SAFEWAY EXPECTS PAYOFF IN TWO YEARS FROM B2B

ELLIOT ZWIEBACH

Safeway, Pleasanton, Calif., believes the payoffs of business-to-business exchanges could be "less than two years down the road," Steve Burd, chairman, president and chief executive officer, told the Credit Suisse First Boston Food & Drug Retailing Conference in New York.

Speaking of Safeway's membership in the World Wide Retail Exchange, Burd said, "It was founded with the notion of being a not-for-profit venture. We've had an auction capability in place for several months, and we're going through a refinement process that will make that better.

"But by the fourth quarter [of 2001], we will have the capability to use the exchange to buy products for resale, and that should work to our advantage. Right now we can do all the things the exchange can do through our 41 manufacturing plants, and while we could dramatically cut the costs of products without the exchange, the exchange will facilitate the process of getting costs down and doing it for us quicker."

Asked about the implementation of electronic data exchange, Burd said most large retailers are already experimenting with scan-based trading, "which makes sense for certain items, and we think it holds enormous opportunities to reduce shrink and produce bankable profits. But I believe EDI will be replaced by an effective B2B exchange."

Burd said Safeway is likely to continue to make acquisitions within the supermarket sector over the next five years "because we're good at that, and we believe we can find more value than other operators.

"But looking ahead over 10 years, we've got to think of moving beyond this sector, and there are a lot of things we think would fit with Safeway, but we're also mindful of what Wall Street would think."