OSHAWA UNITING WHOLESALE, RETAIL ENTITIES

GREG GATTUSO

ETOBICOKE, Ontario -- Oshawa Group here said it is combining its retail and wholesale divisions under a single umbrella with a new name -- Agora Food Merchants -- to improve efficiency and wield more buying clout for its retail customers.

Previously, Oshawa's eight wholesale/retail divisions operated as separate businesses. Oshawa, which supplies 1,500 Canadian independent and corporate stores from the Atlantic to the Alberta border, said last week it had launched major initiatives to standardize business procedures in such areas as information technology, distribution logistics, merchandise procurement, human resources, finance, real estate, and retail store development and design. The goal is to heighten operational performance while improving efficiency, officials said.

The company said it will take a restructuring charge in the fourth quarter -- but it expects to offset that charge by gaining $9.18 million ($13 million Canadian) in efficiencies in coming years.

Oshawa said it will consolidate many of its purchasing functions into a national procurement department that will allow national and regional suppliers to reach any or all of Oshawa's banners -- IGA, Price Chopper, Tradition, Food Town and Omni -- more efficiently when creating promotions, consumer programs and national product listings. This new national procurement department will be headed by Pierre Charron, vice president of national procurement. However, Oshawa said its retail clients will continue to deal with the same divisional staff as before the consolidation.

As a result of the consolidation, Agora Food Merchants will be comprised of three regions.

The Eastern Region will consist of two divisions: the Quebec Division (formerly Hudon et Deaudelin), and the Atlantic Division (formerly Bolands and Lewisporte).

The Central Region will have one division: the Ontario Division, which will replace three previous entities: Oshawa Foods, Knechtel and Horizon.

The Western Region will have two divisions: the Manitoba/Saskatchewan Division (formerly Codville), and the Alberta Division (formerly Horne & Pitfield).

"We're a support operation for franchise stores," said Tim Carter, Oshawa's vice president of public affairs. "And this will allow us to strengthen the store-support services -- everything from marketing to logistics."

After the consolidation, Oshawa Group will operate only two segments: Agora Food Merchants (named for the Greek word "agora," meaning "marketplace") and Serca Foodservice, which supplies restaurants, hotels and health care facilities.

Earlier this year, the company sold its Pharma Plus Drugmarts subsidiary -- as well as 24 retail properties and two cold storage facilities -- in an effort to raise capital and focus more attention on core food businesses.

"What we're doing is trying to leverage our size," Carter said. "In each of the markets in which our divisions operate, they are the second- or third-largest. But when you add them all up, we're one of the largest [food companies] in Canada. But we haven't been taking advantage of our size -- in terms of purchasing or creating the most competitive store-support services for the retailers -- until now.

"This is basically a growth strategy."

Carter said the consolidated entity would make Oshawa-supplied stores "more competitive and more exciting."

Because of the streamlined logistics, retail customers and the shopping public will begin to see fresher products, he said.

Oshawa will also continue to expand its line of private-label offerings. Currently, the company has about 1,000 stockkeeping units, including 60 launched this month. Carter said upcoming private-label products will emphasize niche, gourmet and high-quality meal solutions, including frozens, chilled and ready to eat.

Oshawa last week opened two concept stores that focus on fresh departments: a 15,000-square-foot Tradition store in central Toronto, and a larger IGA Marketplace store in Mississagua, a Toronto suburb. Both formats offer a high proportion -- about 50% -- of fresh products: meat, produce, deli and bakery.

Both new formats also offer meal solutions, though to differing degrees. Carter said urban locations will stock more meal solutions than rural units.

"We're going to be tailoring these stores very closely to their trading area," Carter said. "They have less space, and there will be tremendous attention devoted to utilizing that space very carefully."

Oshawa plans to convert smaller IGA stores to the Tradition format and larger stores to the IGA Marketplace format in the next two years. The company plans to have five Tradition stores open before spring and "hundreds" of units under the two new banners in the next two or three years, Carter said.

Oshawa last week reported an 11% increase in sales for the third quarter ended Nov. 1, to $1.13 billion, compared with $1.01 billion in the year-ago quarter.

Retail/wholesale food sales increased 3.3% to $915 million in the quarter.

3RD-QUARTER RESULTS

Qtr Ended 11/1/97 11/2/96

Sales $1.13 billion $1.01 billion

Change 11%

Same-store 4.7%

Net Income $6.99 million $7.27 million

Change - 3.9%

Inc/Share 18 cents 19 cents

40 Weeks 1997 1996

Sales $3.71 billion $3.24 billion

Change 14.6%

Same-store N/A

Net Income $25.3 million $27.7 million

Change - 8.4%

Inc/Share 66 cents 73 cents

Conversions based on $1 U.S. equal $1.42 Canadian.