FLEMING COS. PUTTING STRESS ON SPECIALTY PERISHABLES

JONNA CRISPENS

OKLAHOMA CITY -- Fleming Cos. here is putting its muscle behind specialty perishables, with an expanded selection and a full-service program, the first of its kind for Fleming's specialty-foods category.

The program, part of a larger focus on specialty foods that includes packaged goods, will focus on the company's King of Prussia division for the first year, but will eventually be rolled out to the company's five other divisions, according to Craig Carlstrom, the company's director of specialty foods.

The company expects to increase first-year sales by "more than $10 million" at its King of Prussia, Pa., division, as a result of the upgrade, Carlstrom said.

The division, which had previously offered only about 6,000 nonperishable items in its specialty-foods category, is increasing that number to about 8,000 and plans to begin shipping its first perishable items by mid-to-late summer.

As part of the new overall specialty program, the division is also handling its own category distribution. Fleming is supporting that task with a newly completed 50,000-square-foot addition to the 320,000-square-foot facility that services the King of Prussia division.

Instead of arranging shipments from the company's Memphis, Tenn.-based division, the King of Prussia division began shipping nonperishables from the newly constructed facility in mid-May.

The specialty perishables -- which will number about 500 in the beginning -- will be stored in their own 8,000-square-foot facility, where about 75% of the space will be devoted to refrigerated goods and 25% to frozen goods, said Carlstrom.

The company expects eventually to double its number of perishable offerings and to outgrow the 8,000-square-foot space, according to Carlstrom, who said that a more permanent location will be found once the category growth is more stabilized.

As part of its first-year goal, Fleming plans to place the program into more than 2,500 supermarkets that are not currently dealing with the wholesaler, as well as to increase the number of Fleming-supported stores that are not currently carrying its specialty-food products, said Jeff Kolpen, chief executive officer of JEM Marketing Group, the Melville, N.Y., firm that is handling all sales and marketing for the program.

Carlstrom described specialty foods as a "growing category" that generates "above-average" profit margins and allows supermarkets to "differentiate themselves from the competition."

Gross-profit margins for specialty-food items throughout the industry are typically 25% or more higher than for similar, nonspecialty items, said Carlstrom.

"The category's growth potential is particularly strong in the Northeast, because of the area's ethnic diversity," said Carlstrom, adding that he expects the division's specialty-food business to increase substantially.

JEM Marketing, which began working with Fleming in mid-April, was chosen in part because of the history its officers have in the full-service distribution of specialty foods, said Kolpen, who operates the company with his father, Moe, and his brother-in-law, Mark Goldner.

JEM Marketing will be in charge of promotions, marketing materials, inventory selection, set-up and rotation, pricing, planograms, demonstrations and more, Kolpen said.

The company has a first-year goal of adding 2,500 to 3,000 supermarket accounts that are not currently dealing with Fleming to the program, Kolpen said.

Fleming's support strategy is a strong departure from the stance that wholesalers have traditionally taken with specialty foods, according to Carlstrom. The prevalent belief among many wholesalers, he said, is that it's best to sell specialty-food items at a cheap price and let price drive the retail sale.

"That's a myth that Fleming would like to dispel," he said. "Customers who buy specialty-food items are looking for something unique, and they're willing to pay a little more to get it."

Carlstrom expects kosher products -- which he calls the "most underdeveloped category" in the division -- to play an important role in the new specialty-foods program. Kolpen estimated that such products will account for 10% to 15% of overall specialty-food sales and represent about 10% of total specialty-food stockkeeping units.

The perishables category will be comprised primarily of deli cheeses, deli meats and specialty breads, with cheeses comprising about two-thirds to three-quarters of the total offerings, according to Carlstrom.

The cheeses, which will be offered in wheels, blocks and prepackaged, will include such selections as Cavot Farms Vermont Cheddars, Alouette Baby Brie, Havarti Cheese and Sonoma Jack Cheese.

The specialty meats, which will comprise the second-largest component of the perishables category, will include about 100 items, including imported salamis, pepperoni, hams and prosciutto, according to Carlstrom.

The breads will include such varieties as pumpernickel and rye and will be sold in prepackaged units.

Carlstrom said the company will look for products that are upscale in nature, ethnic in origin or imported, when choosing its offerings.

Although Fleming has offered specialty-food products since about 10 years ago when two of its divisions -- based in Sacramento, Calif., and Memphis, Tenn. -- introduced a number of products, the offerings were limited to 2,000 to 3,000 items up until about three years ago and there was no companywide full-service support program.