KROGER SAID TO FOCUS ON ETD AS SOLE VIDEO SUPPLIER FOR CHAIN

DAN ALAIMO

CINCINNATI -- Kroger Co. here was set to complete plans for consolidating video distributors the week of Sept. 8, said Jerry Kaiser, drug/general merchandise merchandiser for the Houston KMA and chairman of the committee charged with picking a single supplier for the entire chain.

Kaiser said a letter was being reviewed by corporate lawyers, but would not comment further. While the retailer had put a tight lid on news about the decision, distribution executives contacted by SN said the big winner is ETD Entertainment Distributing, Houston.

"Although no official announcement has been made, it seems more than likely that ETD will be the chosen distributor," said a video industry source. "They have the national infrastructure capable of handling an account like Kroger and it seems that they were the most aggressive in the deal they offered." ETD had no comment when contacted by SN.

However, the source would not rule out the possibility of an eleventh hour reconsideration of the deal, with other distributors being given the opportunity of servicing Kroger divisions, but only under the low-cost terms of the winner's proposal, said the source.

While ETD would be Kroger's only full-service video distributor, other suppliers also will be involved with the chain. For example, SuperComm, Dallas, the shared-transaction fee company that funnels its products through distributors, is apparently in Kroger's plans, as is a direct-purchasing relationship for sell-through with Buena Vista Home Video, Burbank, Calif. Both SuperComm and Buena Vista are part of the Walt Disney Co., Burbank, Calif.

If an agreement is reached, ETD stands to reap a large portion of Kroger's video sales that is estimated in the $100 million range. Total chainstore sales last year reached $25.2 billion.

This comes at a time when ETD recently experienced a near-catastrophic business reverse when Blockbuster Entertainment Group, Fort Lauderdale, Fla., went direct with all the studios, taking all its business away from ETD and reducing its total revenues by 70%. Kroger is presently ETD's biggest account, representing about 15% of the company's remaining business. Other distributors said ETD had to submit a highly competitive bid and Kroger was looking to make a decision strictly based on price.

In at least one KMA, the transition is expected to start on Sept. 16 when a big meeting with the new distributor is scheduled, said a video distribution executive. The old distributor was not invited "and the only name that keeps coming up is ETD."

Referring to the low profit margin structured for ETD in such a deal, the executive said, "Depending upon the deal, ETD might win the battle but lose the war."

Kroger currently operates over 1,350 stores in 16 divisions in 24 states.