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Hannaford's southern exposure.

When Hannaford Bros. leaped across five or six states last year to acquire Wilson's Supermarkets, a 20-store chain based in Wilmington, N.C., many observers were surprised. Wilson's stores were in a new territory for Hannaford and not contiguous to its operating area in four New England states and in upstate New York.

In addition, the Wilsons stores were conventionals. At about 35,000 square feet, they were far removed from the 50,000- to 60,000-square-foot combination and superstores operated by Scarborough, Maine-based Hannaford, mostly under the Shop 'n Save name. The stores also were quite different from those operated by competitors: They were not as bare-bones as the typical Food Lion, but they also could not compare in size or perishables presentation with the newer Harris Teeter and Bi-Lo stores, to say nothing of the Publix units that were being built in Georgia and South Carolina.

Critics questioned how Hannaford hoped to compete with old and new competitors as it embarked on its ambitious expansion plan in the South.

Hannaford has provided the answer: It will retain the Wilsons name in that company's base area, where most of its stores are located. In addition, three of the stores are being expanded, and an additional store will be built in Wilmington. Hannaford expects to invest $8.5 million in expanding the Wilmington store base. New and remodeled stores will include pharmacies, video departments and the use of credit and debit or ATM cards at checkouts.

More significantly, Hannaford is not using the Wilsons name in new areas as it expands. Instead, expansion in those markets will be under the Hannaford Food and Drug Superstores banner. The chain has not previously used its corporate name on stores.

According to the company, seven stores will be opened by year-end. They will range from 45,000 to 62,000 square feet, and all will contain pharmacies. Two of the North Carolina stores will be in Raleigh and one each in Charlotte, Cary and what is known as the Triad area (Winston-Salem, Greensboro and High Point). Hannaford also has two additional sites in Charlotte, which the company says are in the approval process.

To demonstrate that the Wilsons name will be confined to the Wilmington area, two stores in Fayetteville will be renamed Hannaford, although the company had not decided whether these stores will be superstores or combinations.

The Hannaford expansion will go beyond the borders of North Carolina. The chain expects to open a 62,000-square-foot combination store late in 1995 on West Broad in Richmond. A second store will be built in Virginia Beach, and Hannaford says it will open an additional unit in the Tidewater or Hampton Roads area of Virginia early next year. Officials would not comment on further expansion plans in Virginia, or to the south, where there are two Wilsons stores, in Conway and Mullins, S.C.

However, the seriousness of Hannaford's plans for the South was demonstrated by the fact that the company has set up a Southern division in Durham, N.C., to operate both the Wilsons stores, which will be under Larry Wilson of the founding family, whose title is Hannaford vice president of Wilson's, and the Hannaford stores.

Rick Anicetti has been named senior vice president of operations for the division. He was senior vice president for retail operations in New Hampshire and Massachusetts. Other divisional appointments are Bob Stapleton, formerly corporate director of human resource operations, who will head all human resources in Durham; and Tom Butterfield, formerly director of grocery procurement, who will be divisional director of merchandising.

In describing the Hannaford combination stores planned for North Carolina and Virginia, a company release said they will feature "farmers' markets for produce, meal centers, European-style seafood departments, wine and cheese centers and bakeries."

Hannaford also is stressing community involvement. The Hannaford Charitable Foundation has donated S34,000 to the University of North Carolina for scholarships. And, in advance of its move into Richmond, the foundation is contributing $20,000 to two non-profit Richmond neighborhood resource organizations.

James Moody, chairman and former CEO of Hannaford, shed some light on the chain's southern strategy in his presentation at the Lehman Bros. annual food retailing conference in February.

Asked by one analyst why Hannaford chose Richmond, where Ukrop's share is more than 30%, Moody conceded that "there are some very good stores in the market, notably Ukrop's. Is there a need there for what we do? Ukrop's is unlikely to do all the business. We feel we can get some business from them and a great deal from other retailers," he said. Other competitors include Harris Teeter, Bi-Lo, Farm Fresh and Food Lion. Overall, Hannaford expects to open 10 stores annually in the South during the next several years, he said.

Moody also implied a delineation between the Wilsons stores and those to be operated in the South under the Hannaford name. The Wilson's integration is going very well, he said. "We don't want to help them to death. They don't have the infrastructure to take in all the things we might want to load on them." Some buying arrangements have been renegotiated, Moody said, singling out greeting cards.

Asked about the cost of operations, he characterized Wilsons stores as profitable, but relatively simple, with limited private label. They made money by keeping operating costs low. We don't want to jam expensive things on them."

Hannaford has no current plan to move to self-distribution in the South, where it buys from Fleming, through a former Scrivner house. At the same time, Moody made it clear that the company at some time will open a warehouse. "The expectation is that we will probably have enough volume to self-distribute in the next two or three years," he told analysts. "Buying from a wholesaler is not necessarily the best way to acquire food products, but we don't have enough volume to do otherwise. Besides, they want our business and are competitive."

While it is getting most of its product from Fleming, Hannaford is planning to ship health and beauty care products south from its HBC distribution center in Winthrop, Maine, Moody said. This will be more economical than buying products in the category from a southern wholesaler or a rack jobber, he said.

The company is not focusing all its expansion in the South. Nine stores will be opened this year. They consist of new stores in Peabody, Mass.; Williston, Vt.; and South Troy and Glenville, N.Y. Replacement units will be opened in Nashua, N.H.; Burlington, Vt., and Brunswick, Skowhegan and Dexter, Maine.

In his talk, Moody discussed the company's new 62,000-square-foot format, which was opened under the Shop 'n Save banner in Kingston, N.Y., adapted in a smaller version in two other locations and undoubtedly will be the prototype in both the North and the South. "Kingston is doing extremely well. It has great perishables and very cheap groceries with warehouse racking," he said.
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Title Annotation:includes related article; Hannaford Bros.
Author:Weinstein, Steve
Publication:Progressive Grocer
Date:May 1, 1995
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