SUPERVALU SET TO REPOSITION SIX CHAINS AS ONE OPERATION

ELLIOT ZWIEBACH

MINNEAPOLIS -- Supervalu here plans to reposition its six corporate chains internally into a single operation to improve the bottom line and, in essence, to become more chainlike, the company said in its annual report.

The distributor, which operates 345 corporate units, said it plans to combine the operations of 203 of those stores -- excluding 142 Save-A-Lot limited-assortment stores -- by standardizing processes, centralizing administrative functions, eliminating duplication and adopting and sharing best practices such as labor scheduling. However, there are no plans at this time to change any of the operating names, the company told SN.

The annual report also said Supervalu plans to broaden the geographic reach of Save-A-Lot, widen the licensing opportunities for the format to more retailers and add to its corporate ownership. Save-A-Lot's 772 licensed and corporate stores are concentrated in the Midwest, Southeast and Mid-Atlantic regions. Supervalu declined last week to say where expansion would take place.

In a separate development, Supervalu said last week it will close a small Louisiana distribution center in July that was leased in February 1997 to service 26 Schwegmann Giant Super Markets stores in the New Orleans area. Schwegmann filed for Chapter 11 bankruptcy protection in March, saying it will sell its remaining 24 stores.

The leased facility, located in St. Rose, La., also supplies a handful of other customers, whose accounts will be transferred to Supervalu's Hammond, La., distribution center, the company told SN.

Explaining the decision to reposition the corporate stores into a single administrative entity, Supervalu said in the annual report, "Having grown over the years principally by acquisition, Supervalu's retail operations evolved as a portfolio of companies, under six major banners, each with its own infrastructure.

"This new focus allows the company to carefully manage cost, both operationally and through capital investment. These changes also position the company to more effectively assimilate acquisitions in the future."

The annual report said the end result "will be a more flexible and responsive organization, geared to take full advantage of a lower overall cost structure, thus enhancing our competitive posture within our markets."

Supervalu's corporate stores include 65 Cub Foods, 45 Shop 'n Saves, 22 Scott's Foods, 19 Lanecos, 10 bigg's, five Hornbachers and 37 others that operate under a variety of names, plus 142 of the 772 Save-A-Lot units.

Save-A-Lot will continue as a separate entity, the report said, "(because) its very efficient distribution network, strong purchasing leverage for controlled brands and effective licensing arrangements mean Save-A-Lot essentially operates today as a virtual retail chain."

Among other information in the annual report:

Supervalu said it intends to continue to be a primary driver of industry consolidation in food distribution, "where the three top players account for a mere 30% of total volume.

"One way to achieve consolidation is by increasing market share from existing customers. Fragmentation also translates into opportunities for consolidation through acquisition, which will play a key, albeit selective, role in distribution."

The company said Cub will add 13 new corporate stores this year; Shop 'n Save will replace two existing stores; bigg's will add a single new unit; and Save-A-Lot will add 40 corporate units and 100 licensed stores.

No single Supervalu retail customer represents more than 2% of total sales.