RICHFOOD WANTS TO LURE SELF-DISTRIBUTORS

RICHMOND, Va. -- Richfood Holdings here is touting its "low-cost culture" in hopes of picking up wholesaling business from self-distributed chains in the Mid-Atlantic region.

, president and chief executive officer, said Richfood's largest customers include Giant Food Stores, Farm Fresh, Shopper's Food Warehouse, Ukrop's Super Markets and Genuardi's Family Markets -- "chains which are large enough to self-supply, but don't.

"Our competition is not other wholesalers, our competition is self-distributed retail chains in our geographic region."

Stokely said Richfood would like to supply other chains, but did not identify any by name. "We are very aggressive on costs," he said. "We have a low-cost culture. We have engineered our business not to service the independent retailer, to service the large regional chains in our area. We attack costs with a vengeance."

Stokely said the company is proudest of its low gross margin -- among the lowest in the industry.

"That means we sell our products lower than anyone else," said Stokely.

"We use costs to create a competitive advantage. Our Kellogg's Corn Flakes are no different than anybody else's across the country. But I can move them from point A to point B cheaper than anyone else in the business."

Stokely said the company is in a good position to pick up wholesaling business because its distribution facilities have plenty of room.

On the retail side, Richfood's pending acquisition of the Norfolk, Va.-based Farm Fresh chain would add 45 retail locations.

"Farm Fresh has solid name recognition and a solid franchise in the Tidewater/Hampton Roads market," Stokely said. "There is a void for an upscale high-low operator in this market."

He said the company would invest $80 million in Farm Fresh in the next 24 to 30 months for remodels and expansions.

In addition to its wholesale operations, Richfood owns 16 Metro supermarkets in the Baltimore region, making it a leader in that market.

Richfood will continue to make retail acquisitions, Stokely said. However, it will not operate stores in direct competition with current customers.

Stokely's comments came at the annual Donaldson, Lufkin & Jenrette Food & Drug Retailing Conference in New York.