Food4Less franchise registered with state
By Andrew Gomes
Advertiser Staff Writer
The state's largest wholesale grocery distributor, Fleming Companies Inc., has registered its Food4Less warehouse-style retail supermarket franchise with the state.
Fleming representatives said they could not share what, if any, plans they have for Food4Less in Hawai'i, but the company expects to open 75 of the stores nationwide in the next two years.
Randy Hatcher, a Fleming spokesman, said "there is no plan in place" for Fleming to expand the Food4Less concept in Hawai'i with company-owned stores. He added that the company has nothing to announce regarding the possibility of expanding the chain here with a franchisee.
Analysts who follow the Lewisville, Texas-based company said Fleming has aggressively been acquiring conventional supermarket chains in Mainland markets to expand its Food4Less operation, and noted that some kind of acquisition would make sense here.
At least one local supermarket operator said a representative of Fleming has asked whether the grocery chain was available for sale.
Fleming also could be seeking to partner with the owner of existing local grocery stores that could be converted to the Food4Less format, or an independent franchisee to start the chain from scratch, according to observers.
Fleming's Food4Less stores are "price-impact" supermarkets that average 55,000 square feet. They are more similar in size and product variety to conventional supermarkets, but with service and prices more comparable to larger warehouse retailers like Costco.
Fleming, which holds Food4Less franchise rights in Hawai'i, owns or franchises 99 Food4Less stores in about a half-dozen states. Expanding the retail operation has been a strategic growth strategy for the $14 billion food distributor, which in recent years has been trying to diversify beyond wholesale grocery distribution.
In Hawai'i, Fleming does an estimated $300 million in food distribution business by supplying more than 60 percent of the groceries to local stores, including Foodland, Times and Daiei.
If Fleming expands its Food4Less operation in Hawai'i, it would mark a return of the chain that had a brief history in the Islands.
Foodland opened two Food4Less stores in 1988 under a license agreement with Fleming, but converted one to a Sack 'N Save in 1992. In 1996 it sold the other, which is now Pacific Supermarket.
Sheryl Toda, a Foodland spokeswoman, said terms of the Food4Less license prevented Foodland from providing the selection and service it desired, so the operating agreement was ended.
Toda added that Foodland, with 28 stores, is not interested in another Food4Less franchise or selling.
"We are committed to remaining a locally owned and family business," she said.
John Fujieki Jr., chairman and chief executive officer of locally owned Star Markets, said the 10-store chain also is not considering becoming a Food4Less franchisee or selling its stores.
Raymond Teruya, chairman and chief executive officer of the 13-store grocery chain Times, did not say whether the kama'aina company is considering becoming a Food4Less franchisee, but said Times "is not being sold and it is not expected to be sold in the near future."
Industry analysts said conventional supermarket operators have come under increasing pressure in the last few years from warehouse-style retailers like Costco, Sam's Club, Wal-Mart, and Kmart — all of which do business in Hawai'i.
Neil Currie, a food-and-drug retail analyst at UBS Warburg in New York, said conventional supermarkets are losing about 1.5 percent market share annually to discount chains, limited assortment retailers, convenience stores and drugstores.
"The profitability of selling food has grown over the last 10 years in this country, so it has allowed the discount operators to flourish and take market share," he said.
Fleming, one of the nation's largest food distributors, has taken note of the market changes. Earlier this year it struck a $4.5 billion deal with Kmart to supply all its food and consumable products.
Fleming also recently completed a retail exit from the conventional supermarket business by selling, converting to a discount warehouse format, or closing more than 150 company-owned supermarkets.
At the same time, Fleming has increased its discount grocery business to 99 stores, in part by acquiring and reformatting conventional supermarkets from other retailers.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
