ROUNDY'S PLAN TO SHUTTER DCS LEAVES CUSTOMERS IN LIMBO

MARK HAMSTRA/ /Additional reporting: Elliot Zwiebach

MILWAUKEE -- Roundy's here said last week it would shutter two distribution centers to refocus its wholesaling operations, leaving 116 customers to seek new suppliers.

The company said it would close its facilities in Evansville, Ind., and Eldorado, Ill., in September, and that it expected "a portion" of the customers who had been served by those facilities to receive groceries from Roundy's distribution center in Lima, Ohio, instead.

"We're in discussions with those customers now, so we have no idea yet how many of them will choose to go with other suppliers," a spokeswoman for Roundy's told SN.

In a prepared statement, Roundy's said the closures were "not expected to be material" to the company's financial position. "The closing and related consolidation are part of an effort to refocus Roundy's distribution network to realize cost advantages in purchasing, transportation and other operational areas," the company said.

Jim Gipson, chairman, president and chief executive, Houchens Industries, Bowling Green, Ky., whose 40 traditional supermarkets are supplied by the two Roundy's warehouses that are scheduled to close, told SN he had not yet determined what his course of action would be. Houchens earlier this month completed the acquisition of Food Giant, whose 90 stores are supplied by Associated Wholesale Grocers, Kansas City, Kan., among other distributors.

A spokesman for Associated declined to comment on reports that Houchens was planning to transfer its business to that company. Houchens also operates about 200 Save-A-Lot stores that are supplied by that brand's parent company, Supervalu, Minneapolis.

In a conference call with investors last week, Ron Marshall, chief executive officer, Nash Finch, also based in Minneapolis, said he was "excited" about the news of Roundy's planned closures and said he saw it as a "tremendous opportunity." (See Page 54.)

The two facilities had served customers in the southern halves of Illinois and Indiana, as well as in Kentucky, Tennessee and Missouri.

Roundy's will continue to operate five DCs after the closures. A sixth depot, measuring 1.1 million square feet, is slated to open next year in Oconomowoc, Wis.

Meanwhile, Roundy's is continuing to grow its corporate retail base. The company last week said it has signed an agreement to purchase the seven supermarkets owned by McAdams Inc., Mukwonago, Wis.

The purchase price was not disclosed, but was reported to be $63 million.

McAdams operates seven stores under the Pick 'n Save banner, which Roundy's licenses. Roundy's said the purchase is expected to be completed within 60 to 90 days. Ultra Mart Foods, a subsidiary of Roundy's, is executing the transaction.

Of the seven Pick 'n Save stores, two are located in Oconomowoc and the others are in Mukwonago, Muskego, New Berlin, Sussex and Wales, all in Waukesha County in Wisconsin.

Robert A Mariano, Roundy's president and chief executive officer, said the stores will retain the Pick 'n Save banner.

With the addition of the seven stores, Roundy's will operate 127 corporate stores, which operate under the Pick 'n Save and Copps banners in Wisconsin and the Rainbow banner in Minnesota. Corporate retail sales accounted for nearly 60% of Roundy's $4.4 billion in sales volume in fiscal 2003.

Since being acquired by Willis Stein & Partners, Chicago, in 2002, Roundy's has been one of the most acquisitive companies in the industry, adding 31 Rainbow stores in Minneapolis last year and 28 other stores in several different transactions, including the McAdams purchase.