THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, February 26, 1995 TAG: 9502250416
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY STEPHANIE STOUGHTON, STAFF WRITER
LENGTH: Medium: 98 lines
Hannaford Brothers Co., the New England supermarket chain that began as a fruit and vegetable stand in 1883, plans to open its first ``Hannaford Food and Drug Superstore'' in Hampton Roads this year.
The 45,000-square-foot supermarket, heavy on produce and seafood, is tentatively scheduled to debut this fall next to Pembroke Mall in Virginia Beach. A second Hampton Roads store - in York County - will open early next year. The chain eventually may have as many as 15 stores stretching from Hampton Roads to Richmond.
For now, the company has signed leases for eight stores in five Southeastern markets. Three will open in Virginia: two in Hampton Roads and a 62,000-square-foot supermarket outside Richmond in Henrico County. In North Carolina, three stores will debut in the Raleigh-Durham area and one each in the Winston-Salem and Charlotte markets.
Hannaford estimates that in five years, it could have as many as 60 stores dotting the Southeast.
What will Hannaford offer?
The Hampton Roads stores probably will be heavy on perishables and services like pharmacies and automated teller machines. The supermarkets also will feature prepared-meal centers, seafood departments, wine and cheese areas and bakeries. However, the first two supermarkets to open in this region will not include as much variety as the larger Richmond store will.
Analysts say the company's strategy is to offer everyday low pricing. Hannaford officials say they will not have frequent-shopper programs, because they don't believe customers benefit from them.
The Scarborough, Maine-based company will face fierce competition here from market leader Farm Fresh and several other supermarket chains. Newcomers like Harris Teeter and Farmer Jack also intend to scramble for their share of Hampton Roads' supermarket dollars. And SuperKmart and Target may open ``hypermarts,'' which include discount and grocery stores.
``The supercenters are for real,'' said Michael E. Julian, chairman, president and chief executive of Norfolk-based Farm Fresh Inc. ``We will have to work hard to hold our share of the business.''
And Julian has indicated that he will fight to do that.
Farm Fresh has stepped up promotions on its Gold Card, a frequent-shopper program that gives discounts to consumers. The company will also remodel its stores that are near sites where competitors are planning to open new stores.
Julian says he believes Hannaford and Harris Teeter will face several challenges in Hampton Roads: a lack of name recognition and a shortage of good sites.
He's probably right.
At least once, Hannaford has clashed over sites with Harris Teeter, an upscale supermarket chain based in Matthews, N.C.
Hannaford officials thought they had nailed down a site in Virginia Beach, and were upset to find Harris Teeter staking claim to the spot. Harris Teeter, which offered more money, will end up opening at the site in Princess Anne Plaza.
But Hannaford has some advantages in this market. Among the nation's supermarket chains, it has one of the best profit margins. Its earnings and sales have steadily risen.
Last year, the chain's earnings increased 10 percent to $62.3 million. Sales rose 12 percent to $2.3 billion.
``Over the years, they have been a very consistent grower,'' said Sally Wallick, vice president of Legg Mason Wood Walker Inc. in Baltimore. ``Their balance is strong, and they have increased their dividend.''
To cut expenses, Chief Executive Hugh Farrington has added new technologies that have saved the company millions.
He bought a satellite network that links all of Hannaford's stores, transferring inventory and pricing data, spokeswoman Helen Chase said. The new Virginia and North Carolina stores also will be connected, she said.
Last year, Farrington purchased the company's own electronic switch to process credit-and debit-card transactions. Usually, companies contract that work out to other businesses.
Much of the employee scheduling and some health and safety training also are done through computer programs.
Under Farrington, the 188-store chain has aggressively sought new markets in the Southeast, saying its Northeastern markets have been sluggish. But company officials told the Bangor Daily News in Maine that Hannaford was too big to grow in its Northeastern market area without raising antitrust issues.
Hannaford has 118 stores under several names, including Shop 'n Save, Alexander's Shop 'n Save, Martin's Shop 'n Save and Sun Foods. Last year, it purchased the Wilson's supermarket chain of 21 stores in the Carolinas.
Hannaford will springboard to Virginia by using the same wholesale food company that supplies Wilson's. It also will bring its Hannaford food label down from Maine, and buy products from several local suppliers.
Hannaford isn't finished here. It's still looking for sites in Hampton Roads, particularly in the Princess Anne area of Virginia Beach.
``We have to stay here,'' said Rick Anicetti, senior vice president of retail operations. ``We just can't build five stores and then move to Georgia. We've clearly got to fill in.'' ILLUSTRATION: Graphic
HANNAFORD BROTHERS CO.
Source: Bloomberg Business News
[For complete graphic, please see microfilm]
by CNB