On the acquisition trail.
In 1983, net sales skyrocketed to $4.9 billion, a jump of 32.8% over 1982. (The 1983 fiscal year was a week longer than 1982.) Net earnings fared even better, growing 42% to $41.7 million. During the past five years, sales have increased at a compound growth rate of 14.6% and net earnings have compounded at 20.5%.
Buoyed by all the growth that occurred in 1983--plus the imminent acquisition of United Grocers Ltd. of Richmond, Calif., which is set to close later this month--1984 is shaping up to be another record year. During the first 28 weeks of the current fiscal year, sales totaled $2.76 billion, a 10% increase over the same period last year. During this same period, net earnings climbed 17.4%, to $24.6 million, tonnage shipped from the distribution centers rose 7.4% and warehouse tons per man-hour increased by 3.6%, signifying further productivity gains.
Much of Fleming's recent growth has resulted from acquisitions completed in late 1982 and early 1983. R.D. Harrison, chairman and chief executive officer of Fleming, says, "The year following a period of rapid expansion is crucial. It is a time when, after making acquisitions, a company must make those acquisitions fit into total operations."
The takeover binge began in late 1982, when the Oklahoma City-based wholesaler purchased five of the six subsidiaries of Waples-Platter, a Fort Worth-based wholesaler that serves more than 230 stores throughout Texas. The $91 million transaction brought Fleming two full line distribution centers, in Fort Worth and Lubbock, and three food service centers operating as White Swan Foods in Dallas, Austin and Lubbock. The Waples-Platter companies add approximately $750 million to Fleming's sales and give the company more expertise in food service.
Before they had time to digest Waples-Platter, Fleming was on the acquisition trail again, purchasing American-Strevell of Salt Lake City in early 1983. Fleming invested $12.4 million in internally generated funds and assumed $11.4 million of additional debt to acquire the company. Fleming divisions have been created in Salt Lake City and Portland, Ore., from the former American-Strevell.
Last October, Fleming purchased Giant Wholesale Corp. of Johnson City, Tenn., for $9.3 million plus the takeover of certain debts Giant had. This center, which supplies 189 retailers in Tennessee, North Carolina, Kentucky, Virginia and West Virginia, will help Fleming expand in the mid-South.
Fleming's latest purchase bid came in the summer of 1984, when it made an offer to buy United Grocers, a wholesaler based in Richmond, Calif. United Grocers serves 1,500 stores in California and Nevada. This move, still awaiting the approval of United Grocers' shareholders, marks the first time that Fleming has purchased a cooperative. United Grocers operates warehouses in Richmond, Fresno and Sacramento along with a general merchandise center in Sacramento and a perishables facility in Fremont. The firm's sales for the fiscal year that ended April 14, 1984, were $1.04 billion.
As of the end of 1983, Fleming served 3,400 stores in 31 states. Those stores sport 38.8 million square feet of selling space and have estimated retail sales of $9.5 billion. Compared to 1982, before the Waples-Platter acquisition, the number of stores served increased 31.3%, total square footage jumped by 52.2% and total retail sales climbed 58.3%.
The gains last year were even more dramatic when one looks solely at supermarket accounts. At the end of 1982, Fleming served 970 stores that do more than $2 million annual sales. By December 1983, 1,350 stores were in this group. Total supermarket square footage jumped by 58.6% and retail sales from supers skyrocketed by 65.3% during this same period. Supermarkets served by Fleming average 21,880 square feet, and represent 86.6% of wholesale volume. More than 1,200 Fleming-supplied stores operate under voluntary group names such as IGA, Piggly Wiggly, United Super, Thriftway and Minimax. With 730 IGA accounts, Fleming is the largest IGA supplier in the country.
The number two wholesaler continues to expand its customer base by signing new accounts and encouraging existing customers to build new stores or enlarge present units. Fleming formed a new IGA group through its Waples West division in Lubbock. This organization opened with 16 members and expects to grow. Fleming's Philadelphia division recently added 15 units in Washington, D.C., and Baltimore.
In 1983, Fleming-supplied retailers opened 88 new stores that together totalled 2.2 million square feet, a jump of 79.5% over the amount built the year before. The average size of the new stores is 24,700 square feet. "The trend toward increased size is an important one, as stores become larger to strengthen their competitive positions, to be more energy efficient and to offer consumers the increasing variety they demand," says E. Dean Werries, Fleming's president and chief operating officer.
Although the majority of Fleming's customers operate conventional supers, Fleming is aggressively expanding the scope of the formats it serves. Fleming holds the Food 4 Less franchise in 27 states and its Dixieland group recently started supplying two Florida Food 4 Less units, in Gainesville and Tallahassee. Approximately 4.5% of Fleming's revenues are produced by corporate stores.
Through Fleming Finance, the wholesaler supplies the capital its customers use to grow. In 1983, the retailer loan portfolio was $68.5 million, up from $57.8 million at the end of 1982.
Fleming is also extremely productivity conscious. Productivity as measured in tons per man-hour increased by 5.8% in 1983. The company's gains in productivity result from people-oriented programs and technological improvements.
On the high tech front, Fleming continues to pioneer computing usage in wholesaling. The corporation's computer was specially designed for its distribution centers. It measures performance and tracks inventory and product movement, helping to streamline the distribution function. During 1983, inventories turned 18.6 times.
Fleming even uses technology to improve its transportation network. Systems chart the effectiveness of drivers, equipment, and retail receiving operations. Many vehicles have on board computers. Backhaul is also reducing the cost of transportation. In 1983, revenue contributed by backhaul increased by 23.2%--excluding acquisitions.
Fleming is also making inroads with food eaten away from home. As more people eat an increasing proportion of their meals away from home, many supermarket chains and wholesalers are conceding this share of business to restaurants and fast food establishments. However, Fleming perceives food service as a business presenting tremendous growth potential.
The food service side of Waples-Platter was a primary reason for Fleming's decision to acquire the company. Since the deal, Fleming has transformed its food service location in Lakeland, Fla., into a White Swan, using concepts that have made the company a premier food service facilties serve almost 20,000 eating establishments--from fancy restaurants to hospital cafeterias--in Texas, Oklahoma, New Mexico, Louisiana and Florida.
Prior to the Waples-Platter acquisition, food service accounted for less than 3% of Fleming's total sales. By the end of 1983, food service contributed 6.7% of sales and it should expand even more in the future. The White Swan group is investing almost $10 million in the construction of a 216,000-square-foot facility in Houston that will give the company an even stronger presence in that market.
Fleming will continue to get bigger and better in the future. Chairman Harrison says, "As the industry continues to consolidate, other quality companies will find it beneficial to join forces with Fleming, thereby gaining access to additional financial and operational resources... Sizable investments and concentrated efforts will be required to achieve the productivity gains necessary to succeed in this environment. By making such a commitment, Fleming will be an excellent position to increase its market share and achieve sound long-term growth."