CO-OP HELPS RETAILERS FIGHT AGAINST MASS MERCHANDISERS

JOEL ELSON

TIGARD, Ore. -- A co-op wholesale-buying consortium, formed in conjunction with Western Family Foods here to leverage the volume of several thousand independent retailers in procuring branded general merchandise, reports improved margins and a stronger competitive position for retailers.

Western Family, which supplies private-label to its members, negotiates the branded lines under a separate division, on behalf of Associated Grocers, Seattle; URM Stores, Spokane, Wash.; United Grocers, Portland, Ore.; Associated Food Stores, Salt Lake City; Certified Grocers of California, Los Angeles; and Affiliated Foods, Amarillo, Texas.

Although Western Family officials would not comment, a company source said of the consortium, "It is very closely tied to Western Family. It's a way of bringing the Western Family customers into one buying group by harnessing these wholesalers' combined volume in the negotiation [process]."

Since its inception two years ago, the consortium has developed planograms for kitchen tools and gadgets, food storage, plasticware, aluminum-foil bakeware, hardware, baby general merchandise, stick goods, lightbulbs, hair care accessories and pet supplies. "Our margins in categories completed have improved around 5%," said George Satterwhite, director of nonfood for Affiliated Foods. The large volume purchases also lowered shelf prices about 10% in hair accessories and aluminum-foil bakeware, and between 5% to 8% in gadgets, he added.

"The intent of the consortium is to leverage our combined buying power to make independent retailers more competitive with the mass merchandisers, and give us more clout with our volume," he said. Other consortium members have seen similar improvements, according to Satterwhite.

Dan Van Zant, supervisor and buyer of nonfood for Ray's Food Place, Brookings, Ore., a member of United Grocers, said of the buying consortium, "It's working out well and helping us compete better with Wal-Mart. It's improved profit margins 12%."

Rick Lombardo, vice president of nonfood purchasing at Certified Grocers of California, said it's had a positive impact on sales.

"Our retailers are benefiting," Lombardo said. Since Certified joined the Western Family consortium about a year ago, it has allowed Certified retailers "to get competitive with the mass [merchandisers]," he added. The rollout of new planograms has been a gradual process. Most national-brand general-merchandise resets in the program are expected to be complete by the summer, said Lombardo.

Dennis Griffiths, general-merchandise category manager at Associated Food Stores, said of consortium, "It has been working out well on sales of the completed sets, and retailer margins have improved by approximately 3% to 5%." This negotiating approach is a means "to get some buying clout and be more competitive with the mass merchandisers," he said.

Western Family conducts negotiations with national-brand manufacturers, and each wholesaler places its own orders, explained Griffiths.

"Retailers who have had real competitive pressure have become more competitive," said Mike Adamson, general-merchandise communications and advertising manager at Associated Food Stores.

Under the buying program, the co-op warehouses carry one or more national brands to satisfy retailers' regional customer needs.

At Affiliated, for example, aluminum-foil bakeware was one of the first sections Affiliated re-merchandised under the buying program, and in the past year sales spurted ahead 40%, Satterwhite said.

The sales gains came "from improved packaging and a rack display system that is more attractive and better for shopping," he said.

In the new display system, products are packed three per pack and displayed on slanted racks, compared with plastic-bagged products set on the shelf, said Satterwhite.

He said new Bradshaw planograms and new O'Cedar broom and mop sets are slated to be up in stores by June, while new tape and glue sections have already been reset.

At Associated Food Stores, lightbulbs, stick goods and shoelaces were the first departments to get new sets, Griffiths said.

Lighting sections were recast at Associated retailers about 15 months ago with new Sylvania planograms. "We've had positive feedback on sales of every reset category, and especially on bulbs and stick goods," Griffiths noted.

Departments penciled in for revamping between now and August include hardware, kitchen gadgets and plastic food storage in EKCO and Bradshaw International, and aluminum-foil bakeware for the balance of stores.

Each wholesaler establishes its own time schedule for revamping store sets. "We're getting closer together on when the sets are rolling out to stores," Griffiths said.

Satterwhite said in kitchen gadgets, which includes small pegged items, the consortium split on EKCO and Bradshaw. "Some are using one or the other. The contract was so close that it wasn't necessary for us to change to just one of these brands.

The consortium's brands of choice include O'Cedar in stick goods, Sylvania in lightbulbs and Gerber in baby general merchandise.

In plasticware, "we're all using a cross-section of brands, such as United Plastics and Tucker. There has not yet been a consortium contract negotiated for this category. It is still open," Satterwhite said.

Satterwhite said while the selection of a particular national brand is basically by majority consensus,"there is a point where store demographics may demand that we stay with one brand or another. Or the contract may not be good enough to justify the expense of making a change."