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AFS SEES OPPORTUNITIES IN LOCALIZED MERCHANDISING EFFORTS

SALT LAKE CITY (FNS) -- Opportunities to not only survive, but to thrive, lie in retail execution that reflects localized geographic/demographic market segments, said Rich Parkinson, president, Associated Food Stores, at the cooperative's annual meeting here this month.Acknowledging his concern about competitive pressures contributing to the slim 1.6% gain in consolidated sales during the past fiscal

SALT LAKE CITY (FNS) -- Opportunities to not only survive, but to thrive, lie in retail execution that reflects localized geographic/demographic market segments, said Rich Parkinson, president, Associated Food Stores, at the cooperative's annual meeting here this month.

Acknowledging his concern about competitive pressures contributing to the slim 1.6% gain in consolidated sales during the past fiscal year, Parkinson told retailers they need to "reinvent" their business approach, not only to secure short-term survival, but more importantly to ensure "long-term excellence."

Over the past year, Associated has been busy designing marketing approaches geared to better recognize and fulfill customers' expectations. "We must refine our focus to what we can provide to consumers in keeping with their wants and needs, and which we can uniquely provide to them. And that we call 'The Experience,"' Parkinson said.

The impetus for the new face of retail execution has been an extensive market segmentation study carried out over the past year. Using in-house demographic profilers, Associated has identified 141 geographic/demographic market profiles and has created suggested retail responses for each one.

Referred to as "Wow Now," this effort to respond effectively to a wide range of market characteristics aims to provide shoppers, called "guests," with shopping experiences that exceed their expectations and encourage store loyalty.

Creating a "blissful" shopping experience is the goal to which Associated retailers should aspire, said Lee Badger, chairman and president of Lee's Marketplace, Smithfield, Utah.

"We need to create an experience for our guests that they can find nowhere else. + The creation of loyal guests needs to be at the heart of our effort," concurred Parkinson in the company's annual report.

Profiling market segments has been a formidable task given Associated's 450 retail members in six Western states. Most stores are 20,000 to 30,000 square feet, but they range from small "mom and pop" outlets to 75,000-square-foot, full-service supermarkets. Associated also operates 23 corporate stores and supplies another 150 members under a different contract in which they do not qualify for rebates.

The "Wow Now" program will roll out with the corporate stores, most of which are located along the Salt Lake City/Wasatch Front metropolitan area in northern Utah. Implementation in non-corporate member stores is scheduled to begin early next year, Parkinson told SN.

"Wow Now" has already been introduced in two Macey's corporate stores and has seen encouraging results. One store on the western side of Salt Lake City has significant Hispanic demographics, while the other unit, in the southern suburbs, features upper-income characteristics. Parkinson said the first store has added Hispanic groceries, produce and meats, along with bilingual signage. The other store has upgraded gourmet-geared perimeter departments. Another corporate store, a Salt Lake City Dan's location, has been set up as a "laboratory" where retailers can witness new competitive strategies in practice. This store has had a 4% to 5% improvement in sales compared to the other five Dan's stores, Parkinson reported.

Associated considers a minimum 4% increase in annual sales to be essential to maintaining competitive viability, Parkinson said. As noted above, consolidated sales gains for the past fiscal year were well below this 4% goal. Consolidated sales for the fiscal year that ended March 26 rose 1.6% to $1.39 billion, up from the previous year's $1.37 billion. Included in this figure are corporate sales, which fell 2.5% to $470 million. Parkinson attributed the drop to competition, which has included new stores from Wal-Mart Stores, Bentonville, Ark. Corporate sales account for about 33% of total co-op volume.

Retained earnings, which derive primarily from corporate stores, totaled $54.4 million, up 23% from the previous year's $44.3 million. Along with $20 million in Class C stock, Associated uses retained earnings for capital reinvestment. Patronage allocation to non-corporate members was $27.7 million, up 10.8% from the previous year's $25 million.

About 88% of Associated's warehouse volume is distributed through its 4-year-old, 1-million-square-foot integrated warehouse in Farr West, Utah, about 60 miles north of its Salt Lake City headquarters. Efficiency at the warehouse is in the 95% to 99% range, Parkinson said. The co-op owns two more warehouses -- one each in Helena and Billings, Mont.