SMITTY'S CHALLENGES FLEMING CONTRACT

PHOENIX -- Smitty's Super Valu here has notified Fleming Cos., Oklahoma City, that it will cease to be a customer of Fleming's local distribution center after March 1 unless Fleming is willing to match a competing supply offer.

enix-area competitor -- possibly Safeway -- and to supplement that merchandise with goods from the Food 4 Less distribution center in southern California. Yucaipa Cos., Los Angeles, owns both Smitty's and Food 4 Less.

Officials at Yucaipa and Safeway could not be reached for comment last week.

Fleming officials said Smitty's decision to change suppliers is designed to challenge the enforceability of its supply contract with Fleming, which is not scheduled to expire until June 1997. Observers said Fleming believes Smitty's cannot legally renege on the contract.

Smitty's purchased approximately $290 million worth of product from Fleming during the past 12 months, Fleming officials said -- close to 25% of the Phoenix facility's $1.2-billion total annual volume.

In a formal statement last week Fleming said, "Smitty's has provided Fleming with the opportunity to match the terms offered by a competitor. Under the provisions of the (existing) supply contract, Fleming has three months in which to respond.

"Fleming's supply contract [with Smitty's] will expire in 31 months if the company matches the competing offer and 15 months if it does not. Fleming intends to comply fully with the supply contract and expects Smitty's to do likewise."