ROANOKE TIMES 
                      Copyright (c) 1996, Roanoke Times

DATE: Saturday, June 29, 1996                TAG: 9607010009
SECTION: BUSINESS                 PAGE: A6   EDITION: METRO 
SOURCE: MEGAN SCHNABEL STAFF WRITER 

THREE-IN-ONE WAREHOUSE MAKES VALLEY VIEW DEBUT

TIDEWATER-BASED Rack & Sack features three stores under one roof: a grocery warehouse, Farm Fresh Market and Drug Emporium.

Roanoke Valley consumers face another grocery-shopping option - and local supermarkets a new competitor - as a Tidewater discount grocery chain today makes its debut in Southwest Virginia.

Farm Fresh Inc. of Norfolk is opening its 24-hour "three-in-one" grocery and drug store in the building that formerly housed Hechinger's hardware store at Valley View Mall.

The largest portion of the 70,000-square-foot store is devoted to Rack & Sack, a warehouse-style store that sells groceries at a discount. The no-frills operation has dry goods shelved in their packing boxes to cut labor costs associated with unpacking and displaying. But unlike wholesale clubs, the new store doesn't require shoppers to buy groceries in bulk.

A second component is a Farm Fresh Market, which sells perishables - produce, meat, deli and seafood products. The third portion of the store is a Drug Emporium discount drugstore and pharmacy.

Farm Fresh - the top-selling grocery chain in Tidewater and the No.2 supermarket in the combined Richmond-Norfolk market, according to Food World magazine - is making its debut in a region already well-stocked with grocers.

Kroger, with nine stores, controls the majority of Roanoke Valley grocery sales. Food Lion has 13 stores in the valley. Harris Teeter has four locations, with a fifth scheduled to open next spring. Winn-Dixie operates three stores in the valley.

Farm Fresh plans to open just one Roanoke store but may expand later into Lynchburg and the New River Valley, said Michael Julian, president and CEO of the chain.

The company doesn't intend to become the Roanoke market leader overnight - if at all - he said.

"Convenience and habit of going to a grocery store is hard to break," he said. Traditionally, new supermarkets try to attract customers by offering grand opening promotional deals during the first few weeks of business.

But Farm Fresh operates on such low profit margins that the chain can't afford such a strategy, Julian said. Across the industry, grocery chains average a 2 percent markup on food items and slightly higher margins on cosmetics and other nonfood products.

"I doubt that Kroger is too worried," Julian said. "We service a cross-section of the socioeconomic customer base out there. But we've only got one store."

Archie Fralin, Roanoke spokesman for The Kroger Co.'s Mid-Atlantic Region, said his company has competed successfully with Farm Fresh in other markets, including Staunton.

"Any time a competitor moves into the market, it's of interest to us," he said. But he doesn't foresee a single Farm Fresh store having much impact on the area's multiple Kroger locations.

In most markets, Rack & Sack competes less with service-oriented chains Kroger and Harris Teeter than with price-oriented Food Lion and Winn-Dixie, said Kenneth Gassman, a retail analyst with Davenport & Co. of Virginia, in Richmond.

Nor does Farm Fresh intend to compete with the 200,000-square-foot Wal-Mart Supercenter right next door, Julian said.

The two discounters likely will feed off each other, Gassman said. "They'll carry the same head of lettuce, but I think it'll work," he said. "You get a critical mass of selling square footage targeting the same market niche, and that'll become the low-price center of Roanoke."

This is Farm Fresh's second entry into the Roanoke grocery market. Until the early 1990s, the company owned the Nick's Markets chain of neighborhood stores. Farm Fresh sold the chain to concentrate on opening larger locations such as the one at Valley View.

The company owns 38 Farm Fresh stores and 13 Rack & Sacks. The Roanoke store is the chain's third three-in-one Rack & Sack; the other two are in Richmond. The Staunton and Harrisonburg Rack & Sacks will be converted in August.

"Over the years, we've done a lot of things very well," Julian said. "The three-in-one store is the best of everything we do."

LENGTH: Medium:   82 lines
ILLUSTRATION: PHOTO:   DON PETERSEN STAFF Vendors and Rack & Sack employees 
          check inventory for the  store's grand opening today at Valley View 
          Mall.