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TEMPLE, Texas — Fred’s Inc. has entered a multiyear primary distribution contract with McLane Co.
McLane said Thursday that the new agreement, which starts in October, will consolidate the efforts of 60-plus distributors serving Fred’s 651 discount and pharmacy stores.
The contract, the length of which wasn’t disclosed, includes the distribution of refrigerated and frozen items as well as perishables, snacks, candy, cigarettes and tobacco products.
“McLane is well-known in the industry for offering supply chain efficiencies and additional benefits of scale of a single-source of supply for key consumable categories,” Fred’s chief executive officer Michael Bloom said in a statement. “Partnering with McLane as an alternate distribution source allows us to improve our efficiencies and overall direct-to-store process, including our ability to improve service, assortment and freshness and, ultimately, grow sales and profit.”
Fred’s operates two distribution centers, in Memphis, Tenn., and Dublin, Ga. The Memphis-based retailer’s discount general merchandise stores, located in 15 Southeastern states, include 372 full-service pharmacies. Fred’s store count also includes 18 franchised locations, four of which have pharmacies. The company, too, has three specialty pharmacy-only locations.
“Fred’s has uniquely positioned itself to be a successful pharmacy retailer with a broad, value-based assortment in the Southeast,” stated McLane president Tony Frankenberger. “It’s a privilege to be chosen as a supply chain provider for Fred’s and further help the company reach its goals.”
McLane noted that Fred’s recently participated in the distributor’s Center for Category Innovation process. That enabled Fred’s to leverage McLane’s proprietary sales database and category managers to identify and capitalize on key merchandising trends, along with market-specific product mixes and planograms.
In reporting Fred’s second-quarter financial results on Tuesday, Bloom had cited supply chain as a key area of focus for the retailer, which saw declines in revenue and same-store sales for the period.
“Retail sales in the front store and pharmacy departments were pressured less in August than in July but still experienced unfavorable sales trends in categories such as food, beverage, paper and household chemicals,” Bloom stated, adding that Fred’s is “at an inflection point as a company.”
“Our key areas of focus will be to optimize our store fleet and supply chain, focus on markets where we can win, make additional investments in marketing and technology, all to enable growth with discipline,” he explained. “We will take this next six to 12 months to catch up on needed competitive and structural strategies. We can be the best in the rural markets we serve, we know who our customers are and what they need, and we can deliver access to pharmacy and health care services as well as a broad, value-based assortment of products.”
Fred’s is a new customer for McLane and marks the second major new business that the distributor announced this week. On Monday, McLane said it has been awarded the Eastern and Midwest business by convenience store chain Circle K. Under the multiyear pact, McLane will begin serving 1,161 Circle K locations in January 2017 and another 982 locations in January 2018, totaling 2,143 stores. Circle K also extended a multiyear contract with McLane to continue serving its 1,356 former Pantry locations.
Overall, McLane operates 80 distribution centers nationwide and buys, sells and delivers more than 50,000 consumer products to about 90,000 locations. The company provides grocery and foodservice supply-chain solutions to convenience stores, mass merchants, drug stores and chain restaurants.
