WETTERAU FAMILY STARTS FOOD VENTURE

ELLIOT ZWIEBACH

ST. LOUIS -- The Wetterau family is moving back into the food business with a new venture that will include retailing and licensing.

More than a year after Supervalu, Minneapolis, acquired 123-year-old Wetterau Inc., Hazelwood, Mo., the great-grandsons of the latter company's founder have formed a new firm, Wetterau Associates, based here.

The new venture will acquire regional food chains and operate licensed Save-A-Lot stores. In addition, it will acquire niche manufacturers, distributors and real estate holdings in a number of businesses, including food.

For its first venture, Wetterau Associates is operating a 12,500-square-foot Save-A-Lot in Smithfield, N.C., under a license. The unit opened in late January. The company is contemplating a second unit in the state in May, a third in July and two more later this year, with eight to 10 more scheduled to open next year in North Carolina, South Carolina and possibly Virginia, said Mark Wetterau, chairman and chief executive officer of the new company.

Mark Wetterau was president and chief operating officer at Wetterau Inc. before its acquisition by Supervalu.

Wetterau Associates will license the Save-A-Lots from Supervalu. Save-A-Lot, which was a wholly owned subsidiary of Wetterau Inc., is now a wholly owned subsidiary of Supervalu.

Mark Wetterau's brother Conrad is president and chief operating officer of Wetterau Associates and Mike Waitukaitis is chief

financial officer.

Most recently, Conrad Wetterau had been senior executive vice president, chief administrative officer and president of the food distribution group at Wetterau Inc. He resigned in July. Waitukaitis was senior vice president of Wetterau Inc., responsible for mergers and acquisitions. He also had oversight for the tax department.

Ted Wetterau, the father of Mark and Conrad Wetterau and former chairman and CEO of Wetterau Inc., is a consultant and adviser. "He's helping to [push] the marketing side from the standpoint of bringing in people to look at different deals and opportunities," Mark Wetterau said.

"He's the up-front man, utilizing the contacts and knowledge he developed over 40 years in the food industry to approach companies we may be interested in."

The new company's focus, Mark Wetterau said, will be to invest in a multitude of industries.

The biggest food focuses will be in licensing and regional chain acquisitions.

The Wetteraus consider Save-A-Lot to be an important niche business because it involves high-quality national brand alternatives in a limited-assortment type format, Mark Wetterau said. They selected North Carolina as their base of operations, he said, because there were no other Save-A-Lots within 400 to 500 miles. Once the company has five to 10 stores open, it will know how well they are accepted, Wetterau said, "and the subsequent rollout could be very quick."

Wetterau Inc. acquired the Save-A-Lot chain in 1988, when it licensed just over 100 stores. There are now more than 400 Save-A-Lot units, some of which are Supervalu corporate stores but most of which are licensed to a variety of operators.

"It was one of the fastest growing entities at the old Wetterau, and it's probably growing just as fast at Supervalu," Mark Wetterau said. In discussing the acquisition of regional chains Wetterau said: "We don't want any stores that are troubled or whose market and consumer acceptance is diminished. We want companies that are accepted, strong and able to grow.

"In retailing, we want to operate several regional chains of anywhere from six to 100 stores," Wetterau said.

Although he declined to pinpoint any specific regional chains in which Wetterau Associates is interested, he said the company is in the preliminary stages of talks with some operators. In manufacturing, the company wants to acquire "three or four companies, each doing $200 million to $300 million annually to grow with and build from." These would be niche companies "that are capable of growing to become larger fish in small ponds," Wetterau said. He declined to pinpoint specific types of businesses in which his company is interested, however.

According to Conrad Wetterau, financing for the acquisitions could come from a variety of sources, including pure equity, senior bank financing or, in some cases, subordinated debt financing. If a consortium of investors is required, Wetterau Associates will always be in a position of control, with a 51% ownership.

Additionally, Ted Wetterau may provide financing on some deals, although he is not expected to have ownership positions in all the company's acquisitions, Conrad Wetterau said.

While wholesaling was a big part of Wetterau Inc.'s business, the new Wetterau venture will be eschewing the traditional food wholesale business.

Accordingly, in the area of distribution, Wetterau Associates is seeking to acquire "three-tier distributors" -- companies that manufacturers rely on to supply end-users.