OKLAHOMA CITY (FNS) -- Fleming Cos.' annual report, released last week, is bullish on the Internet fulfillment business, noting that Internet-based business could represent as much as 10% of the firm's total wholesale volume in the "very near future -- and a great deal more within three to five years."
American Grocer.com and, most recently, Webvan.com."
"Our early involvement enables us to be one of the leading players and standard-setters in the multibillion-dollar Internet marketplace," said Mark S. Hansen, chairman and chief executive officer. "In fact, we're already benefitting from the tremendous momentum."
Internet fulfillment sales and a number of other "strategic" factors are expected to contribute to a corporate sales increase in fiscal 2000, the first such increase in more than five years, the report pointed out.
Noting a "tremendous potential" for value retailing, Fleming will concentrate growth in its Food 4 Less and other value-oriented retail operations, the report said. "The segment has been growing at an impressive rate and shows no signs of slowing. This durable format features a very low cost structure, along with the highly competitive prices that attract value-conscious consumers."
The company added nine Food 4 Less stores to its retail operations last year and expects to open at least six more such units in 2000. Also, additional value-retail concepts will be tested. It was said that the typical Food 4 Less store costs up to 30% less to build than a conventional supermarket. By the end of 2000, Fleming expects to be operating at least 30 Food 4 Less units with total annual sales of about $700 million.
While the divestiture or closing of seven retail chains and groups has been completed or is under way, the company will focus on improving the performance of "strong regional players," including Baker's, Rainbow Foods, Sentry Foods and Abco Foods, the report stated. Capital expenditures this year will total $180 million, compared with $166 million spent last year.
The report contends that Rainbow Foods holds the No. 1 market position in Minneapolis. In Milwaukee and southeastern Wisconsin, the Sentry banner has a second-place market share, and in Omaha, Neb., Baker's is the share leader, the report said.
The company's distribution arm this year will be focusing on nontraditional sales. Last year, Fleming added $1.4 billion in annualized net distribution sales, a sizable share from nontraditional sources including mass merchants. The company, as reported, completed contracts to serve more than 800 Kmart stores and expanded business in Target Stores and Drug Emporium. Kmart is Fleming's largest customer, accounting for about 4.5% of sales.
As a result of distribution center consolidations, the company increased the average sales volume per center 24% from 1998 to 1999. By year-end 2000, an additional 22% increase is expected.
Fleming will centralize more than 60% of all merchandise procurement in 2000, shareholders were told. "This will make more efficient use of procurement staff, improve our buying effectiveness and substantially reduce the cost of all goods."