FORMER AGRICULTURE SECRETARY Mike Espy was acquitt

FORMER AGRICULTURE SECRETARY Mike Espy was acquitted on 30 corruption-related charges, including accusations that he accepted illegal gifts and tickets to sporting events from companies his department regulated, such as chicken giant Tyson Foods. Espy resigned in 1994 after the accusations were made by independent counsel Donald Smaltz.

Smaltz spent four years and $17 million on the investigation. After spending two months hearing the case, a jury took less than two days to exonerate Espy on all charges.

THE SUPREME COURT DECLINED to hear an appeal by the Nutritional Health Alliance, a group of manufacturers, retailers and consumers of dietary supplements, over their contention, denied by lower courts, that Food and Drug Administration labeling regulations violate their First Amendment protections. The FDA, which was given authority over health claims by the 1990 Nutrition Labeling and Education Act, allows health claims for dietary supplements only when there is "significant scientific agreement" about the claims.

The alliance contended that such a standard violated its members' free speech rights.

THE PROPOSED SETTLEMENT between tobacco manufacturers and the state attorneys general appears more favorable to retailers than the national settlement debated and eventually defeated in Congress in 1997, according to the National Association of Convenience Stores.

For example, prohibitions in the proposed settlement against outdoor advertising do not cover signs smaller than 14 feet, allowing retailers to continue to display banners and do not address point of sale or other "indoor" advertising. The full text of the proposed settlement is available at the NACS Web site, www.cstorecentral.com.

FMI AND GMA HAVE LAUNCHED an initiative to provide a vision for an electronic marketplace for manufacturers and their trading partners to communicate and conduct business over the Internet. Member company executives who sit on the Joint Industry Committee on Electronic Commerce will explore how the industry can use Internet technology to exchange data, conduct business transactions and communicate with consumers.

Net profits in the supermarket industry rose to a 25-year high of 1.22 percent of sales for 1997-98, according to the Food Marketing Institute's Annual Financial Review.

That represents an increase of 0.02 percentage point over the previous high of 1.20 percent, recorded in 1995-96.

The numbers show a reversal of bottom-line disparities between large and small retailers. Between 1993 and 1997, supermarket operators with sales of $100 million or more consistently outperformed those with less than $100 million; between 1995 and 1997, the larger companies' net profit percentages were more than double those of the smaller players.

However, for 1997-98, supermarkets with less than $100 million in sales saw net profits jump to 1.34 percent of sales, up from 0.53 percent in 1996-97, while profits for larger companies fell to 1.18 percent of sales from 1.26 percent in 1996-97 and 1.38 percent in 1995-96.

Return on assets and return on equity also increased significantly for smaller supermarkets, with ROA rising to 7.77 percent in 1997-98 from 4.61 percent in 1996-97 and ROE increasing to 19.11 percent from 10.18 percent.

For the industry overall, FMI reports that inventories are down to an average of 22.56 percent of sales, while capital expenditures continue to increase. Interest expenses remained at less than one percent of sales, but shareholder equity declined for the first time in several years as the industry looked to low-cost debt to finance capital expansion.

Supermarket POS scanners are more accurate than those of any other retail class of trade, generating the fewest pricing errors and the smallest overcharges and undercharges, the Federal Trade Commission said.

Supermarket scanners had an error rate of just 2.43 percent, according to Price Check II, a new study sponsored by the FTC and the National Institute of Standards and Technology. And when errors do occur, the amounts are minuscule?an average of 66 cents for overcharges and 73 cents for undercharges. Food stores were slightly more likely (56 percent) to overcharge than undercharge.

Error rates for other retail channels ranged from 3.02 percent for drug stores and mass merchandisers to 6.23 percent for hardware stores.

Overall, scanner accuracy has improved dramatically since the FTC's first survey in 1996. At that time, just 45 percent of inspections provided the right price for at least 98 percent of items checked. This time 71 percent of the scanners checked met that standard.

Hudson Foods, Inc. and two former employees have been charged with lying to the U.S. Department of Agriculture and delaying the record recall of 25 million pounds of ground beef in August 1997.

The charges, brought by the U.S. Attorney's Office in Nebraska, accuse the company and the employees of "making false statements and conspiring to provide false and misleading information to USDA concerning the production and distribution of Hudson ground beef." These misrepresentations delayed identification of the beef, which was contaminated with E. coli bacteria, and increased the risk to consumers, USDA said.

James Hudson, the company's former chairman, said in a statement that he was "bitterly disappointed" by the charges and is "convinced that Hudson Foods and all its employees acted properly and honorably in handling the recall."

The two employees charged are Michael Gregory, formerly Hudson's national quality control manager and recall coordinator, and Brent Wolke, manager of the Columbus plant.

J. Sainsbury, the United Kingdom's second largest grocery chain, will pay $490 million for Cambridge, Mass.-based Star Markets in a transaction expected to close early this year.

Star, which had sales of about $1 billion in 1997, operates 25 supermarkets, 24 superstores, four natural food markets and a wholesale food business.

Sainsbury also operates the 127-store Shaw's chain, based in East Bridgewater, Mass.

"Given the rapid consolidation of the U.S. supermarket industry and the increasing competition for consumers' food dollars, it is now appropriate for Star Associates to continue to grow and flourish as part of a large industry participant," said Star chairman and CEO Henry Nasella.

Mark S. Hansen, who resigned in September as chief executive of Sam's Club, has been named chairman and CEO of Fleming Cos. He began work at the Oklahoma City-based wholesaler immediately after the November 30 announcement.

Hansen replaces Robert E. Stauth, a 25-year Fleming veteran who stepped down last summer. In the last few years, the company has faced lawsuits from several customers and produced disappointing financial results.

Hansen joined Sam's Club, a unit of Wal-Mart Stores, Inc., in 1997. He was president and CEO of category killer PetsMart from 1989 to 1997 and has also held management posts with Federated Foods and Jewel Cos.

"We have found just the leader to restore Fleming's position in our industry," said interim chairman Edward C. Joullian III, who led the search committee.

Hansen said his main goals "are to support the success of our customers and to improve Fleming's competitive position and long-term earnings potential."

A&P has launched a three-year, $1.5 billion initiative to modernize its aging collection of supermarkets.

The program includes the opening of 175 to 200 new superstores, the remodeling of about 75 existing units into superstores and the closing or sale of 127 "non-strategic" stores across the U.S. and in Canada.

It also calls for a continued realignment and consolidation of distribution, manufacturing and administrative facilities. A&P has already eliminated two Northeastern distribution centers, closed a coffee plant and a bakery, and integrated the management of its two Super Fresh divisions.

The store closings and sales, expected to generate between $50 million and $80 million from asset sales and working capital liquidation, include the sale of the Montvale, N.J.-based company's Richmond, Va. division.

This "store exit program" will result in an after-tax charge of $120 million to $160 million in the quarter ending February 27. A further $30 million to $50 million in write-offs is expected over the following four quarters.