HOMELAND: A 'HOLISTIC' APPROACH TO COMPETING WITH SUPERCENTERS

Homeland Holding Corp., the Oklahoma City-based parent company of Homeland Stores, is taking what it calls a holistic approach to competing against the growing number of Wal-Mart supercenters and Neighborhood Markets operating in Oklahoma, David B. Clark, president and chief executive officer, told an investors meeting in New York.

ster and better, along with offering a loyalty card," Clark told the annual food and drug retailing conference sponsored by Donaldson, Lufkin & Jenrette.

As a result, he said Homeland is holding its own against the approximately 20 Wal-Mart supercenters and two Neighborhood Markets with which it competes, with four more Neighborhood Markets due later this year.

Homeland's capital spending is focused on minor remodeling, Clark said -- which involves not simply adding new decor but also moving the bakery closer to the front of the store for quicker in-and-out convenience, offering a better selection of ready-to-eat hot and cold products in the stores' delicatessen sections, and using limited fixtures and signage to allow the product to be the focus of attention.

"These are things we've learned over the last couple of years that give us a good bang for the buck," Clark explained, noting that Homeland has updated approximately 50% of its 83 units over the last three years, with 12 more scheduled for this year.

Homeland is also making strides with its major remodeling efforts, Clark said, noting that a major remodel in Edmond, Okla., increased produce department penetration by 2%, boosted pharmacy to 10% of total store volume and increased floral business in a day "to what we used to do in a week."

He said Homeland expects to continue to expand through acquisitions of area independents. "The Oklahoma market is very fragmented," he said, "with independents accounting for 36% of statewide volume, down from 49% a year ago," which still leaves room for additional consolidation, Clark noted.

In the past few months, he said the company acquired nine units of Apple Markets, a group of 25,000-30,000-square-foot stores in rural Oklahoma "that are well insulated from competition." Those stores required little capital expenditure and were accretive to earnings, he said.

The acquisition of four units of Brattain Foods moved Homeland into Muskogee, Okla., with stores ranging from 35,000-50,000 square feet, Clark said. "Those stores are operating above our sales expectations, though it's premature to say if they'll be immediately accretive," he noted.

The chain is also in the process of acquiring three Price Chopper units and four Baker's Supermarkets in Oklahoma City, Clark said.

Homeland uses its loyalty cards to maintain its customer base, he said, with 1 million of the state's 3 million residents owning the cards, he added.

Using the data it collects, Homeland "goes to great lengths to understand our customers and their buying practices so we can merchandise better to them, and we can locate most customers that we lose to a competitor and direct marketing activities at them to win them back," he said.

A recent tie-in promotion with McDonald's in the Oklahoma City marketplace -- in which patrons with Homeland cards got a free drink at outlets of the fast-food restaurant -- was so successful, Clark said, "that McDonald's asked us to expand it statewide."