SUPERVALU TO BUY FLEMING CALIFORNIA CHAIN

ELLIOT ZWIEBACH

RANCHO CUCAMONGA, Calif. -- Supervalu, Minneapolis, stands to gain its first retail toehold in southern California with the pending acquisition of Sav-U Foods, a 21-unit limited-assortment chain here being sold by Fleming Cos., Oklahoma City.

Supervalu officials told SN they expect to change the store banners to Save-A-Lot, a St. Louis-based subsidiary, in the next six months to a year and expand to 100 locations in southern California in the next two to three years, with a long-term potential for 200 to 300 stores.

Sav-U Foods has annual sales of more than $1 billion. Besides the stores, the agreement includes a 110,000-square-foot distribution facility and office here, plus inventory and certain liabilities. Financial terms of the transaction, slated to close next month, were not disclosed.

The deal would mark Fleming's exit from the limited-assortment field, which it has been serving since it picked up Sav-U as a customer in 1992.

A Fleming spokeswoman said the wholesaler has been supplying Sav-U Foods for about four years, "but it was a piece of business that we were never actively pursuing, and this was an opportunity that made sense for us to shift our focus elsewhere."

Fleming elected to get out of the limited-assortment store business because "operating limited-assortment stores is not aligned with Fleming's core business strategy for the future," stated Bill Lawson, senior vice president of corporate development and international operations. "Our primary focus is on growing sales, distribution support and services in the supermarket sector."

Supervalu is acquiring the stores and distribution center through Moran Foods, a St. Louis-based subsidiary that operates Save-A-Lot, a limited-assortment chain with 550 stores in 30 states.

The conversion of the Sav-U banner to the Save-A-Lot name would start with the addition of Save-A-Lot's custom-packed brands, Supervalu said. Other plans include adding refrigerated cases to allow the stores to fit more than dry produce, expanding the number of stockkeeping units from about 700 to 900 and trimming Sav-U's prices. Bill Moran, Save-A-Lot president and chief executive officer, said the company also hopes to expand the Sav-U warehouse to 140,000 square feet.

Moran said the acquisition of the Sav-U stores "is a natural expansion of our highly specialized concept." Save-A-Lots, 10,000 to 12,000 square feet, carry about 1,200 items, which he said fill 90% of a consumer's needs at up to 40% less than conventional supermarket prices.

Supervalu acquired Save-A-Lot in its 1992 acquisition of Wetterau, Hazelwood, Mo. Some of the stores are corporate-owned, while others are independently owned. The 21 Sav-U Foods stores, which are 10,000 to 15,000 square feet and which Moran said would remain corporate units, are located throughout southern California, from Bakersfield south to San Diego.

Save-U Foods represents Supervalu's first wholesale food customer in the area, "which makes this a significant market entry, and we hope we can roll out additional Save-A-Lots in southern California," a Supervalu spokeswoman explained.