INDUSTRY PERSPECTIVE

SEATTLE (FNS) -- Consolidation in the supermarket industry has become the overarching catalyst for recent changes in the fresh-foods departments, according to a number of industry observers and retail veterans interviewed by SN.The effects of consolidation are bringing the perishables business closer in practice to the other parts of the business, like Center Store, according to Bill Bishop, president,

SEATTLE (FNS) -- Consolidation in the supermarket industry has become the overarching catalyst for recent changes in the fresh-foods departments, according to a number of industry observers and retail veterans interviewed by SN.

The effects of consolidation are bringing the perishables business closer in practice to the other parts of the business, like Center Store, according to Bill Bishop, president, Willard Bishop Consulting, Barrington, Ill.

"We are not absolutely sure of what the new world will look like. We only know it will be different," he said.

Ed Odron, a former retailer and now president of Ed Odron Produce Marketing Services, Stockton, Calif., agreed, saying the future is still uncharted territory, though operators know their mandate.

"The driving force is to take cost out of the business," he said. "Competition won't let you raise retail prices, and with produce, it's supply that controls the markets."

Grower/shipper fears of consolidation's impact on the number of potential trade customers have come true, according to Ray Gilmer, communications director, Florida Fresh Fruit and Vegetable Association, Orlando.

"There are fewer retailers to sell to and there is a concentration of the market. The physical impact is growers don't have options to find the best possible buyer and develop relationships," he said. "Retailers are becoming mass merchandisers and there are few options for segmentation."

Executives in the new consolidated chains have received orders to find new ways to manage a greater number of stores and larger distribution areas, with a smaller staff. As a result, they're increasingly turning to technology to process data, maintain systems and track performance.

Category management is one area that is expected to accelerate in perishable departments. Operators will live and die on how well the business is managed with strong pressures placed on realizing synergies and driving sales at a brisk pace.

"These mergers are actually forcing perishable departments to catch up with the other departments," said Bruce Axtman, president of an East Wenatchee, Wash.-based consulting and research firm. "Technology resources, unavailable to perishable executives in the past, are now available."

In addition to category management, operators are exploring other applications as a means to improve transactions.

Those operators who've made an investment in technology will not have to play catch up when it comes to obtaining accurate movement data, profit identification and shrink numbers.

"The mergers have helped operators achieve savings in most cases," said Dick Spezzano, a Monrovia, Calif.-based consultant. "Kroger, with their Fred Meyer units, has been way ahead of projections. Albertson's is doing well."

"Bringing together the best practices of the acquiring company and the company being acquired will produce a hybrid," said Odron. "Once completed, there's tremendous information power in the corporate office for tracking sales."

Cost savings aside, fresh-foods departments are seeing shifts in operations that will fundamentally change the way they have done business. Regarding procurement, operators are moving toward centralizing transactions to streamline operations. Logistics and merchandising are being increasingly separated operationally, observers said.

"Logistics can be easily centralized," said Bishop. "Merchandising and product authorization take market expertise."

One of the driving forces behind centralized logistics, particularly with perishables, is the demand for more frequent deliveries. Produce in particular presents substantial obstacles as retailers strive to condense back-room operations.