A CHANGE IN PLANS 1994-12-26 (2)

DAVID MERREFIELD

This year had more than its share of activity when it came to companies that staked out new directions for themselves or had circumstance staked out for them.

Sometimes companies blazed new trails by changing the corporate structure in quite a grand way -- through acquiring another company or merging with another.

Others found new direction by downsizing, re-engineering, developing new formats or through bold reaction to competitive pressures. Here's a quick sampler of some of the critical new directions that came about in 1994:

Probably the clearest predictor that change is in the wind is when a company's ownership changes. The biggest deal of the year transpired in September when Food 4 Less Supermarkets and Ralphs Grocery Co., two southern California operators, announced a management-led deal valued at $1.5 billion. That thrust the combined companies into a leading 30% share of market in the region, jumping over the former leader, Vons Cos., by about 5%. The transaction also ushered in the end of the use of Alpha Beta and Boys as store banners in the region, along with several executive title changes.

As for Vons, Arcadia, Calif., that chain moved toward a new pricing strategy during the year and announced a couple of waves of layoffs in a bid to shore up a sagging bottom line. Virtually all operators in southern California were battered during the year by sharp competition and a sluggish regional economy. Another big merger of 1994 was announced in June when wholesalers Fleming Cos. and Scrivner Inc., both based in Oklahoma City, agreed to merge. The deal created the nation's largest wholesaling operation and resulted in the closure of several depots and topside executive changes affecting former Scrivner executives. Effects of the deal are likely to ripple on during the coming year.

A big change came in a smaller context when the Dutch-American company Ahold acquired Red Food Stores, Chattanooga, Tenn., and, for the first time, essentially eliminated management of the acquired company, combining it with management of its Mauldin, S.C.-based Bi-Lo chain. That action, started in June, clearly took Ahold out of the holding-company posture and identified it as an operating company. Also in the context of overseas companies enhancing their posture in the United States, J. Sainsbury, London, took a big position in Giant Food, Landover, Md., in October. Various re-engineering initiatives also set change in motion during 1994. For instance, wholesaler Spartan Stores, Grand Rapids, Mich., pressed deep into Efficient Consumer Response territory at the first of the year by launching a program involving flow-through distribution techniques. Similar programs continued through the year.

Kroger Co., Cincinnati, the nation's largest retailer, continued to seek ways to do business with ECR in mind and made big strides toward putting category management to work.

Fleming Cos. continued down the re-engineering road by rationalizing management and operations among the various companies it acquired in recent years.

Wholesaler Supervalu, Minneapolis, also took steps toward efficiency of operations by taking a close look at operations and shuttering redundant depots. The company, which tends to eschew the term "re-engineering," calls its efficiency-building program Supervalu Advantage. Late in the year the company announced a plan to sell about 30 stores and eliminate 10% of its work force to help cover the costs of implementing the efficiency program.

And Safeway, Oakland, Calif., continued to make progress toward its goals of cost reduction, particularly at store level, and of ensuring that earnings are properly reinvested to drive sales. The year wasn't particularly big when it came to format development, although there was momentum in development of warehouse-style stores. American Stores Co., Salt Lake City, took steps to move into such a format with a small group of stores under the Price Advantage banner. Smith's Food & Drug Centers, also in Salt Lake City, announced plans to open its first warehouse store next year, and some observers predicted more Smith's units would quickly follow.

A&P, Montvale, N.J., made plans to convert some of its Canadian stores to a price-driven format, and the long-slumbering limited-assortment format got a boost when Supervalu said it would speed the rollout of its Save-A-Lot stores. Vons shuttered its Hispanic-oriented Tianguis format, apparently because of slumping sales and labor disputes. Critical decisions were made in various markets, too, one of the biggest being Salisbury, N.C.-based Food Lion's decision to shut nearly 90 of its stores in 10 states, largely in Southwestern markets. The move affected about 8% of Food Lion's store base. And it may represent the final chapter in the chain's bid to shore up slumping sales, occasioned, in part, by a television broadcast more than two years ago that questioned its sanitation practices.

Also in the Southwest, big change came to Homeland Stores, Oklahoma City, when in November the chain spun off a batch of stores to Associated Wholesale Grocers and agreed that the cooperative should supply the balance of its stores. In the Northeast, Grand Union Co., Wayne, N.J., planned in November to close some 25 supermarkets in a bid to maintain liquidity. In the South, Publix Super Markets, Lakeland, Fla., continued a northward march from its traditional base in Florida.

In the category of more threatening change, Kash n' Karry Food Stores, Tampa, Fla., filed for Chapter 11 in October, as did Megafoods Stores, Mesa, Ariz., in August. One small membership-club operator, Wholesale Depot, Natick, Mass., filed for Chapter 11 at mid-year, and later liquidated.

Finally, the trade association business saw change when the National Association of Service Merchandising, Chicago, staged its final convention in Palm Springs, Calif., in October and voted to go out of business.