OSHAWA GROUP RETURNING TO ITS FOOD ROOTS

GREG GATTUSO

ETOBICOKE, Ontario -- For Oshawa Group here, fiscal 1998 will be remembered as the year it returned to its roots as a food company.

Fiscal 1998 saw the divestiture of non-core assets, renaming and realignment of its retail divisions, and investments in servicing both the "eat-in" and "eat-out" markets.

"Oshawa's program of refocusing the company and combining many divisional functions is being undertaken to improve the utilization of food operation assets and enhance shareholder value," said Allister P. Graham, chairman and chief executive officer, and Jonathan A. Wolfe, president and chief operating officer, in the company's annual report. The executives said the decision to concentrate on food prompted the sale of drug store operations, cold storage facilities and in the previous year, a laundry company.

"This activity corrected a structural deficiency where assets were dissipated across too many unrelated businesses, sometimes failing to achieve the critical size necessary to produce a satisfactory return on investment," they said. "In place of these non-core assets, two large food-service wholesalers were added in fiscal 1997 and 1998.

"The result in food service has been the creation of Canada's first national food-service distributor, which is three times the size of its next largest competitor."

As reported in SN, substantially all of Oshawa's capital is employed in two large national operations, Agora Food Merchants, the retail division, and Serca, the food-service division.

"Sufficient scale has already been achieved with each to ensure competitive operational strength," they said.

The company has launched an initiative to share support functions across all Agora divisions, including business systems, store design, retail brands, distribution and procurement.

"The sharing of common divisional tasks will remove duplication and advance efficiency," the executives said. "In doing so, greater utilization will be made of all resources, including shareholder investment."

According to the annual report, the redeployment of assets into the two divisions, Agora and Serca, is the first part of a two-part plan designed to increase shareholder value. Under the second phase of the plan, "both Agora and Serca will assume a noticeably different appearance and employ a totally modified operating base," the company said. When fully developed, Agora will be known for its successful franchisees and principal banners, including IGA, Tradition Market Fresh Foods and Price Chopper, the executives said. Each banner will focus on a different portion of the consumer market, "generating sales with strong and unique appeals."

State-of-the-art technology will link all of the divisions.