KASH N' KARRY TO REBANNER AS SWEETBAY SUPERMARKETS 2004-03-15 (2)

MARK HAMSTRA

TAMPA, Fla. -- Kash n' Karry here is hoping that a supermarket by another name will smell even sweeter.

The 103-unit chain, a division of Salisbury, N.C.-based Delhaize America, said it planned to remove the Kash n' Karry banner from the Florida market and replace it with the Sweetbay Supermarkets banner within the next three years.

"This is more than just a name change," said Shelley Broader, president and chief operating officer, Kash n' Karry, in an interview with SN last week. "We're changing the whole shopping experience for consumers."

Sweetbay will include a strong focus on perishables, natural and organic foods, locally popular products and ethnic foods, she said.

"This is going to be a concept that's especially designed for the Florida consumer," she said.

In a conference call last week discussing Delhaize's results for the fiscal year ended Jan. 3, Ron Hodge, chief executive officer of both Hannaford Bros., Scarborough, Maine, and Kash n' Karry, said the company was hoping to capitalize on the rapid growth of the Florida market. The state's population is expected to increase by 8 million by 2030, with much of that growth forecast for Kash n' Karry's core market in the western region of the state.

He said he envisions Kash n' Karry occupying a niche in which it offers higher quality than supercenters operated by Wal-Mart Stores, Bentonville, Ark., but lower prices than Publix, Lakeland, Fla., and Albertsons, Boise, Idaho.

"We are all about the business of reinventing Kash n' Karry," Hodge said, noting that the chain also is in the process of implementing some technology systems for managing labor and inventory that had been developed at Hannaford. He said Delhaize also had begun investing in training Kash n' Karry's employees to improve service levels.

Delhaize unveiled plans to revamp Kash n' Karry in January, but it wasn't until last week that the company said it would rebanner the entire chain. At that time, the company said it would shutter 34 stores, mostly in the Orlando, Fla., market and in other areas outside Kash n' Karry's core western Florida markets. The company also said it would invest heavily in the remaining Kash n' Karry stores, doubling capital expenditures in the next year.

Laura Ries, president, Ries and Ries, a marketing consulting firm based in Atlanta, said changing the name of the stores makes sense if the company is trying to implement a complete overhaul of the stores.

"In general, I think it's a great idea," she said. "Not enough companies consider a name change when they're trying to change people's perceptions. If you do a massive renaming and redecorating of the properties, you have a much better shot of getting a lot of publicity for the effort, which gets people's attention," she said.

The Kash n' Karry name, she pointed out, was "not distinctive" and "lacked character."

"It doesn't tell you much," she said. "A new name has a lot more potential of giving them a new identity."

She suggested that Kash n' Karry stands the best chance of being successful with the new name if it can make a big splash with the conversion.

"Changing a name needs to be done in a big way," she said. "It's like pulling off a Band-Aid. It needs to be done all at once."

Broader said Kash n' Karry plans to build one new Sweetbay Supermarket in the Seminole, Fla., market by the end of this year and four new stores in the Naples/Fort Myers, Fla., market. At the same time, the company plans to convert the 13 or so existing stores in that market to the new format.

Broader, a veteran of Kash n' Karry's sister chain, Hannaford Bros., was named to oversee Kash n' Karry last June. She said the expertise she gained overseeing Hannaford's perishables operations will be reflected in the revamped concept, although she stressed that local tastes will drive the merchandising and decor.

"The research we've done tells us that customers in Florida love fresh foods, and they want us to give them information about foods," she said. Customer education and product information will be a significant part of the Sweetbay offering, she said.

Broader said pricing would remain competitive. "The desire for excellent and exciting food is not related to economic status," she said.

The Sweetbay name was derived from a type of tree common in the Southeast, selected using consumer feedback. Broader said the name created more visual imagery in people's minds than other names that were considered. The logo, which features a colorful mix of fresh fruits and a loaf of bread, was taken directly from the Hannaford Bros. logo.

Paul Solomon, professor of marketing at the University of South Florida, Tampa, said the Kash n' Karry name has eroded through the years as the chain has undergone several ownership changes while remaining "trapped in the middle between Publix and Wal-Mart."

He said the company would have to differentiate itself further in order to compete effectively in western Florida.

"It sounds like it will be a more service-oriented chain, but that's what Publix is, and you can't out-Publix Publix," he said.

A telephone survey of consumers in the Tampa market conducted by International Demographics, Houston, last summer revealed that about twice as many people had shopped at Publix in the preceding week than had shopped at Kash n' Karry, which was the No. 2 chain, followed by Winn-Dixie, Albertsons and Wal-Mart. The survey of 2,000 adults gave Publix a 63.2% score, vs. 32.8% for Kash n' Karry.

Meanwhile, Delhaize reported that comparable-store sales at all of its U.S. banners increased in the second half of the year. Comp-store sales for the year improved 0.6%, including a 2.9% rise in the fourth quarter.

The company said its margins at its U.S. operations declined for the year, however, because of the heavy investments in price reductions, especially at its core Food Lion chain.

Pierre-Olivier Beckers, president and chief executive officer, Delhaize Group, Brussels, Belgium, said the investment in pricing is helping the company compete effectively in a difficult region of the country. He said Food Lion has a price advantage of about 4% to 6% over traditional supermarkets, although it is still priced 5% to 7% higher than Wal-Mart.

In the fourth quarter, Delhaize said U.S. sales were up 13%, to $4.2 billion, and operating profits improved 18.1%, to $203.9 million. U.S. sales for the year totaled $15.5 billion, a 3.5% increase over year-ago results, while net income slid 36.4%, to $93.1 million.

Total 2003 sales for Delhaize Group, which includes its operations outside the U.S., were 18.8 billion euros, or about $23 billion, and net income slid 4%, to 171.3 million euros, or about $210 million.

The company said the effects of the weak currency exchange rates has an impact on sales and earnings of about 13%.

The company said it plans to open 61 new stores this year and is forecasting comp-store sales growth of 1% to 1.5%.