Metro stores to adjust marketing image

Grocer will tailor wares to local tastes

Supermarkets

June 30, 2000|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

RICHMOND, Va. - Metro Food Markets, which has billed itself as a "theater of food" and a trendsetter in bringing sushi, cappuccino and take-out chicken to the supermarket, has gone too highbrow in consumers' minds, the Baltimore-area chain's new president said yesterday.

Metro will begin tailoring its merchandise to specific neighborhoods, in some cases offering a broader mix to appeal to middle-income shoppers, said Bill White, president since April. White, also president of Lanham-based Shoppers Food Warehouse, took on Metro as well when parent company Supervalu Inc. merged the two chains' administrative functions.

The shift from offering the same fare in every store is one way Metro can become more price-competitive and differentiate itself from major rivals Giant Food Inc. and Safeway Inc., White said in an interview yesterday after Supervalu's annual shareholders meeting here.

"The object is to create a point of difference between ourselves and the competition," White said. "Shoppers is pretty strong on price impact. Metro has ... an image of being upscale. You will see merchandise changes from store to store."

Supervalu acquired Metro and Shoppers when it bought Richmond-based Richfood Holdings Inc. in September for $1.5 billion in stock, cash and assumed debt.

The Richfood deal - which also included the 37-store Farm Fresh, the No. 2 chain in Virginia's Hampton Roads - gave Minneapolis-based Supervalu a retail foothold in the mid-Atlantic. And it was able to expand its wholesale distribution network by taking on Richfood's warehouses and customers. Supervalu is the nation's 10th-largest supermarket operator.

Supervalu decided to hold its annual meeting outside Minneapolis for the first time, and gather in Richmond, Richfood's former headquarters, to emphasize the deal's importance for Supervalu's growth.

"This was as smooth a transition as any acquisition we've made, and this is the largest," said Michael Wright, Supervalu's chief executive officer, speaking to a packed room of shareholders, customers and franchisees.

Wright said he plans to step down as CEO before the next annual meeting and allow Jeff Noddle, who was appointed president and chief operating officer last week, to take over.

Earnings for the first quarter that ended June 17 show the integration of Richfood contributed 3 cents per share. The company reported a 25.4 percent increase in net earnings to $69.9 million, from $55.7 million, excluding the net benefit of one-time items taken in last year's first quarter. Earnings per share rose 15.2 percent, from 46 cents per share to 53 cents per share. Shares of Supervalu closed yesterday at $19.50, up $1.2344.

Noddle said the company will emphasize growth of its "price impact" formats at both Shoppers, with 30 stores in the Washington market, and Metro, the second-largest chain in the Baltimore area, with 20 stores. Shoppers operates as a no-frills, everyday-low-price warehouse store, while Metro discounts certain items as promotions.

For now, White said, the two chains will keep their names and formats, but no decision has been made for the long term.

The company will decide on appropriate formats as stores are built or remodeled. For instance, a Metro that closed for remodeling in Westminster will reopen as a Shoppers Food, White said. And, he said, a Metro that was to open in Ellicott City this year is on hold until the best format can be determined.

Growth of the former Richfood chains is limited only by the lack of available sites, said Alec Covington, president and chief operating officer of the Richfood region for Supervalu. Metro has been able to expand quickly because sites have been available, he said.

"With the capital base Supervalu has, we will be able to move aggressively to expand as real estate presents itself," he said. "As competition has increased in the market, we're going to have to be prepared to grow our store base - and have more price impact."

White said he hopes to open about five new Shoppers stores each year and four to five new Metros per year.

Supervalu is moving ahead with plans to consolidate some back-of-the-store operations to cut costs, Noddle said. He also said the company plans an aggressive expansion for its smaller format, limited assortment Save-A-Lot stores, with 140 to 160 planned for this fiscal year. Some of those would likely open in the Baltimore area, Noddle said.

Supervalu has completed about 80 percent of the consolidation of the distribution side of the business, using most of Richfood's former warehouses in Pennsylvania, Maryland and Virginia and shutting down one former Supervalu center.

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