CO-OP WHOLESALERS' NET UP, COSTS DOWN: STUDY

GLEN A. BERES

WASHINGTON -- Cooperative wholesalers managed to increase net income, reduce costs and use assets more efficiently in 1994 -- despite essentially flat sales, according to a new study of the category.

The study, developed by the National Cooperative Bank here, examined financial data from 29 retailer-owned grocery wholesalers with sales of more than $50 million.

NCB found that the 29 cooperatives had combined volume of $22.1 billion in fiscal 1994, only a 0.5% increase over total sales of $22 billion for the group in 1993. However, those same co-ops had a combined net income of $278 million last year, a 6.1% rise from $262 million in 1993.

Retailer-owned wholesalers also compared favorably with six voluntary wholesalers NCB used in its study: Fleming Cos., Oklahoma City; Supervalu, Minneapolis; Nash Finch Co., Minneapolis; Super Food Services, Dayton, Ohio; Super Rite Corp., Harrisburg, Pa. (acquired by Richfood Holdings, Mechanicsville, Va., in October), and Riser Foods, Bedford Heights, Ohio.

The study revealed that the 29 co-ops generated net profits of 1.4% of sales, compared with 0.7% of sales for the voluntaries. Co-ops also showed a higher net sales per dollar of assets -- $6.07 vs. $5.03 for voluntaries.

Other findings of the report include:

Retailer-owned co-ops had average interest-bearing debt equal to 27.4% of total assets in 1994, down from 27.6% in 1993. By comparison, the voluntary wholesalers had average interest-bearing debt of 40.3% of total assets last year.

Average inventory days on hand improved to 25 from 26 in 1993. Voluntaries carried inventory an average of 27 days.

"These ratios demonstrate that the [co-ops] are using inventory and assets efficiently while maintaining solid levels of working capital," according to the study.

Distribution to co-op members as a percentage of sales increased slightly to 1.3%, compared with 1.2% in 1993. However, net member investment as a percentage of sales dropped to 12.8% from 13.9% in 1993.

"Co-ops seem to be using greater amounts of internally generated earnings and other sources of capital for purposes of fixed asset investment," the study concluded. Patrick Connealy, NCB vice president, said: "The statistics in NCB's study indicate that the wholesalers continue to be very well capitalized, an important financial component in an industry that, while mature, has experienced new and bigger competitors, particularly at the retail level."

Thomas K. Zaucha, president and chief executive officer of the National Grocers Association, Reston, Va., said it was imperative for co-ops to continue to strive to achieve the positive results suggested in the study.

"It is critical for retailer-owned wholesalers to be aggressively investing capital in fixed assets, including technology, to gain efficiencies for themselves as well as their member retailers," he said.

"This will help ensure [their] continued competitiveness in the marketplace."