FRESH ACCENT PUT ON FOOD BY MARKS & SPENCER, KINGS

JAMES FALLON

LONDON -- Marks & Spencer plc is taking its food operations in the United States and United Kingdom on an expansion drive to increase its offerings in fresh and prepared foods, and to increase the number of its stores offering food.

The retailer, based here, recently opened the 22nd store in its Kings Super Markets chain, based in West Caldwell, N.J. The chain is focused on northern New Jersey, northern New York and southern Connecticut.

Kings plans to open at least one more store in 1998, including a new format that will focus on fresh and chilled foods, said Chris Littmoden, the executive director of Marks & Spencer responsible for North America.

The store, which will be located in New Jersey, will have little storage space, with all products sold having a short shelf life and a quick delivery time, Littmoden said.

While he declined to provide more details, the store sounds similar in concept to the Marks & Spencer food stores in the United Kingdom.

The British company has pioneered the concept of prepared foods in Britain and in some categories has more than 50% of the market. The stores focus on prepared meals, dairy products, fresh fruits and vegetables and fresh fish and meats, with smaller areas offering such products as beverages and wines, snacks, sweets and some canned foods, textiles and household products.

Marks & Spencer initially acquired Kings nine years ago for $108 million in an attempt to push its prepared- and fresh-meals concept into the United States. However, it found that the lack of chilled warehousing and the distribution distances made it difficult to offer a full range of prepared meals and it backed away from its initial plan.

Instead it has focused on expanding Kings as a full-service food retailer and introducing a small number of prepared foods. The growth has been slow, though, with only four stores opening in the last five years.

"Kings is a great business," Littmoden said. "I only wish we could grow it even faster."

The renewed drive on fresh food and prepared meals in the United States comes as Marks & Spencer is embarking on an aggressive expansion program in food in its core U.K. operation.

Marks & Spencer's food business has been under growing pressure from such full-service food retailers as Tesco plc, J. Sainsbury plc and Safeway plc as these expand their offerings in higher-margin fresh and prepared foods. The company has only about 4% of the U.K. food market, although in such categories as chilled recipes its share is above 50%, said Guy McCracken, the executive director responsible for food operations.

Marks & Spencer now is moving to blunt the inroads of the full-service operators by investing $66.8 million (40 million pounds) over the next two years to open full-service meat departments, in-store bakeries and service delicatessens in its 100 larger stores.

But Sir Richard Greenbury, the company's chairman, has denied repeated reports that Marks & Spencer is preparing to take Tesco and Sainsbury's head-on by becoming a full-service food retailer.

"We do not intend to go down that route," he said. "We have a very successful business that is highly profitable and there clearly is a market for us or else we wouldn't have yearly sales of almost $5.01 billion [3 billion pounds]."

McCracken said Marks & Spencer currently has 40 full-service meat departments and it plans to open another 60 over the next few years; there are three in-store bakeries and the plan is to expand this to 50; and the company will open its first six service delicatessens in April 1998. While other food retailers have such departments in their stores, Marks & Spencer's will stand out because of the quality and breadth of its offering, he claimed.

In addition, the company is opening more of its smaller-format neighborhood food stores. While it already has 35 of these, McCracken said only about 15 are in the format that Marks & Spencer believes is the right one going forward. These average 12,000 square feet, are located in suburbs of major metropolitan areas, and have a full range of fresh and prepared foods.