Safeway 1999 Annual Report Download - page 17

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The Safeway SELECT line of products includes carbonated soft
drinks; unique salsas; the Indulgence line of cookies and other
sweets; the Verdi line of fresh and frozen pastas, pasta sauces and
olive oils; Artisan fresh-baked breads; Twice-the-Fruit yogurt;
NutraBalance Pet Food; Ultra laundry detergents and dish soaps;
and Softly paper products. The Safeway SELECT line also includes
an extensive array of ice cream, frozen yogurt and sorbets; Healthy
Advantage items such as low-fat ice cream and low-fat cereal bars;
and Gourmet Club frozen entrees and hors d’oeuvres.
In addition, Safeway has repackaged over 2,500 corporate
brand products primarily under the Safeway, Lucerne and Mrs.
Wright’s labels.
Manufacturing and Wholesale The principal function of
manufacturing operations is to purchase, manufacture and process
private label merchandise sold in stores operated by the Company.
As measured by sales dollars, approximately one-half of Safeway’s
private label merchandise is manufactured in company-owned
plants, and the remainder is purchased from third parties.
Safeway’s Canadian subsidiary has a wholesale operation that
distributes both national brands and private label products to
independent grocery stores and institutional customers.
Safeway operated the following manufacturing and processing
facilities at year-end 1999:
U.S. Canada
Milk plants 7 3
Bread baking plants 6 2
Ice cream plants 4 2
Cheese and meat packaging plants 1 2
Soft drink bottling plants 4 –
Fruit and vegetable processing plants 2 3
Other food processing plants 4 1
Pet food plant 1 –
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Total 29 13
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In addition, the Company operates laboratory facilities for
quality assurance and research and development in certain of its
plants and at its corporate offices.
Distribution Each of Safeway’s 12 retail operating areas is served
by a regional distribution center consisting of one or more facili-
ties. Safeway has 16 distribution/warehousing centers (13 in the
United States and three in Canada), which collectively provide the
majority of all products to Safeway stores. Safeway’s distribution
centers in northern California and British Columbia are operated
by third parties. During 1999, Safeway acquired three distribution
centers through its acquisitions of Carrs and Randall’s.
Capital Expenditure Program
A component of the Company’s long-term strategy is its capital
expenditure program. The Company’s capital expenditure program
funds, among other things, new stores, remodels, manufacturing
plants, distribution facilities, and information technology advances.
Over the last several years, Safeway management has significantly
strengthened its program to select and approve new capital invest-
ments, resulting in continuing strong returns on investment.
The table below reconciles cash paid for property additions
reflected in the Consolidated Statements of Cash Flows to Safeway’s
broader definition of capital expenditures, and also details changes
in the Company’s store base over the last three years:
(Dollars in millions) 199 9 1998 1997
Cash paid for property
additions $1,333.6 $1,075.2 $758.2
Less: Purchases of
previously leased
properties (37.2) (35.7) (28.2)
Plus: Present value of all lease
obligations incurred 17 9.5 117.4 91.3
Mortgage notes assumed
in property acquisitions 9.7 32.8 0.9
Vons first quarter
expenditures ––7.2
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Total capital expenditures $1 ,485.6 $1,189.7 $829.4
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Capital expenditures as
a percent of sales 5.1% 4.9% 3.7%
Stores opened (Note 1) 67 46 37
Stores closed or sold 54 30 37
Remodels (Note 2) 25 1 234 181
Total retail square footage
at year-end (in millions) 70 .8 61.6 53.2
Note 1: Excludes acquisitions.
Note 2: Defined as store projects (other than maintenance) generally requiring
expenditures in excess of $200,000.
Improved operations and lower project costs have kept the return
on capital projects at a high level, allowing Safeway to increase capi-
tal expenditures to $1.5 billion in 1999 and open 67 stores and
remodel 251 stores. In 2000, Safeway expects to spend more than
$1.6 billion and open 70 to 75 new stores and complete approxi-
mately 250 remodels.