FORMER ROUNDY'S RETAILERS PREPARE TO CHANGE PRIVATE LABEL

Mark Hamstra

MINNEAPOLIS -- Nash Finch's acquisition of two Roundy's warehouses in Lima, Ohio, and Westville, Ind., should add about $1 billion to the wholesaler's top line, assuming it can retain the customers that came with the facilities.

"We've had a chance to talk to virtually all of the customers, and we think they'll enjoy working with Nash Finch," said Ron Marshall, chief executive officer of the wholesaler, based here, in a phone interview with SN. "It's a good deal for Nash's current customers, too, because we'll be adding a lot of volume, and there are some best practices out there that we can share."

All of the warehouse customers who were contacted by SN said they planned to stay with Nash Finch, at least in the near term, although none were contractually obligated to do so.

"I've heard that Nash Finch is doing everything possible to make the transition seamless," said Tom Jackson, president, Ohio Grocers Association, Columbus. "I think that everyone is very positive about it. They bought a very successful operation with Roundy's."

The biggest adjustment, both Marshall and the retailers agreed, will be in rolling out a new private label. Nash Finch's "Our Family" line will replace the "Roundy's" brand over the course of the next year.

"That's the one change that's going to be most obvious to our customers," Marshall said. "Everything else is going to be seamless."

Richard Riesbeck, president and CEO of St. Clairsville, Ohio-based Riesbeck Food Markets, one of the largest customers that is joining Nash Finch through the acquisition, said he's confident his customers will adjust to the new brand, especially when they are wooed with promotions designed to encourage trial.

"We have every reason to believe that our customers' reaction to Our Family will be positive," Riesbeck told SN. "The quality is very good, and the packaging is attractive."

He also said Nash Finch has committed to support the rollout of Our Family in various ways. Riesbeck's will primarily promote the brand through direct marketing, he said. The Riesbeck's chain includes 13 stores in Ohio and West Virginia that utilize an everyday-low-price strategy.

To move the old Roundy's-label product out of the stores, Riesbeck said he plans to launch an aggressive markdown campaign, with up to 50% off on all retail dry grocery under the label.

"It's not our intent to offer both labels simultaneously," he said. "We hope to bring in items under the new label as we sell out the Roundy's items."

Riesbeck said the private-label offerings were among the factors he considered when he decided to remain a customer of the Lima warehouse that Nash Finch acquired.

"We had anticipated the inevitable sale of Roundy's Ohio division for some time, so around mid-2004, we had our suppliers come in and talk about how the change in different wholesalers would affect us, and we delved into private label," he said. "Nash Finch brought their private label into our office, and we think it compares favorably with Roundy's."

Some retailers said the change in private labels represents their biggest concern.

"That's the only thing I'm really negative about," said Rob Bernhard, owner of Dot's Bellbrook Market, a two-store operator in Bellbrook, Ohio. "Roundy's did an awfully good job of promoting its private label."

He said he's decided to stay with Nash Finch as a wholesaler in the near term, although he said he remains open to other suppliers.

"I've been with Roundy's for 20 years, and I hate to see them go, but I don't know that things are going to be any different with Nash Finch at this point," Bernhard said.

Nash Finch's Our Family brand is slightly more extensive than the Roundy's label, and the wholesaler continues to expand it.

Beginning in the second quarter of this year, the company will add a higher-end extension called Our Family Pride, which will be designed to exceed national brands in quality, the company said. Nash Finch plans to begin expanding its low-end label, Value Choice, from its current level of 139 stockkeeping units to between 250 and 300 by the end of 2006, beginning in the second quarter.

Burt P. Flickinger III, managing partner, Strategic Resource Group, New York, said he thinks there could still be some turmoil among the new Nash Finch customers, who have the choice of taking their business to Associated Wholesale Grocers, Kansas City, Kan., or others.

"A lot of customers have been looking at AWG, Supervalu and Laurel Grocery," he said. "This could be an era of unprecedented transformation. Right now, there are too many wholesalers in America chasing too few independent retailers."