KROGER SET TO MERGE TWO TEXAS KMAS

ELLIOT ZWIEBACH

CINCINNATI -- Kroger Co. here said last week it will merge its two Texas retail divisions into a single operating unit -- the new Southwest Kroger Marketing Area.

The Southwest KMA will be the largest of Kroger's 14 retail divisions, the company said.

The move will combine the chain's Houston and Dallas KMAs, which include 177 supermarkets in Texas and Louisiana, three grocery distribution centers and other support facilities.

Although the two divisions have already begun operating as a single KMA, the merger will take several months to implement, a Kroger spokesman said. Although the spokesman told SN he was not aware of any plans to consolidate other KMAs, industry analysts said such moves are possible.

"Kroger is saying this [Texas merger] is not part of any program, that it's an isolated event and the company is not in the process of downsizing its regional operations," Ed Comeau, a securities analyst with Donaldson Lufkin & Jenrette, New York, told SN last week. "But with so many regions, a company like Kroger is bound to have duplicative functions, and although there's no announcement that it is beginning to consolidate its infrastructure, I would anticipate there will be more to come."

Debra Levin, a securities analyst with Morgan Stanley Dean Witter, New York, told SN Kroger has said no similar mergers are planned, "but the trend at Kroger, despite its decentralized operation, is to take opportunities when they arise involving economies of scale, even between divisions.

"For example, Kroger has designated certain warehouses for slow movers, with each serving several divisions, and the chain has been combining accounting and data processing functions across several divisions. So the merger of the Texas KMAs is certainly part of a larger trend at Kroger that is likely to result in more backstage consolidation to reduce administrative costs."

According to Robert E. Zincke, president of the Houston KMA -- who was named president of the new Southwest division -- the merger will streamline product procurement for Kroger in the region while reducing costs and improving overall efficiency. "The consolidation of operations will enable us to focus full attention on strengthening Kroger's position [in the Southwest region]," Zincke said.

The Southwest KMA will be headquartered in Houston, with a regional office in the Dallas-Fort Worth area for locally based human resources, facility engineering, merchandising store support and real-estate functions, the company said.

Kroger said 150 jobs will be affected as the company eliminates duplication and combines management and administrative positions in the Dallas office; the company said affected employees are being offered several career options, including opportunities to move to the KMA office in Houston, take store-level positions or accept reassignment within Kroger.

Kroger said Lyle Yates, president of the Dallas KMA since 1993, has retired after a 42-year career with the company. His successor, Zincke, 54, has been with Kroger since 1964 and was named president of the Houston KMA in 1990.

Zincke will report to Jim Thorne, senior vice president. In other management changes:

Jon Flora, vice president of merchandising in Dallas, will become executive vice president of the Southwest KMA. He will remain in Dallas to focus on strengthening Kroger's business there, the company said. Flora will report to Zincke.

Dennis Barton, vice president of operations in Dallas, will move to Houston as vice president of administration, a new position. He will report to Zincke.

Dave Burkart, vice president of operations in Houston, and Ray Hogue, vice president of merchandising in Houston, will retain those positions with broadened responsibilities. They will report to Zinke.