VERNON, Calif. -- Smart & Final here is preparing to expand into Florida next year with its grocery-warehouse style format.
As the first step in that expansion plan, Smart & Final said last week it had agreed to acquire a 90% interest in Henry Lee Co., one of the largest independent food-service distributors in Florida, for $18 million in cash and notes.
The acquisition would pave the way for the 1995 opening of six Smart & Final warehouse stores in Florida, an official of the California company told SN last week. The company plans at least 34 additional Smart & Final units in Florida, depending on the results of the initial rollout, the official said.
Smart & Final's hybrid format features a large food-service-style offering and grocery items in large-sized packs. It does not charge a membership fee to shoppers.
Roger M. Laverty 3rd, president
and chief executive officer of the 145-unit Smart & Final operation, said the acquisition of Henry Lee Co. should lead to "the potential for an aggressive expansion throughout Florida.
"Henry Lee's 230,000-square-foot warehouse and distribution center in northwest Miami will provide Smart & Final with the initial distribution infrastructure to serve as many as 40 Smart & Final stores in Florida," he said.
With the addition of Lee's $150 million sales, Smart & Final said its annual volume will exceed $1 billion.
The Smart & Final format features fewer stockkeeping units (about 11,000 SKUs) than a conventional supermarket and emphasizes items that appeal to small independent food-service operators as well as the general public. Its deli and frozens departments offer large institutional sizes and quantities.
Laverty said Smart & Final, which operates in California, Nevada, Arizona and Mexico, has been contemplating for some time its expansion into new markets.
"The Florida market has shown great potential for this unique warehouse food concept due to its overall growth, significant Hispanic presence and the strong concentration of small independent restaurants and businesses, which are the company's most significant customer base," he said.
Henry Lee Co. distributes 10,000 food-service products to 2,500 customers in Florida, Central and South America and the Caribbean, but carries virtually no private label items.
Edward Sternlieb, Henry Lee's chairman, president and chief executive officer, will retain a minority interest in the company and will continue to manage it, Smart & Final said.
Securities analysts who follow Smart & Final welcomed the expansion news.
"It was the right opportunity at the right time," said Rick Church, an analyst at Smith Barney, New York. "Smart & Final jumped on it because it enables them to leverage off an established business to help subsidize the expansion."
Church said Smart & Final had been talking about a major entry into a new market -- such as Dallas, where the company owns land, or Florida -- for some time. "It chose Florida first because the Henry Lee acquisition was an opportunity that raised its head," he said.
Church said he expects Smart & Final to open its first group of Florida stores in Broward and Dade counties in southeast Florida, eventually moving into the Palm Beach area.
Jonathan Ziegler, an analyst with Salomon Bros., New York, said Smart & Final already has experience running a food-service business in Port Stockton, Calif. "The company has opened warehouse stores around that facility, so it's already doing the same thing in an existing market that it plans to do in Florida, where it's already located store sites," Ziegler said.
Monroe Greenstein, an analyst with Lazard Freres, New York, said the initial group of six stores Smart & Final will open in Florida should allow it to establish the Smart & Final concept among consumers and businesses in that area.