THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, July 21, 1995 TAG: 9507210627
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY STEPHANIE STOUGHTON, STAFF WRITER
LENGTH: Medium: 76 lines
Farm Fresh Inc. is retreating partially from the Richmond market by selling six grocery stores and other properties to rival Hannaford Bros. Co.
The deal, worth about $25 million, was announced Thursday.
Farm Fresh is selling the stores, in part, because of tough competition in the Richmond market. Also, Hannaford and Harris Teeter are planning to open stores and Wal-Marts there may start selling groceries.
The sale does not mean that Farm Fresh is leaving the Richmond market. The company plans to increase its discount supermarket presence by turning three of its remaining stores into Rack & Sacks. After the changes, it will operate seven stores in the market: four Rack & Sacks and three under the Farm Fresh name.
Farm Fresh Chief Executive Officer Michael E. Julian said that, in Richmond, the company is moving away from its standard grocery store format, which often includes a pharmacy and an ATM.
``In Richmond, we are clearly . . . concentrating on the discount part,'' Julian said.
The stores being sold operate under The Grocery Store name. In all, seven are being sold: six in Richmond and one in Charlottesville. Also included in the sale are a store under construction and the assets from two closed stores in the Richmond area.
Hannaford initially plans to keep The Grocery Store name until it converts the stores to its own format.
About 900 employees work at the seven Grocery Stores. They will be interviewed by Hannaford or given jobs at other Farm Fresh locations, company officials said.
The purchase - subject to approval by Farm Fresh's directing board - is expected to close this fall.
Julian would not comment when asked whether Farm Fresh might sell additional stores.
For Farm Fresh, it's a good time to scale back.
The company's Grocery Stores - which operate only in the Richmond area - have struggled to win shoppers from Richmond-area supermarket leader, Ukrop's, and others. The new competitors, Hannaford and Harris Teeter, promise to make the battle even fiercer.
For Hannaford, the purchase means a better chance of beating Harris Teeter into the Richmond market.
North Carolina-based Harris Teeter and Hannaford both plan to open stores in Hampton Roads, as well.
``What this does is it gives us an immediate presence (in Richmond),'' said Helen Chase, a spokeswoman for Scarborough, Maine-based Hannaford. MEMO: What Hannaford will buy:
*Six The Grocery Store supermarkets in the Richmond area and a
seventh in Charlottesville
*One store in Richmond under construction
*Assets from two closed stores
What Hannaford will pay:
*$25 million
Number of stores Farm Fresh will operate after the sale:
*57 stores
Why Farm Fresh is selling the stores:
*Increasing competition
*Stores were not performing as well as others
*To switch focus to discount division in the Richmond market and free
up capital to invest in other stores
Why Hannaford is buying the stores:
*Mainly to get into the market quickly before competitors. The move
also saves the company money by CNB