DELHAIZE'S BLOOM AND SWEETBAY SUPERMARKETS

Mark Hamstra

SALISBURY, N.C. -- Delhaize America's garden of new concepts is in full bloom.

The company, parent of the Food Lion, Kash N' Karry and Hannaford Bros. chains in the United States, last year unveiled two new retail banners -- Bloom, a Food Lion Market, which it is testing in five locations; and Sweetbay, a new name and format that is replacing the Kash N' Karry banner in Florida.

The Brussels, Belgium-based company said it is pleased with the results of both concepts, although it has not revealed specific details about their performance.

Analysts said Bloom's value lies in its service as a test vehicle for new merchandising ideas.

"As far as Bloom is concerned, it's always positive to have new, innovative initiatives, in order to be able to keep growing the top line," said Pascale Nachtergaele, analyst, Delta Lloyd Securities, Antwerp, Belgium.

However, she stressed that the stores are still in the testing stage and that it is too soon to draw any conclusions about how Food Lion might choose to deploy the stores or the ideas it is testing in them.

Jeff Lowrance, a spokesman for Food Lion, said the chain was looking at the Bloom banner as a distinct concept and that it was not making comparisons in terms of returns on investment with its traditional Food Lion stores.

"We're trying our best not to use Food Lion as a measuring stick, because we feel Bloom is a completely different store design, and it has a different strategy, so we don't feel like measuring against existing Food Lion stores would be a valid analysis," he told SN. "But we've been pleased with how Bloom has performed and how customers have responded to it."

In many ways, the Bloom stores are similar to typical Food Lion locations. One of the key points of differentiation, however, is the TableTop Circle section each store has near the front entrance. The section includes grab-and-go items like milk, beer, soda, bread and eggs, in addition to prepared foods.

"That is one of the things that customers have commented on positively, both through focus groups and anecdotally," Lowrance said. "Customers have understood right from the start what we're trying to do, and having that section right at the front of the store, so they can get milk or grab a few things for dinner tonight quickly and be on their way, has resonated well with consumers."

The produce department is situated in the center of the store, rather than along a wall, with grocery gondolas on either side. By placing the produce department directly behind TableTop Circle, Food Lion also hopes to make it easier for in-and-out shoppers to make fill-in produce purchases.

Another key component of the Bloom stores is the handheld scanner technology that allows customers to ring up their grocery purchases as they shop. Originally offered in only four of the locations, the scanners were added to the fifth store after customers said they wanted them, Lowrance said.

"Some customers think of Bloom as the store with the personal scanners," he said.

What all these innovations add up to is a higher cost of operation than a typical Food Lion, observers said, although some said the cost of opening a Bloom may not be that much more than the cost of opening a new Food Lion. Analysts also said Food Lion was not as concerned with the ROI of individual Bloom stores as it is in the longer-term benefits to the whole organization.

Food Lion deliberately located its first five Bloom stores in varied locations around the Raleigh market to determine how the concept would perform under various conditions. One store is located just off a major highway in a densely populated area, another is located adjacent to a university, a third is located in a small town, a fourth in a suburban area and the fifth in an area of high competition between two supercenters and near three other supermarkets.

"Each store is having a different kind of experience, and that's something we wanted to look at and analyze," Lowrance said. "We are gaining fresh insights from each location."

CREATING SWEETBAY

Like Bloom, Sweetbay Supermarket is a new concept Delhaize America has invented -- albeit with a strong influence from Hannaford Bros., its successful New England banner.

Plans call for the entire 100-store Kash N' Karry chain to be converted to Sweetbay by the end of next year. As of late last month, the company had 10 Sweetbay Supermarkets open, including three that had been built from the ground up. Another four Kash N' Karry stores were scheduled to be converted by early this month, and plans call for 30 stores to carry the banner by the end of the year. A significant portion of the $550 million that Delhaize has slated for capital expenditures in the U.S. is expected to be used for this effort.

The Sweetbay concept features an emphasis on variety in the perishables department and a colorful, energetic ambiance centered around food quality.

In a recent conference call discussing financial results for fiscal 2004, Pierre-Olivier Beckers, president and chief executive officer of Delhaize America, said results from the first Sweetbay stores have been impressive, especially in the stores' perishables departments.

"Since their launch, those stores have posted dramatic sales growth, and we have seen significant increases in sales distribution in such fresh departments as meat, seafood, produce and deli," he said.

The sales increases are coming at a cost, however. In addition to the cost of remodels -- estimated at several million dollars per store -- Sweetbay also employs a larger staff and carries more product.

The first Sweetbay in Seminole, Fla., for example, employs about 175 people, vs. slightly more than 100 for a typical Kash n' Karry, and has five managers instead of the usual four.

Delhaize is taking some steps to reduce the investment costs, however, by using more efficient lighting systems in conjunction with skylights and by preserving some department locations from the original Kash N' Karry stores, according to reports.