FOOD LION TO MAINTAIN ACQUISITION STRATEGY

SALISBURY, N.C. -- Following two acquisitions last year, Food Lion will continue to pursue an acquisition strategy while maintaining a program of store growth, according to the chain's annual report.

als and build value for shareholders into the future," Tom E. Smith, chairman, president and chief executive officer, wrote in his shareholder letter in the report.

Smith said Food Lion grew "in a new way" last year with the acquisition in March of Food Fair, a seven-unit operator in Winston-Salem, N.C., and in December with the purchase of 100 units from Kash n' Karry Food Stores, Tampa, Fla.

The Kash n' Karry transaction was for $121.6 million in cash, plus assumption of $221 million in existing long-term debt, Smith said. As previously indicated, Smith said Food Lion will provide $150 million in capital expenditures over the next four years for store remodeling and new-store development at Kash n' Karry.

Besides acquisitions, another source of growth for Food Lion was an aggressive store-renovation program, which the annual report said boosted sales by approximately 15% per unit.

The company said it remodeled or expanded 124 stores last year and added 155 deli/bakeries. Another 100 stores are scheduled for upgrades or expansions this year, the report noted.

Food Lion also opened 55 new stores last year, including 22 relocations, while closing three units; in 1997, the company said, it will open 55 to 60 new stores, including 18 replacement units.

In the area of technology, Food Lion said it rolled out an on-line network last year to help stores communicate better with the office, distribution centers, vendors and customers. The report said the Kash n' Karry stores will be added to the computer linkup later this year. Food Lion said it is using Electronic Data Interchange for more than 90% of its purchase orders; at store level it said it has completed its rollout of a "No I.D. Tender" check-approval system to provide faster checkout service and offer more payment options.

In other highlights of the annual report:

The company said 6.5 million customers are using its MVP frequent-shopper card, which returned $38 million in discounts to customers in 1996.

Following a successful promotional tie-in with the National Association for Stock Car Auto Racing, Food Lion plans to add more local promotions and special family events to its NASCAR schedule this year. In addition, the chain said it is sponsoring the NASCAR Country radio program, which is broadcast on more than 400 stations in Food Lion's marketing areas.

Food Lion has expanded the number of its private-label items to 1,750, with private-label sales representing 16% of the chain's total.