SARA LEE RELISHING SANDWICH SHOPS IN KROGER UNITS

NANCY BRUMBACK

CHICAGO (FNS) -- Sara Lee branded fresh sandwich shops are up and running, and doing "very well" so far in a partnership with Kroger Co., according to Sara Lee executives.

In a bid to extend the equity of its brand name further into the fresh foods segment of the grocery business, the manufacturer, based here, has developed freestanding Sara Lee sandwich shops in 17 Kroger units, said C. Steven McMillan, executive vice president responsible for bakery, packaged meats, coffee, grocery and household products.

Sara Lee executives spoke of the sandwich shop program during the company's annual meeting and in a press conference here late last month.

John H. Bryan, chairman and chief executive officer, said these shops are "doing very well," and are an additional way to make consumers more familiar with the premium deli meats Sara Lee introduced two years ago.

Kroger is running the shops, he said. "All the revenues are Kroger revenues. They buy the meat from us," explained Bryan.

The operations, under the name Sara Lee Sandwich Shoppe, are in 17 stores in Kroger's Houston division. Most are a part of an in-store food court, the location that has been most successful, said a Sara Lee executive contacted after the annual meeting.

The shops range in size from four to 12 linear feet of counter front and sandwich preparation area. They offer both prepared, ready-to-go sandwiches and custom-made sandwiches.

Sara Lee's Bil Mar Foods division is overseeing the development of the sandwich shops and is working on other, smaller versions that could be adapted to stores without food courts, noted the executive. The company is also exploring opportunities to put the shops in other chains, particularly those with in-store food courts.

Officials at Kroger, based in Cincinnati, declined to comment on the performance of the sandwich shops, which resemble kiosks.

The Sara Lee representatives at the meeting also reported expansion of similar Sara Lee kiosks with sandwiches and baked goods in airports, schools and sports arenas.

Those Sara Lee kiosks, numbering 200, are run by Sara Lee and represent "a new channel and new location for customers to experience our products," said McMillan.

The company is breaking new ground in other fresh food categories as well. Its foray into fresh baked goods could generate sales of $1 billion by the year 2000, said executives.

Those sales would come from expansion of the fresh baked goods program into about 85% of the U.S. market, plus a joint venture with Frito-Lay for single-serving packaged baked goods under the Sara Lee name.

The company will continue to emphasize "good-for-you" products in its meat brands and expects to add some lower-fat items in fresh baked goods.

Sara Lee's fresh baked line of bagels, English muffins, pita bread and recently introduced sweet goods, including Danish, cakes, doughnuts and cookies, is already being distributed to 17% of the U.S. market after its introduction last year, said McMillan.

"We are the No. 1 fresh bagel in every market in which we compete," McMillan claimed. "By the year 2000, the fresh baked goods business should be twice as large as our existing frozen baked goods business," which is about $200 million, he said.

In addition, the joint venture with Frito-Lay is expected to produce sales of about $600 million by the year 2000.

That venture pairs single-serving snacks developed by Sara Lee and sold under the Sara Lee brand with Frito-Lay's distribution system. That line is aimed primarily at convenience stores, said McMillan. It will include muffins, cupcakes, brownies and doughnuts.

"These fresh ventures will dramatically increase the profits and exposure of the Sara Lee brand," he noted.

At the press conference following the annual meeting, chairman Bryan said the company felt its brand could be strong in the single-serving category, "not a category where brands have been strong."

The company went after the fresh baked goods supermarket business for the same reason, he added.

Asked if he felt Pillsbury was about to challenge Sara Lee's entry in the fresh baked category with its new sliced breads, Bryan said Sara Lee had no plans for sliced bread and did not know if Pillsbury planned to do other baked products.

Bryan noted the "good-for-you" products have not been great successes in the baked goods area, but said the Sara Lee fresh baked line will add some of these products in the near future.

Sara Lee's meat group is seeing its strongest growth in easy-to- prepare products and in its new fat-free hot dogs under the Ballpark, Kahn's and Bryan brands, said McMillan.

The company's meat products will be featured at the Atlanta games, said McMillan, although much of Sara Lee's Olympics involvement centers on its Champion and Hanes apparel business.

The kiosks and the company's decision to open full-price shops for its Champion apparel line indicate Sara Lee's unwillingness to rely solely on retail distribution in the future.