ALBERTSONS GETS EXTREME 2004-08-09 (2)

MARK HAMSTRA

BOISE, Idaho -- Albertsons here will debut its new price-impact format by converting seven exiting Albertsons stores in Texas and Louisiana by the end of next month, the company said last week.

The Super Saver concept, which Albertsons will roll out via a new division called Extreme Inc., also based here, will offer a more limited selection of products; however, it will have some of the same services as a traditional Albertsons store, the president of the division said last week.

In an interview with SN, Mike Clawson, who was president of Albertsons' Northwest Division before he took over the new price-impact division, said the new format would offer "a full variety, but a limited selection."

"It may not have the full [stockkeeping unit] count of every brand in the world, but you will be able to fill your shopping needs with a full selection of items," he said. "It will be very focused on fresh and quality in the produce and the meat departments, and there will be some limited services in the store."

He declined to reveal details about the departments that would be offered, although he said they might differ somewhat from those offered in traditional Albertsons outlets. The stores will employ meat cutters, he said.

Super Saver will have an "innovative new design coupled with unique merchandising formats tailored to the demands of customers in their neighborhoods," Extreme said in a prepared statement.

Extreme said Albertsons would shutter the seven stores -- five in the Dallas-Fort Worth market and two in Baton Rouge, La. -- on Aug. 26 and hire new staff to reopen them as Super Savers next month. Analysts said the new concept should allow the company to reduce its labor costs by enabling it to negotiate more favorable union contracts for the stores.

Despite sharing a name with the Super Saver banner that Albertsons operates in Southern California, Clawson said the two concepts would be distinct.

"The banner will look very similar, but the ones in Southern California are run by the Southern California division, and they are a very Hispanic format," he said. "We actually have no interconnection in the operation of those stores at all."

He said the Extreme headquarters staff of "about 10 to 12 people" was assembled from within Albertsons and from outside the company. Most of the staff, which operate from a separate building in a different part of town from Albertsons' corporate offices, are category managers, he said. He declined to comment about how the stores would be supplied.

In a prepared release, Extreme said it planned to "expand rapidly" in the future. Yet Clawson also declined to discuss what additional markets Extreme may be considering for expansion or how many stores it planned to open beyond the first seven.

"I think we've got a lot to learn as we get these things opened up," he said.

He also said Extreme could choose to operate under other banners in other markets.

"Super Saver is really a great name. And it says price-impact, so we're happy to use that name," he said. "[But] it might not be the only name we ever use, depending on where we are."

The stores that are being converted average about 50,000 square feet, he said.

Jonathan Ziegler, principal, Pups Investment Management, Santa Barbara, Calif., said Albertsons has several reasons to back the rollout of a price-impact format, including the success of its Super Center stores in Southern California, the success of Kroger's Food 4 Less concept, the potential to lower its cost structure, and the potential to recycle underperforming Albertsons stores.

"It also gives them a price-competitive format to compete against supercenters," he said. "There really are an amalgam of factors that are going into Albertsons' decision."

Ziegler said he wasn't sure why Albertsons created a separate division to operate the new format, although he speculated that it could create some operational advantages for the company.

Clawson said he believes "experience says that if you want to run a price-impact concept, it's better to do it through a separate division."

Albertsons previously had operated the Food Max warehouse-store format.

The company in February had said it planned to create the new division to oversee a price-impact store rollout and that Clawson would be president. At that time, the company said it planned to open price-impact stores "in multiple cities across the U.S."

In addition to Cincinnati-based Kroger, other companies that operate both traditional and price-impact stores include Supervalu, Minneapolis; which operates Shop 'n Save stores in St. Louis and Pittsburgh; Spartan Stores, Grand Rapids, Mich., which operates The Pharm, a deep-discount drug store with a grocery component; and A&P, Montvale, N.J., which operates Food Basic in Ontario, the New York-Philadelphia region and Detroit.