ASSOCIATED FOOD STORES TO ACQUIRE DAN'S GROCERY

ELLIOT ZWIEBACH

SALT LAKE CITY -- Associated Food Stores here moved further into corporate retail ownership last week with the pending acquisition of Dan's Grocery Stores, a multi-unit operator here.

The acquisition -- the retailer-owned cooperative's third since January -- is expected to be completed by Jan. 15.

Rich Parkinson, president and chief executive officer of Associated, told SN the deal is part of Associated's new strategy to build its corporate retail business as a way of protecting market share and boosting profitability.

Dan's operates seven units. Earlier this year Associated acquired seven units of Macey's, Sandy, Utah, and four units of Lin's Foodstores, Saint George, Utah, plus a single-store operator in Overton, Nev., that was converted to the Lin's banner.

Parkinson said Dan's, Macey's and Lin's are three of Associated's top four customers, accounting for combined volume of approximately $375 million. The cooperative's other largest member, Ream's Food Stores here, has no interest in selling, Parkinson told SN.

Until a year ago Associated did not own any stores. However, the acquisition of some members by chain competitors prompted the cooperative to become more active in pursuing retail ownership "to preserve the integrity and future of the retailer-owned system," Parkinson said.

He said Associated expects to increase volume to $1 billion, exclusive of retail sales, by the end of its fiscal year March 31 -- an increase of 6.5% from the $940 million the company did the previous year.

According to Parkinson, Associated expects to derive at least four benefits from operating corporate stores:

Protecting its existing warehouse base by making sure the stores are not sold to other entities that might not use Associated as a supplier.

Retaining the retail profits from corporate stores within Associated, to boost the capitalization of the cooperative.

Creating a seamless conduit between the warehouse and its customers for the sharing of information, enabling the supplier to be more efficient and more responsive to all member needs.

Adding value to the parent company.

Parkinson said Macey's annual sales total slightly more than $200 million, and Lin's does $70 million to $75 million annually.

The seven Dan's stores operate throughout Utah with sales of approximately $100 million, Parkinson said. The company was founded 50 years ago by brothers Dan and Eli Gardiner.

"The Gardiner family and its stores have been an institution for a long time," Parkinson said. "They will continue to be a part of the growth of Associated Food Stores."

Parkinson said Dan's decided to seek a buyer "because there were diverse family interests and an inability to accommodate all family members."

Under Associated's ownership, Don Gardiner, son of the chain's founder, will return to oversee Dan's under a management contract that will run one to two years, Parkinson said. Don Gardiner's son, Ted, who has run the operation for the past three years, will pursue other interests, he added.

The contract with Gardiner is similar to agreements Associated signed with Ken Macey of Macey's and Rod Orton of Lin's, who each agreed to run their operations under Associated's ownership for two years.