GLEN'S ENDS VIDEO-RENTAL PROGRAM DUE TO 'R' RATINGS

DAN ALAIMO

GAYLORD, Mich. -- Top executives at Glen's Markets gave two thumbs down to R-rated movies and ended one of the industry's longest running video-rental programs.

Glen's sold its inventory, fixtures and other components of its video business to specialty retailer Horizon Video, Traverse City, Mich., early this month, and closed all its in-store rental departments, said Glen Catt, president and chief executive officer. Included in the deal were four freestanding video specialty stores. The 24-store chain will continue to carry and expand sell-through video, he said.

The program was still making money, Catt noted, although not quite as much as in its earlier years. Video volume for the 19 departments and four freestanding stores was $2.6 to $2.7 million last year, he said. "Our video had been doing quite well and was fairly profitable," he said.

Separately, SN has learned that D&W Food Centers, Grand Rapids, Grand Rapids, Mich., is also curtailing its video-rental program. D&W executives were not available for comment and further details were unavailable. Last year, Meijer Inc., Grand Rapids, said it was getting out of video rentals.

The main reason Glen's walked away from rentals is the principals' decision that the content of many R-rated movies is inconsistent with the company's family image and with their own personal religious beliefs. Catt's partner is Denny Freeman, executive vice president and chief operating officer. Both are elders in their respective churches, said Catt.

Having decided they didn't want R-rated movies in their stores anymore, they also realized they could not operate a successful video-rental program without R-rated new releases, said Catt.

"In our situation, the No. 1 reason we got out is because of our personal convictions," he said.

While a prolonged boycott by the Michigan chapter of the American Family Association was a contributing factor in Meijer abandoning video rental, according to industry sources, there was no such pressure on Glen's, said Catt.

"Perhaps our thinking has changed, or maybe there are just more R- and PG-13-rated movies with more strong language and more nudity. But we got to the point where we really had a tough time with that being part of our business," he said.

"The No. 2 reason is we think video in grocery stores is slipping a little. We knew that, in order to be aggressive, we were going to have to put a lot more money into it. That would have meant putting in more of the R titles and probably driving that business a little bit more with advertising," said Catt.

Unlike other retailers who have gotten out of rentals, competition from giant specialty stores like Blockbuster and Hollywood was not a factor. "We are fortunate that in northern Michigan we don't have any of the Blockbusters or the major competitors in video," said Catt. Horizon Video, with 17 stores after the acquisition of the four Glen's freestanding units, is now the biggest specialty chain in northern Michigan, he said.

"Horizon Video has stores in some of the communities where we had video sections in our stores. So it was a positive for them to eliminate one of their main competitors," said Catt. Some of Horizon's stores are leased from Glen's real estate company and are located near the supermarkets, he said.

Horizon plans to expand the four freestanding stores it bought and use the inventory and fixtures from the in-store departments for the three or four new stores it will open in the year ahead, said Scott Hicks, business operations manager.

In one location a connecting door between the Glen's supermarket and the video shop will remain open, he said. "We love it and Glen's loves it. We work off each other's traffic," said Hicks. After the dust settles from the acquisition, Hicks hopes to do cross promotions with Glen's in locations where the two retailers have nearby stores.

Total inventory purchased from Glen's was about 50,000 tapes, he said. The freestanding stores ranged from 2,500 to 4,000 square feet.

Glen's had been one of the early retailers to use the Dove seal of approval program from the Dove Foundation, Grand Rapids, Mich., to identify family-friendly programming. "I'm sorry to see Glen's pull out of the video-rental business," said Dick Rolfe, managing director of Dove.

"I think it will be a loss to the community, but I respect them for holding the line on the kind of product they make available to their customers," Rolfe said.

"Supermarkets have always attempted to maintain the most family friendly image they could. Because of that, many of them have had difficulties justifying the rental of R-rated movies. Since Hollywood will not release family-edited versions of these R-rated films, as we have asked them to do for years, then quite simply, the market is drying up on them," said Rolfe.

"The video industry is going to find that this is the wave of the future in the supermarket industry. Supermarkets do not need to process hundreds of customer complaints about unsavory video titles. It's easier for them to provide their customers with what they want and that's why wholesome family product has always done so well at sell-through. That's why so many supermarkets are moving out of rental and into sell-through," he said.

In the past, when Glen's declined to carry top movies because of content, such as nudity or rape scenes, Catt would receive "some hate mail," he said.

"People would say that we did not have the right to choose what they watch. I would respond to every letter and tell them they were absolutely right, we don't have a right to choose what they watch. But we do have right to choose what we want to put in our stores and what fits our image," he said.

"I value their right to choose what they want to expose themselves to. But I also value the standard and the image that we, as a family company, want to portray to people, and what we feel comfortable with," said Catt. Meanwhile, the retailer is going to continue to expand its video sell-through program, although it will not carry R-rated titles, said Catt. "We will carry selected PG-13s for sell-through, and certainly the Gs and PGs," he said.

"We are planning on getting more involved in sell-through and probably driving that a lot more than we ever did before in our video departments. We feel that there is a real value there. More and more people seem to be wanting to build their own little library at home of certain movies that they really like, or their children like," said Catt.

Catt estimates that the rental market will remain strong for another three to five years and eventually lose out to in-home delivery systems. "There are still a lot of good dollars to be made," he said.

"But while sell-through may end up going from videocassettes to the discs, there's always going to be a market for it. People see a movie and they really like it, so they go out and buy it. They may only watch it two or three times, but it's there to watch whenever they want to," he said.