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COMBINATIONS

The most obvious way in which food retailing is combining is simply by means of the spate of acquisition activity that's taken place in recent months.But as a glance at the front page of this week's issue will show, retailing is combining in subtler ways, too: Some industry players are busily moving from being holding companies that devolve management to the local level to becoming companies that

The most obvious way in which food retailing is combining is simply by means of the spate of acquisition activity that's taken place in recent months.

But as a glance at the front page of this week's issue will show, retailing is combining in subtler ways, too: Some industry players are busily moving from being holding companies that devolve management to the local level to becoming companies that drive important management activities from a central headquarters.

To start, let's take a look at the news article written for this week's SN by Center Store Editor Carol Angrisani about American Stores Co. Traditionally, American Stores could have been considered a holding or investment company with food- and drug-retailing interests. American Stores owns a batch of supermarket chains that occupy territory on both coasts, and in a good deal of the central part of the nation too. The food-retailing chains are as diverse as Acme, Jewel Food Stores and Lucky Stores. To add to the complexity of the situation, it also operates drug stores under the Jewel Osco, Osco Drug, Sav-On and other banners.

Considering the food-retailing assets alone, there is far more than geographical diversity among the chains. They market in different ways too. For instance, some trade on a high-low offer, others on the everyday-low-price premise. All have different images in different markets. Perhaps because of these complexities, American Stores for many years relied on local management teams to operate chains.

Gradually, though, American Stores has been inching toward combining some aspects of management to lessen operational costs and to improve other efficiencies. Nearly five years ago, American Stores centralized its private-label procurement efforts and about 18 months ago did the same for branded products.

Now, the most recent news is that American Stores will fold marketing into the centralized procurement system, pulling that activity away from local levels. In short, American Stores has made a commitment to category management by putting buying and selling activities into the hands of the same team.

Next, take a look at the Page 1 news feature about Ahold. That article was developed by SN Senior Editor David Orgel, who spent several days with Ahold's senior management in Holland.

During a period of some 20 years, Ahold has been busy acquiring numerous chains in this country. It has grown in that period from selling not a thing in this country to becoming a $14.3 billion force. Ahold owns chains such as Bi-Lo, Giant Food Stores, Stop & Shop Cos., Tops Markets and others. These chains are perhaps more diverse than American Stores.'

As might be expected, Ahold USA was the quintessential holding company at first, then gradually moved into combining some operations. Notably, Ahold has developed integrated information-technology systems for its chains. It also has trimmed the number of banners it operates by combining companies, has moved to centrally procuring and distributing slow movers and also uses a common private-label brokerage across its chains.

As holding companies such as these move into more and more combinations in search of rational and efficient operations, one consideration should be kept in mind: Customers still buy locally, so the importance of local products and merchandising techniques must not be sacrificed. More than one chain has found its expansion plans stymied when that principle was left behind.