AND THEN THERE WAS ONE

LITTLE ROCK, Ark. -- The sale of Harvest Foods assets signals the demise of the third of four chains created from former Safeway divisions in 1988.

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Safeway's spinoff of its Houston division, which became AppleTree Markets, shut down in 1992, and Food Barn, the spinoff of Safeway's one-time Kansas City division with stores in Missouri and Kansas, went out of business in 1994

Only Homeland Stores -- Safeway's former Oklahoma City division -- remains, although it sold off 29 stores and its warehouse to emerge from a prenegotiated Chapter 11 in 1996.

According to Thomas E. Ireland, managing director of Alvarez & Marsal, a crisis-management consulting firm based in New York, the spinoffs were all chains with sales of $300 million to $500 million "with older stores, a union work force, their own warehouse and a corporate overhead structure -- the kind of operation that was under strong economic pressure nationwide.

"Companies of that sort, without a distinctive niche and a larger store base for buying more efficiently or spreading out the overhead, were more vulnerable to competition and more prone to failure."

At its peak, Harvest operated 59 stores of 20,000 to 60,000 square feet, with most in the 30,000- to 35,000-square-foot range.

It emerged from prepackaged Chapter 11 bankruptcy protection in December 1994, with a $20 million capital infusion that was earmarked for store expansion.

The company said at the time it planned to open 29 new stores over a five-year period, including approximately 20 stores in smaller communities under the Market Basket banner. However, of the three Market Baskets that eventually opened, the company closed two last summer and converted the third to Harvest Foods in December.

Harvest acquired Rand's, a locally based wholesaler, in January 1995 and moved the wholesaler's base of operations into its own larger warehouse facility with the intention of expanding the wholesale customer base by increasing the number of product lines.

"But integrating the two warehouses and the operating systems led to difficulties that resulted in a liquidity crunch, which resulted in Harvest not having the right inventory in the stores," Ireland told SN. "And once it began losing customers, it was difficult to get them back."

Harvest shut down the wholesale operation in mid-June, when it filed the Chapter 11 petition. Speaking on behalf of the company at that time, John Earl, a company spokesman, said integrating Rand's business with Harvest's existing wholesale operations "was really the critical problem that caused the liquidity crisis."