Safeway 2001 Annual Report Download - page 12

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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 creams, frozen yogurts
and sorbets; Healthy Advantage items such as low-fat ice creams
and low-fat cereal bars; and Gourmet Club frozen entrees and
hors d’oeuvres.
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-third
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 process-
ing facilities at year-end 2001:
U.S. Canada
Milk plants 7 3
Bread baking plants 7 2
Ice cream plants 4 2
Cheese and meat packaging plants 1 2
Soft drink bottling plants 4 –
Fruit and vegetable processing plants 1 3
Other food processing plants 2 –
Pet food plant 1 –
Total 27 12
In addition, the Company operates laboratory facilities in
certain of its plants and at its corporate offices for quality assur-
ance and research and development.
DISTRIBUTION Each of Safeway’s 12 retail operating areas is served
by a regional distribution center consisting of one or more facilities.
The Company 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. The Company’s distribu-
tion centers in northern California, Maryland and British Columbia
are operated by third parties.
Capital Expenditure Program
A component of Safeway’s long-term strategy is its capital
expenditure program. The Company’s capital expenditure pro-
gram funds, among other things, new stores, remodels, manu-
facturing plants, distribution facilities and information
technology advances. Over the last several years, Safeway man-
agement has strengthened significantly its program to select and
approve new capital investments, 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) 2001 2000 1999
Cash paid for property
additions (Note 1) $1,793.0 $1,572.5 $1,333.6
Less: Purchases of previously
leased properties (50.3) (37.4) (37.2)
Plus: Present value of all lease
obligations incurred 292.5 201.1 179.5
Mortgage notes assumed
in property acquisitions 4.8 19.5 9.7
Total capital expenditures $2,040.0 $1,755.7 $1,485.6
Capital expenditures as
a percent of sales 5.9% 5.5% 5.1%
Stores opened (Note 1) 95 75 67
Stores closed or sold 49 46 54
Remodels (Note 2) 255 275 251
Total retail square footage
at year-end (in millions) 78.8 73.6 70.8
Note 1. Excludes acquisitions. Includes 11 former ABCO stores purchased in 2001.
Note 2. Defined as store projects (other than maintenance) generally requiring expenditures
in excess of $200,000.