KROGER'S BIG EXPERIMENT

ELLIOT ZWIEBACH

ATLANTA -- Kroger Co.'s division here is satisfied with the results of the 96,000-square-foot megastore it opened in Alpharetta, Ga., even if it isn't likely to clone the store in other locations.

The huge store, which some observers consider a significant supermarket industry trial, will help Kroger find new ways to handle its business at existing and future locations, Kroger executives said.

The experiment has formed an unusual hybrid: It offers upscale merchandise on the perishables side, which occupies half the store, and club merchandise in the warehouse section, which is placed at the rear of the store.

The unit, 30 miles north of here, features a conventional grocery assortment, a complete drug store, a food court with more variety and the Atlanta division's first club-pack section using warehouse racking. It also offers some typical 1990s amenities, including a video department, a dry-cleaning service, a photo lab and a bank.

Some observers are calling Kroger's experiment a breath of fresh air for the supermarket business. Jonathan Ziegler, a securities analyst with Salomon Bros., New York, said Kroger's Alpharetta store "regenerated my batteries, which had been beaten down by the negative sales trends in the industry.

"This store was very exciting in terms of merchandise presentation, and I think Kroger will use it to get ideas about traffic patterns and what's selling and not selling."

Kroger itself is far more low-key about the venture, at least for the record. "The store is just an experiment -- a costly experiment -- and not a prototype," according to Barney Epstein, manager of community affairs for the division here. "We built it as a trial. This was a unique opportunity, and there was a consensus within the division that this kind of store was right for that location."

Epstein said Kroger has no plans to open any additional stores approaching the size or scope of the Alpharetta store. However, elements of it are likely to find their way into other stores in the division, he told SN.

"It's in a high-income area where we thought the people and demographics would support a store like this, and there was sufficient space to build a store this large to see what it would do."

But he stressed that rather than building 96,000-square-foot units in the future, "we intend to continue to build stores of 60,000 to 70,000 square feet."

While he declined to pinpoint the store's volume, trade observers put it at about $600,000 to $650,000 a week.

However, volume is likely to climb in the next couple of years, observers predicted.

When it opened, the Alpharetta store did significant volume, said one, "because of the uniqueness of the concept. But there's been some settling back since then.

"The way I see it, that store was built about 18 to 24 months ahead of its peak," this observer continued. "That area, on the north side of Atlanta, has enormous potential, but the store is a little ahead of itself right now."

Kroger is up against some hefty competition in the area, with a Winn-Dixie right across the street, a Cub and a Harry's Farmer's Market nearby and a new Publix going up about a mile away. There's also a 65,000-square-foot Kroger about three miles away. "The area is very heavy on store count," one observer noted.

Not surprisingly, Kroger needs to rely on heavy marketing to play up its strengths here. Ads for the store refer to it as "a super supermarket" and promise "everything you could ever need in a store."

A walk around the megastore confirms much of that sales pitch. Some of the features that stand out are the variety and scope of the food court and the racking in the warehouse section.

The food court -- located just off the center of the store, right up front -- offers "a totally different concept than anything we currently have," said Brent Scott, the division's vice president of merchandising.

While other local Krogers have elements of the store's food court, the one at Alpharetta encompasses everything the other stores have and more, he pointed out.

For example, the Coffee Cafe at the front of the court, which Kroger operates, includes its own setup for made-to-order Caesar salads, a custom sandwich counter, a gourmet pizza counter that offers slices or takeout items, and a salad bar.

Two franchised fast-food operators -- Williamson Bros. BBQ and Great Panda Chinese food -- operate in the food court, and the Kroger service delicatessen counter features its own gourmet pasta operation and desserts and other specialty gourmet items by a host of chefs and apprentices, Scott noted.

Customers can enter the Alpharetta store from either the right, which leads into the perishables side, or the left, which opens onto the drug store and conventional grocery section.

The produce section in the right front corner features a wide assortment of fruits and vegetables that use a different decor package and different display fixtures than other Kroger stores, Scott said.

The decor package includes track lighting only instead of fluorescent tubes, and the displays feature large open-market fixtures rather than refrigerated cases.

As in a handful of other stores in the division, the floral section in Alpharetta has been moved away from produce to the center of the store, adjacent to cosmetics, for maximum exposure and for tie-in gift-giving with the cosmetics counter, Scott explained.

Behind the food court, running from front to back, is the frozen foods section. Behind floral is the pharmacy, and behind the pharmacy is the division's only customer-access beer and wine cooler.

Just in front of the warehouse section along the side and rear wall is the store's conventional grocery section. In front of groceries is the full-line drug store.

A unique feature of the club-pack section is its warehouse racks. The club-pack allocation is the largest in the division, with 36 feet of dry grocery racks on a side wall and 24 feet of freezer cases along the back wall.

How much influence will this club-pack layout have on other Kroger stores?

Kroger is not using the section at the Alpharetta store to determine the mix of club packs at other stores, Scott said.

"We'll add warehouse packs where the demand exists, at new and existing stores," he said. "And while all products will be available to all stores, the assortment will depend on demographics, not on what sells at the Alpharetta store."

While Kroger intends to continue installing club-pack merchandise at other stores, it does not anticipate using warehouse racking anywhere else, Scott pointed out.

The future of the Kroger megastore will be partly determined by the corporation's divisional nature.

As a decentralized operation, Kroger does not have any plans to open similar megastores in any other divisions, Paul Bernish, Kroger's corporate director of public relations, told SN.

"Each division comes up with its own concepts, and what our Atlanta division did in Alpharetta is not going to be duplicated anywhere else because we just don't do that.

"We really try to tailor each store to its specific trade area, and while some ideas go back and forth between divisions and while some features may be incorporated into stores in other divisions, there is no set plan or guideline on a corporate basis.

"If something works well at a particular location, everyone [in the company] will know about it, but there have been no corporate guidelines since before our 1988 restructuring," Bernish explained.