ALBERTSON'S MIDWEST SETS SALES-GROWTH PLAN

NANCY BRUMBACK

OAK BROOK, Ill. (FNS) -- Albertson's is seeking to drive growth in its Midwest region with unit expansions, a new format and a quadrupling of dry grocery warehouse space, Pete Van Helden, president of Jewel-Osco, said in a speech here.

A primary Midwest region goal this year is to "drive our top-line sales growth," Van Helden said at a meeting of the Merchandising Executives Club here. He said the company is "very pleased with our market share" but wants to increase sales.

A major component of that drive will be continued expansion into the Milwaukee market Jewel entered about two years ago. The company now has 30 stores -- 11 combination Jewel-Osco units and 19 free-standing drug stores -- in that market and will open two more stores there this year.

"We are definitely in Milwaukee for the long haul," said Van Helden, an Albertson's veteran who has headed the 276-store Midwest region since November.

In addition, Van Helden sees opportunities for expansion in downstate Illinois, the area outside of the greater Chicagoland market, as some competitors leave.

He noted the chain is "constantly looking for acquisitions," particularly in the 10- to 30-store range.

Overall, the Midwest region plans to add five new combination stores this year, three free-standing drug stores and six fuel centers, while remodeling 16 stores, enlarging one and replacing three.

Van Helden said the "long overdue overhaul" of the chain's dry grocery warehouse at its Melrose Park, Ill., headquarters begins April 1 and will take about two and a half years.

Jewel is adding 180,000 square feet to the facility, and will raise the entire roof from 18 to 38 ft. A mechanized pick-to-belt system will be installed that can handle about 60% of the products in the warehouse, he said. The system "should substantially improve accuracy to the stores."

The expansion will increase the warehouse's capacity four and a half times, to 120,000 pallets, he said. It supplies the 193 stores that carry food (the others are free-standing drug stores.) The warehouse will remain in full operation during construction.

Jewel will be able to drop an outside storage facility when the expansion is complete, but has no plans to discontinue a supply relationship with Supervalu, Van Helden said in response to an audience question.

The chain is also developing a new, small combination food and drug store format.

The first of these 25,000-sq.-ft. units opened in the Chicago suburb of Oak Park just before Thanksgiving, and the second in suburban Arlington Heights the first week in March. A third, larger unit at 45,000-sq.-ft. will be built in downtown Chicago, at Roosevelt Road and Wabash Avenue, later this year.

"We've discovered recently there's an opportunity" in these smaller stores, he said. The first two were converted from Jewel supermarkets that lacked expansion room "that we would have walked away from" in the past.

Instead, a drugstore and pharmacy and the other departments of a larger Jewel-Osco combination store were downsized to fit the space.

"Everything is in there, but smaller," Van Helden said after the meeting. "We found we can do it in 25,000 sq. ft., so it will be even easier" in locations with 30,000 or 35,000 sq. ft. Conventional Jewel-Osco combination stores run about 70,000 sq. ft.

"We've been very, very pleased with the progress" in the first two small combos, and they have met an enthusiastic reception from their market areas, he said.

Along with new developments in physical store formats, Van Helden pointed out the parent company is actively engaged in e-commerce tests in its various divisions.

In the Dallas-Fort Worth market, the company operates a format he termed "strictly a fulfillment site," while in Seattle there's a fulfillment site with a store, so that customers can pick up an order, have an order delivered or shop conventionally.

In the Las Vegas and Kansas City markets, the company's Sav-On drug chain is experimenting with e-commerce.

In Chicago, Jewel has a long-standing relationship with the Peapod on-line grocery pioneer. "We are very pleased with our relationship with Peapod," he added.

The newest on-line venture for Albertson's is with Priceline.com and the Acme division in Philadelphia, begun in late February.

Van Helden noted Albertson's has a program in place to transfer successful practices in one division to other divisions. Jewel's drugstore experience and its floral department operations are being used as models for other Albertson's chains, he noted.

In turn, Jewel expects to add Quick Fixin's, a home meal replacement program, to many of its stores over the next year, he said, along with a fried chicken program that's been extremely successful in Albertson's stores for some time. "We think the Colonel is a little worried."

Following Albertson's negotiation of a contract with Starbucks, Jewel will be adding Starbucks coffee shops to many of its stores, Van Helden said. "We've found when customers have coffee, they shop a lot slower."

Jewel also plans to increase its use of data from its Preferred frequent shopper card to develop more localized and ethnic marketing initiatives, he said.

And finally, responding to a question from the audience, Van Helden said there are "no plans" to change the 100-year-old Jewel store name to Albertson's, as has been done with some acquisitions in California.

"The company has looked at a national brand, but there are no plans for it today," he said.