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Productivity improvements boost earnings.

While many wholesalers look outward for companies to acquire and territories to enter, Super Food Services has been content to look inward for improvement. and it has found it. The Dayton, Ohio-based wholesaler has recorded impressive increases in net earnings in the current and latest fiscal years due to improved productivity at its distribution centers and increased sales by customers.

During fiscal 1984, Super Food has posted impressive increases in earnings over fiscal 1983, an impressive year itself. Through May 5, the end of the first 36 weeks of fiscal 1984, net income increased to $4.7 million, 43% more than the $3.3 million recorded in the comparable period of fiscal 1983. Net income for the 12-week period that ended May 5 stood at $1.5 million, 29% more than the third quarter of fiscal 1983.

Jack Twyman, chairman of Super Food, says, "Although we are pleased with these accomplishments, the numbers onlu partly reflect the excellent results we began experiencing late in fiscal 1983 from the many new programs of improved oroductivity implemented during the past year. We believe the continuation of these programs provide a sound basis for higher levels of productivity."

Sales are at record levels, although net sales increases so far in fiscal 1984 are not as dramatic as the leap recorded by earnings.

Total revenue during the 36-week period that ended May 5 rose 5%, to $889 million.

Super Food's climb to improved profitability began in fiscal 1983. Sales for the fiscal year that ended Aug. 27, 1983, were $1.22 billion, 8.5% higher than the $1.13 billion recorded in fiscal and 1982. During fiscal 1980, 1981 and 1982, net sales climbed by 9.1%, 6.7% and 8.8%, respectively, but significant net earnings growth did not occur until 1983. The sales improvement resulted from the addition of new accounts, and from increased sales in stores operated by Super Food retailers.

During fiscal 1983, net income skyrocketed by 50.8%, to $5.54 million. This followed annual increase of 9.2% in fiscal 1982, 1.7% in 1981 and 5.4% in fiscal 1980. The net after-tax margin for fiscal 1983 was 0.45% compare to 0.32% for the prior year. Twyman says, "Improvement in this important area will continue to be a goal of our company."

Super Food supplies more than 800 retailers in Ohio, Michigan, Kentucky, Indiana and Florida. Approximately 380 of the independent stores do business under the IGA banner. The company operates warehouses in Ohio, in Bellefontaine and Cincinnati; Michigan, in Bridgeport and Saginaw; and Orlando, Fla.

A new facility was recently completed in Michigan, as was an expansion in the Florida division. Says Twyman, "For the first time in many years, we have ample capacity in all divisions and are positioned to grow internally and to aggressively compete for additional sales outside of our traditional customer base."

To gain additional volume for its facilities, Super Food is aggressively pursuing all types of accounts, not just conventional supermarkets. "We are in an 'economy of scale" industry, and volume is an important ingredient toward the efficiency of any distribution center," Twyman says. "A wholesale grocery company must be prepared to be a leader in all new retail formats."

super Food-supplied locations range from independently owned convenience stores to mammoth Albertson's combination stores. (In fact, sales to 57 Albertson's units in Florida represent 27% of Super Food's total volume.)

To help its members increase sales and thus boost movement through the distribution centers, Super Food has been encouraging its affiliates to build new supers and remodel existing units. Super Food customers added 1.1 million square feet to stores during fiscal 1983. Many of the expansions were quarterbacked by the store development departments located at the distribution centers.

Although Super Food has avoided the acquisition route to expansion so far, the firm's direction could change. Twyman says, "With our physical plants and improved financial strength, we will now be more active in looking for acquisitions. As a company, we offer an attractive alternative to many companies in the wholesaler industry. We want to limit our acquisition activity totally to the wholesale distribution industry in those areas that would be contiguous to our existing marketing areas."

With the supermarket industry becoming increasingly segmented into varying formats and styles, timely information is becoming essential to the profitable operation of distribution facilities and supermarkets. To gather data that can aid the marketing efforts and internal controls of the distribution centers and their customers, Super Food has aggressively upgraded its computer programs.

Twyman says, "The most dramatic innovation as far as retail technology is concerned is the introduction of micro and mini computers at retail. Our retail services department is working vigorously to be at the leading edge of this revolution so that we will be in a position to support our retail customers with the hardware and software necessary to take advantage of the efficiencies apparent in the use of electronic technology."

The wholesaler is developing a package of six computer applications to market to its retailers under a program called SCORE (Super Food Computerized Operations for Retail Efficiency). A direct store delivery program was the first application. As of October, 30 stores had installed the system, with 70 more projected to be in operation by mid-1985.

"We developed a priority list based on a survey of our retailers, and a direct store delivery program was requested the most," says Larry Dear, vice president of corporate information systems. The system enables retailers to maintain price controls, case costs, rebates, discounts and other accounting functions associated with DSD products. It helps make receiving more accurate through the use of a wand scanner and computerized labels.

A time and attendance program that will computerize the timekeeping function at store level will be the next software program offered. The system will tell employees when they are clocking in too early or out too late, and requires supervisor approval to do that.

The program, which will be introduced late in 1984, should improve the labor ratio at participating stores by eliminating extra payroll time and by reducing the clerical work required to calculate payroll. The system will eventually be able to electronically communicate labor hours into Super Food's mainframe computer for stores that subscribe to the wholesaler's payroll service.

Programs on the drawing board include meat cutting tests, a complete meat inventory management system, a financial system package and an application that will send invoices to stores electronically. This will allow grocers to know exactly what will arrive with each truck-load, and at what price.

Super Food has also utilized technology to improve productivity within its distribution centers. Engineered work standards for order selection and loading are in place in the Orlando and Cincinnati warehouses. Employees are rewarded when they perform at a certain percentage above the norm. A similar system should be in place in the Bellefontaine distribution center by June 1985.

The Orlando facility has instituted a warehouse management and merchandise management system to improve the organization of the products within the facility. At every distribution center, the store development teams are working with personal computers that create electronic spread sheets to simplify the process of doing a breakeven analysis. "We are committed to using technology to improve both our profitability and the profitability of our customers," Dear says.

Super Food has also worked to improve its bottom line by issuing 600,000 shares of common stock in July 1983. The more than $15 million raised by the offering was used to retire short- and long-term debts. At the close of fiscal 1983, Super Food had no short-term bank debts, as compared to $5 million and $3 million at the end of the 1982 and 1981 fiscal years, respectively.

"With the proceeds of the public offering, we have reduced our short-term debt substantially and dramatically increased our shareholder equity," Twyman says. "Our capital expenditures in physical plants will remain minimal in the year ahead. With that scenario in place, we will perform more cnsistently. In the years ahead we will be able to improve our performance on a consistent basis because of our increased financial strength.

"There is no question we are now postured to continue to improve our operations and, as a result, improve our margins. This will ensure continued success in all phases of our business."
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Title Annotation:Super Food Services
Publication:Progressive Grocer
Date:Nov 1, 1984
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