Spartan Eyes Food Town Alternatives

February 7, 2003
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GRAND RAPIDS — Spartan Stores Inc. is “exploring alternative strategies” for its 39 Food Town retail grocery stores.

Spartan acquired the Food Town supermarkets in August 2000 at the same time it acquired 21 deep discount drugstores known as The Pharm.

The Pharm drugstores are not part of the strategizing effort, which was announced last week.

The company said that following a comprehensive review, it has decided to “take more decisive actions” with its Food Town stores in Northwest Ohio and Southeast Michigan, in the general area of Monroe County.

Spartan is working with The Food Partners, an investment banking firm that specializes in the food industry, to devise a new strategy.

Sale of the stores is one of the potential options, acknowledged Gregory O’Brien, a principal of The Food Partners.

“We’re helping them evaluate the stores overall. Sale is one of the areas that will be looked at,” he said, adding that he couldn’t comment on what other alternatives Spartan is considering.

“There are a range of options that are being evaluated. They’re going to be making a decision about what they will do and they haven’t made that decision yet.”

Chairman, President and CEO James B. Meyer said all the options under consideration are intended to return retail operations to profitability more rapidly.

Spartan also announced last week it will close its Ohio distribution facilities that have served Food Town and The Pharm stores exclusively.

None of Spartan’s independent retail grocery store customers have ever been served by the Ohio facilities, noted corporate spokesperson Jeanne Norcross.

Norcross said the decision to close that operation was independent of the strategic review process the company is undertaking with its stores.

The planned warehouse closings in Ohio are intended to reduce operating costs and improve operational efficiency.

“When we acquired Seaway Food Town back in August of 2000, there was the distribution center that had served the Food Town grocery stores for 50 years, as well as serving The Pharm stores.

“We had looked at our whole supply chain over that period of time and really came to the conclusion that it just wasn’t cost effective to operate three distribution centers.”

The one in Ohio is the smallest and has the smallest capacity of the three.

After evaluating all three of them, the labor costs and the logistics of transportation, it just made sense from an efficiency point of view to operate only two centers, she said.

The Ohio operations will be folded into Spartan’s Grand Rapids and Plymouth, Mich., distribution facilities.

Although there will need to be some short-term staffing adjustments made while that transition is taking place, the company doesn’t anticipate the creation of any long-term jobs with the consolidation, Norcross said.

Spartan will host its third quarter earnings conference call on Feb. 13.           

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