KROGER IS REPORTED TO BE CUTTING CAST OF VIDEO SUPPLIERS

DAN ALAIMO

CINCINNATI -- Divisions of Kroger Co. here are moving forward with plans to consolidate video suppliers, although the vendors have yet to receive written notification, said video industry sources.

The divisions have received letters from corporate headquarters instructing them to change to ETD Entertainment Merchandising, Houston, as their primary video distributor, it was said. Previously four different distributors had been used by the various divisions, which include those under the Dillon Cos. subsidiary headquartered in Hutchinson, Kan.

At least three divisions have already made the change and more will in the near future, with some waiting until the first of the year.

Meanwhile, divisions were given strong, but non-mandatory, recommendations to buy sell-through products directly from Buena Vista Home Entertainment, Burbank, Calif., and to use the shared-transaction fee program of SuperComm, Dallas, said the sources. Both Buena Vista and SuperComm are part of Walt Disney Co., Burbank.

Kroger executives did not return calls for comment and suppliers declined to speak specifically about the retailer's plans on the record. Supplier executives agreed, however, that the attention Kroger is giving on this particular decision sends a strong signal about the company's ongoing commitment to video rentals and sales.

But it is unlikely that many other supermarket chains will follow Kroger's lead in consolidating primary video distributors, since few of them deal with more than one now, said observers. But it does reflect a drive to improve efficiencies and profits within the video category that is taking place in other chains, they said.

On the other hand, Kroger's endorsement of SuperComm and Disney's direct-buying programs may have ramifications for the larger industry, the observers noted. "This is just a giant endorsement of shared revenue," said one source.

"It's not our practice to comment specifically on individual accounts," noted Des Walsh, vice president and general manager of SuperComm. "We have enjoyed a relationship with Kroger for many years and are delighted to be continuing this relationship in a newly expanded role," he said.

"The value of revenue sharing and our category management role has been well documented. The expansion of the program to the majority of supermarket retailers in the U.S. indicates that it now plays a key role in the supermarket rental business," said Walsh.

On direct buying, one source noted, "There was money on the table, and Kroger picked it up. Now Disney can have any chain that they want direct and the other studios of course have no choice but to counter or mimic that. So I think the whole thing will be direct before too long," he said.

Of the 16 Kroger and Dillons divisions, ETD originally serviced nine, while Sight & Sound, St. Louis, had four, Ingram Entertainment, La Vergne, Tenn., had two, and WaxWorks Video Works, Owensboro, Ky., had one. All four distributors, along with Disney direct, SuperComm and Rentrak Corp., Portland, Ore., another shared-transaction fee distributor, made presentations to a select committee of Kroger executives last summer. A decision was apparently made shortly after, but news about it has been going out slowly, while final contracts were drawn up and corporate attorneys approved the details. Kroger started the process last spring.