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    Fleming's Suppliers See Ripple Effect

    CHICAGO - The bankruptcy of grocery distributor Fleming Cos. Inc. is having a ripple effect on its food suppliers as companies ranging from Kraft Foods Inc. to Hershey Foods feel the pinch, according to a recent report by Reuters.

    CHICAGO - The bankruptcy of grocery distributor Fleming Cos. Inc. is having a ripple effect on its food suppliers as companies ranging from Kraft Foods Inc. to Hershey Foods feel the pinch, according to a recent report by Reuters.

    U.S. food companies are seeing an impact as Fleming's inventory reductions crimp their shipment growth and exposure to the company's liquidity problems forces them to set aside extra cash to cover payments that Fleming may default on.

    Fleming on Wednesday asked the court to approve $150 million in debtor-in-possession financing to supplement its existing cash flow as it attempts to restructure.

    The Lewisville, Texas-based company has also proposed an agreement that would let suppliers that meet certain conditions -- such as agreeing to ship merchandise and restore normal trade terms -- participate in a lien against the company.

    A representative for Fleming did not return calls seeking comment on the status of that request and the company's attorneys were not immediately available.

    Some food makers are taking precautionary measures, according to the report. Hershey Foods Corp. said Thursday it took a first-quarter pre-tax charge of $5.0 million, or 2 cents a share, to create a "bad debt" reserve to protect itself if Fleming defaults on payments.

    Kraft Foods Inc. said Tuesday that it is continuing to ship product to Fleming, but under "more restrictive" credit terms.

    During a conference call to discuss first quarter earnings, executives at Kraft, the biggest North American food company, attributed a slowdown in first-quarter shipments to lower inventories and store closings tied to the Fleming and Kmart bankruptcies.

    Kraft said it would be able to manage through the difficulties with Fleming without setting up a special reserve fund.

    On Thursday, Hormel Foods Inc. said its second-quarter earnings would be hurt by Fleming by an undisclosed amount.

    Other packaged food makers, including Sara Lee Corp., Kellogg Co. and H.J. Heinz Co., have yet to comment on their Fleming exposure.

    But Sara Lee said in a court document filed Monday that Fleming's bankruptcy plans interfere with Sara Lee's right to take back merchandise. A spokeswoman for the Chicago-based company declined to comment on Fleming, citing the company's "quiet period" before earnings.

    Healthy Choice meals maker ConAgra Foods Inc. expects "no material financial impact," from Fleming, its spokesman, Chris Kircher, told Reuters.

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