Valu Time line of products, and expects sales of this "price-fighter" label, $2 million in 2002, to increase 9% in 2003. He also said that one of Fresh Brands' major initiatives this year will be the rollout of natural/organic products and departments in many of its stores. He noted that sales of the company's private-label natural/organics line, Full Circle, increased from $67,000 in 2002 to more than $835,000 in the first four months of 2003.

In results for the 16-week first quarter that ended April 19, Fresh Brands said its sales rose 1.9% to to $187.7 million, comparable-store sales (in franchise and corporate stores) rose 0.15%, net income increased 0.7% to $1.93 million, and earnings per share were 38 cents, compared with 36 cents in the previous year's first quarter.

Winn attributed the sales improvement to the January opening of a new corporate store in Kenosha, Wis.; a franchise replacement store in Omro, Wis.; and $500,000 in sales "as a temporary secondary wholesale supplier to a group of local supermarkets."

Asked by SN if the primary wholesaler to that group was Fleming, Dallas, which entered a Chapter 11 bankruptcy reorganization last month, Winn declined to comment. However, he added that he really does expect Fresh Brands' pickup of this business to be temporary. Other openings planned by Fresh Brands in the next 12 months include new corporate stores here and in Maquoketa, Iowa (its first in that state), as well as three expanded and renovated franchise stores and two replacement stores, all in Wisconsin, according to Winn.