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Supervalu to Launch Value-priced Natural/Organic Format

MINNEAPOLIS -- Leveraging its expertise in small-box retailing, produce procurement, and private label marketing, retailer/distributor Supervalu here is bursting onto the growing retail natural and organic foods scene with Sunflower Market, a new value-priced retail concept. The first Sunflower Market is scheduled to open in Indianapolis in January 2006, the company said yesterday at its investor conference.

"Operating retail grocery chains in the top markets throughout the U.S. gives us a unique perspective into consumer preferences," said Jeff Noddle, Supervalu chairman and c.e.o., in a statement. "Across the nation, we are seeing a growing demand for affordable organic foods with exceptional taste and nutritional quality. Sunflower Market draws on our expertise in small-box formats, and leverages our supply chain expertise, which enables us to deliver outstanding natural and organic products at a price point consistent with consumer expectations."

Supervalu said consumer research found that 96 percent of consumers use fresh organic produce at least occasionally; and that while 66 percent of the U.S. population seeks organic products, the cost of organic foods is the most common obstacle for consumers.

The company did not say when additional Sunflower Market units would be opened, or where they would be located. It did say the concept's typical footprint is expected to range from 12,000 to 15,000 square feet, and the units will stock from 8,000 to 12,000 SKUs of natural and organic products. All Sunflower Market stores will be operated by Supervalu.

The new venture apparently has no relation to Longmont, Colo.-based, 6-unit specialty retailer Sunflower Markets. Supervalu said the word "Sunflower" is a registered trademark it has had since 1959.

John Hooley, president of corporate retail for Supervalu, said the concept makes use of "a unique merchandising approach" that will highlight perishables. The stores will include organic wherever possible, minimally processed, with no artificial colorings, sweeteners, flavors, or preservatives. Featured departments will include grocery, frozen, and dairy; produce and bulk foods; deli and cheese; all-natural bakery and café; hormone- and antibiotic-free meat and seafood; beer and wine; and wellness departments.

With the Sunflower Market format, Supervalu acknowledged it is leveraging its experience in operating its successful Save-A-Lot chain, which is known for its targeted approach, small-box design, and limited assortment strategy.

Supervalu will source a large percentage of Sunflower Market's produce through W. Newell & Co., its specialty produce company. Additionally, more than 100 private label items, marketed under the newly launched "Nature's Best" brand, will be deployed through Supervalu warehouses, and Sunflower Market will utilize Supervalu's standardized information technology backbone for merchandising systems, store systems, and operations support.

To leverage its new Nature's Best brand, Supervalu said it will make the private label program available to its corporately owned and operated retail banners as well as to the nearly 2,200 independent retailers to which Supervalu is a primary distributor.

Also at its annual meeting, Supervalu updated its same-store sales guidance for corporate-owned Save-A-Lot stores. The company said it now expects positive same-store-sales comparisons for the remainder of the year.
In total, Supervalu's retail comparable store sales, when adjusted for planned in-market expansion, are projected to be flat for the remainder of the fiscal 2006 year.
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