ALBERTSONS MAY ADD SPECIALTY UNITS

Elliot Zwiebach

SANTA FE, N.M. -- Given the apparent success of Super Saver, its Hispanic neighborhood store format, Albertsons is considering opening other neighborhood formats, Peter Lynch, president and chief operating officer, told shareholders at the company's annual meeting here.

"We could open additional new brands," he said, although he did not specify what formats Albertsons was considering.

Lynch told shareholders sales have risen 20% at the three Super Saver locations in Southern California since they were converted from the Albertsons banner almost a year ago, "and we're evaluating expansion of that format to other markets.

Questioned by SN after the meeting, Lynch and Larry Johnston, chairman and chief executive officer, declined to say when Albertsons might expand Super Saver to other locations or where those stores would be. Johnston said the company wants to expand its learning curve before opening additional Super Saver units.

"It's like our Internet grocery operation," Johnston told SN. "We piloted a concept in Seattle in 1999 and studied it in detail as we tried to perfect the shopping process before expanding it, and that's what we're doing with Super Saver -- to get it right before expanding it to other Latino markets."

"We're taking what we learn at those stores and implementing that throughout the company," Lynch pointed out.

"There are big opportunities within our stores," Johnston added, "and we're learning so much that we can put back into those stores. So we're not finished proofing the pilot stores yet because we're still learning a myriad of things."

Johnston said the learning process in its Albertsons.com business has helped the chain as it's expanded the Internet-based operation from Seattle down the West Coast and, most recently, into Las Vegas, "which has been our most successful market so far -- because we kept learning," he explained.

The meeting was held outside Albertsons' Boise, Idaho, base for the second year in a row as the company rotates meeting sites "to bring the company closer to its family of customers and shareholders," Johnston said.

Last year's meeting was held in Reno, Nev., which attracted a significantly larger turnout than this year's event, which was held in a much smaller room and attracted only a sprinkling of shareholders.

According to Johnston, Santa Fe was chosen for this year's meeting "because of the strong performance of our stores here and because it is representative of our strong growth momentum in the Southwest."

Albertsons operates three Albertsons supermarkets with Sav-on drug stores inside and two standalone Sav-ons here.

Johnston and Lynch spoke to shareholders about opportunities and results in their comments to the annual meeting, including the following:

Albertsons is expanding its "focus on fresh" to encompass meat, floral and seafood after seeing increased sales and lower shrink in produce, Lynch said.

Since converting its one-hour photo-finishing operations to a 30-minute service at all stores in March and April, sales are up 15%, Lynch said.

As Albertsons moves into the third phase of a three-year restructuring effort, it plans to concentrate on strategic sourcing and supply chain management, Johnston said. The company is ahead of schedule on reaching its goal of eliminating $750 million in costs, he noted, having achieved cuts of $446 million in less than two years.

Albertsons has been able to deliver on its promise of "service first, second to none," Lynch said, based on findings by an outside research company that indicated customers rate the chain's service at 95%, compared with 87% in early 2001. To keep service levels high, Lynch said the company has created a President's Award that will be presented annually to six stores for outstanding sales, service and commitment to the community.

Albertsons believes its new Essencia premium private-label line "will deliver $50 million in annual sales in a short time," Lynch said. The line will be featured in a series of TV ads this fall, he added.

The chain's preferred savings card has increased market share and basket size in Northern California, Lynch said, "while in Florida it helped boost sales 5% and increased traffic and basket size, and in the Pacific Northwest it's being used in 70% of transactions."

Sales of organic and natural foods rose 77% last year, Lynch said.