Safeway 1997 Annual Report Download - page 15

12
Safeway Inc. (“Safeway” or the “Company”) is the second
largest food and drug chain in North America based on sales,
with 1,368 stores, including 315 Vons stores, at year-end 1997.
The Company’s U.S. retail operating areas are located princi-
pally in Washington, Oregon, northern California, southern
California, Arizona, Colorado and the Mid-Atlantic region. The
Company also has Canadian retail operations which are located
primarily in British Columbia, Alberta and Manitoba/Saskatchewan.
For each of its 10 retail operating areas, Safeway believes that
it holds the number one or number two market share position
for the total area served. In support of its retail operations, the
Company has an extensive network of distribution, manufacturing
and food processing facilities.
On April 8, 1997, Safeway completed the acquisition of The
Vons Companies, Inc. (“Vons”) pursuant to which the Company
issued 83.2 million shares of the Company’s Common Stock for
all of the shares of Vons common stock that it did not already
own (the “Merger”). The Company also holds a 49% interest in
Casa Ley, S.A. de C.V. (“Casa Ley”), which operates 74 food and
general merchandise stores in western Mexico.
Retail Operations
Stores Safeway operates stores ranging in size from approxi-
mately 5,900 square feet to over 89,000 square feet. Safeway
determines the size of a new store based on a number of con-
siderations, including the needs of the community the store
serves, the location and site plan, and the estimated return on
capital invested. Most stores offer a wide selection of both food
and general merchandise and feature a variety of specialty
departments such as bakery, delicatessen, floral and pharmacy.
In most of Safeway’s larger stores, specialty departments are
showcased in each corner and along the perimeter walls of the
store to create a pleasant shopping atmosphere. Safeway’s pri-
mary new store prototype is 55,000 square feet and is designed
to accommodate changing consumer needs and to achieve cer-
tain operating efficiencies.
Safeway continues to operate a number of smaller stores
which offer an extensive selection of food and general merchan-
dise, and generally include one or more specialty departments.
These stores remain an important part of the Company’s store
network in smaller communities and certain other locations
where larger stores may not be feasible because of space limita-
tions and/or community needs or restrictions.
The following table summarizes Safeway’s stores by size at
year-end 1997:
Number Percent
of Stores of Total
Less than 30,000 square feet 368 27%
30,000 to 50,000 730 53
More than 50,000 270 20
■■■■■
Total stores 1,368 100%
■■■■■
Store Ownership At year-end 1997, Safeway owned more than
one-third of its stores. Safeway leased its remaining stores. In
recent years, the Company has preferred ownership because it
provides control and flexibility with respect to financing, remodel-
ing, expansions and closures.
Merchandising Safeway’s operating strategy is to provide value
to its customers by maintaining high store standards and a
wide selection of high quality products at competitive prices.
The Company emphasizes high quality perishables such as
produce and meat, and specialty departments, including in-
store bakery, delicatessen, floral, and pharmacy designed to
provide one-stop shopping for today’s busy shoppers.
Safeway has introduced a line of more than 850 premium
corporate brand products since 1993 under the “Safeway
SELECT” banner. These products include soft drinks, pasta
and pasta sauces, salsa, whole bean coffee, cookies, ice
cream, yogurt, pet food and laundry detergent. The line also
includes Safeway SELECT “Healthy Advantage” items such
as low-fat ice cream and low-fat cereal bars, and Safeway
SELECT “Gourmet Club” frozen entrees and hors d’oeuvres.
Company in Review