MINNEAPOLIS -- Consistently strong leadership and an aggressive pursuit of industry consolidation have enabled Supervalu here to reach the eve of its 135th anniversary next year in remarkably good shape.
"Supervalu exemplifies a tradition of fresh thinking," Jeff Noddle, chairman, president and chief executive officer, told SN. "That tradition is the foundation of how we operate and how we address the market."
The company did not adopt the Supervalu name until 50 years ago, in 1954, when it was known as Super Valu Stores -- one of the banner names it used for its voluntary store group.
For 84 years before that, Supervalu forged its identity in a series of forerunner companies that operated under a variety of names.
Supervalu traces its origins back to 1870, when Hugh G. Harrison, a Minneapolis banker and the city's mayor, got together with W.D. Washburn -- one of the founders years later of General Mills -- to finance Benjamin S. Bull in a new wholesale company, B.S. Bull Co.
A year later, Harrison and Washburn got together again to finance local businessman George R. Newell in forming another wholesale business that merged with B.S. Bull under the name Newell and Harrison Co.
A city directory in 1874 profiled Newell and Harrison with this description: "They deal in groceries of all kinds, selling only at wholesale. Already they supply a large portion of the retail dealers in the state and are energetically pushing their trade in all directions. Their business has fully doubled in the year past, and if it continues to increase in a like ratio, will reach in a short time as high in figures as the sales of any house in the Northwest. Their enterprise is worthy of success."
However, when Newell became disenchanted with the partnership later that year after he suspected one of Harrison's appointees of embezzlement, he bought out the Harrison and Washburn interests. He renamed the wholesaler George R. Newell Co.
In 1879, Harrison established another wholesale business for his son, Hugh Jr., called H.G. Harrison Co. When the son died in 1883, the elder Harrison brought in S. P. Farrington, an experienced wholesaler, to run the business and changed the corporate name to Harrison, Farrington & Co.
In 1883, Harrison sold his interest to Fendall G. Winston, a Minneapolis railroad contractor-turned-wholesaler once he began supplying food to railroad camps. The business' name was changed to Winston, Farrington and Co.
Ten years later, the company hired Joseph L. Harper as merchandiser and E.J. Fisher as financial manager, and changed its name to Winston, Harper, Fisher Co.
When Fisher died in 1916, the Harrisons returned to the company when Perry Harrison, one of Hugh Harrison's grandsons -- who, like his grandfather, was a local banker -- joined the firm as principal owner and financial manager. Tom Harrison, Perry's son, joined the company in 1919.
According to a 1959 interview with Tom Harrison, "There just wouldn't be any Northwest if it wasn't for the financing of independent retailers by the wholesale grocers -- wholesale dry goods, wholesale hardware and all the rest of it. That was the retailer's principal source of capital."
By the mid-1920s, chain store operators were beginning to impact independent grocers and their wholesale suppliers "[because] it was the first time we'd been up against price advertising," Harrison said.
"As was the custom then, the advertising was confined largely to staple items at very hot prices. The situation became so serious that it was suggested we have a meeting with our dealers [retail customers] ... that evolved into a discussion of prices because the prices the chains were using represented less than the prices we were charging the dealers at wholesale, and they wanted to know, 'How come?"'
At one point in the meeting, Joseph Harper, the company's merchandiser, told the retailers pricing was a retail problem, not a wholesaler concern -- comments that caused several companies to seek out other sources of supply.
The Harrisons and Newells Reunite
With the loss of that volume, Winston, Harper, Fisher Co. merged with its crosstown rival, George R. Newell Co., to form Winston and Newell Co., the direct forerunner of Supervalu. The instigator of the merger was a Chicago accountant named J. Frank Grimes -- later the founder of IGA -- who felt merging several wholesalers into larger entities would give them more buying power.
The merger reunited the Newells with the Harrisons 52 years after the breakup of Newell and Harrison. At its founding in 1926, Winston and Newell had 5,000 retail accounts with a combined volume of $5.5 million.
In 1928, Winston and Newell joined IGA. Yet when it tried to convince its 5,000 customers to put the IGA banner on their stores, only 700 agreed, "and fewer than 400 actually participated," Harrison recalled in the 1959 interview.
As a result, by 1932, Winston and Newell's volume dropped to $3.9 million, with losses of $61,000. The company considered liquidation, but company officials didn't want to lay off their 175 employees in the middle of the Depression. So they decided to keep the business going, even if it meant further losses.
One sticking point that arose early in Newell and Harrison's relationship with IGA was a reluctance by the wholesaler to subordinate its own private-label line to the IGA line, Harrison recalled. It was that issue that ultimately led the company to sever its ties with IGA in 1942, leaving it with the question of what name to put on the former IGA stores.
That led to the introduction of the Super Valu name.
The "Super Valu" Banner Appears
According to Harrison, "Like many voluntary operators, in our eagerness to build volume and number of stores, we had accepted almost anyone into membership and identified them with our voluntary group [IGA] sign.
"Our better stores resented being identified by the same name as our smaller or poorer stores, and we finally concluded it would be easier and quicker to completely change our store identifications and use one identification for our larger, more aggressive dealers, and another for the others."
In 1942, after testing the Super Valu name at a single store near company headquarters here, Winston and Newell replaced the IGA signs on six stores in Des Moines with Super Valu banners, priced those stores the same as the chains, and advertised the same prices as the chains were promoting.
When the test proved successful, Winston and Newell withdrew from IGA and created two voluntary groups: Super Valu for the larger, more modern stores; and U-Save Stores for smaller units.
Super Valu Goes Public
In 1951, with volume at $57 million, Winston and Newell held a public offering, selling 50,000 shares of stock at $11.75 per share -- a move that ultimately resulted in the decision to change the company's name.
"We were spending many thousands of dollars advertising Super Valu stores, but the general public had no reason to connect Winston and Newell Co. with Super Valu," Harrison explained in 1959. "It became apparent to us that if for only one reason -- the development in the minds of the investing public of a satisfactory image for the company -- we should change our firm name to Super Valu Stores."
With a new name and the motto, "Growth is hard to beat," Super Valu Stores began looking for growth opportunities. Its first acquisition, in 1955, was Joannes Bros., a Green Bay, Wis., wholesaler.
During the early 1960s, Super Valu began an aggressive acquisition program, adding the Eavey Co., Xenia, Ohio, in 1961; J.M. Jones Co., Champaign, Ill., and Food Marketing Co., Fort Wayne, Ind., in 1963; Chastain-Roberts Co., Anniston, Ala., and Read-Canady Corp., Anderson, Ind., in 1964; and Lewis Grocer Co., Indianola, Miss., in 1965.
When the federal government blocked Super Valu from making further wholesale acquisitions, it began looking for growth opportunities outside its core business, adding ShopKo, a chain of 11 general merchandise stores in Wisconsin, in 1971 -- an acquisition that helped boost sales to $1 billion.
Jack Crocker Adds Retail Viewpoint
In 1972, Super Valu Stores hired Jack Crocker, former president of Portland, Ore.-based Fred Meyer and a veteran retailer with 24 years in the business, as executive vice president. He was named president and CEO later that year; in 1973, he became chairman.
"Jack Crocker is the turnaround artist who made Supervalu more than just another Upper Midwest wholesaler," Gene Hoffman, president of the company's wholesale operations under Crocker, told SN. "More than anybody else, he started Supervalu on the road to greatness, and he made Supervalu the epitome of the wholesale industry."
According to Jeff Noddle, "Jack really led the move to modernizing Supervalu. When he got here after leaving Fred Meyer, he started asking people what business we were in. When they told him we were in the wholesale business, he told them we were not, that we were in the retail business, but we were doing it through stores owned by other people.
"No one at Supervalu before him had thought like a retailer, but he did. He began to change the culture of the company by bringing in people who had retail backgrounds, and he communicated the idea that because we served people in the retail business, we had to think like them."
Crocker told SN he couldn't help but view the company from a retailer's point of view, "and we set a policy that profits at the wholesale level could not increase unless our independent customers could earn a profit and grow. Basically, their profitability had to supercede ours, and that's still the policy there today."
Under Crocker, Super Valu reduced retail fees at a time when prices were escalating "to let retail customers know that we saw the stores and the wholesaler as one company, and that enabled us to get more cooperation and to grow together," he told SN.
In 1976, Crocker hired Mike Wright as the company's corporate attorney. In 1977, Crocker brought in Hoffman, former president of Kroger, to oversee all operations, excluding ShopKo.
In 1977, Super Valu was allowed to acquire Charley Bros., Greensburg, Pa., after it convinced the Federal Trade Commission that independents needed to have a strong wholesale partner to help them survive against chain competition. "That took a lot of effort, but we got the government's approval. After that, it became easier to make wholesale acquisitions," Wright told SN.
A few years later, the company began moving into the retail business.
Super Valu Acquires Cub
Prior to 1980, the only corporate stores Super Valu owned were a four-store group in North Dakota called Hornbacher's. Then Crocker was approached by Jack Hooley, a Super Valu customer, who wanted to sell his five Cub Stores (plus one under construction) to the wholesaler.
"He told me the net worth of the company was $2.5 million, but he was asking $10 million," Crocker recalled. "When I asked him how he could justify the selling price, he told me each store was doing over $1 million a week at a time $250,000 a week was a good volume.
"That's when I realized that if we could buy those stores and offer the concept to other independents, we could compete with anyone in the country."
Cub was one of the industry's first superwarehouse stores, with massive amounts of groceries on warehouse shelving, expanded perishables around the perimeter, and low pricing: the model of the price-impact format that has become an industry standard, but that was revolutionary in the early 1980s, Crocker told SN.
What made the Cub stores unique, he added, was "the honest way they were priced -- what we'd call everyday-low pricing today -- at a time most retail stores were high-low."
According to Wright, Super Valu initially expanded Cub with corporate and franchised stores near its home base, "and as we moved beyond the Twin Cities, we expanded primarily through franchises. In retrospect, perhaps we should have expanded Cub totally on a corporate basis."
In 1981, Crocker stepped aside as CEO in favor of Wright. When Crocker retired in 1982, Wright succeeded him as chairman.
In the early 1980s, Wright began thinking about using ShopKo, its discount department store division, as a potential vehicle for developing supercenters, "and we opened several supercenters in the Cleveland market under the Twin Valu banner," he told SN. "However, although that venture started well, it was evident ShopKo didn't believe in the supercenter concept. That ultimately soured us on ShopKo as an investment."
In 1992, Super Valu made a public offering on 50% of its ShopKo holdings and used the proceeds to go after wholesale acquisitions, beginning with Wetterau, Hazelwood, Mo. Wetterau at the time was the nation's third-largest wholesaler, with annual sales of approximately $5 billion. The deal included 300 Save-A-Lot extreme-value stores.
Super Valu continued to make acquisitions through the 1990s, moving into the Pacific Northwest in 1995 when it acquired West Coast Grocery Co., Tacoma, Wash.; into New England in 1995 when it acquired Sweet Life Foods, Suffield, Conn.; and into the Southeast in 1999 when it acquired Richfood Holdings, Richmond, Va. The Richfood deal also added three more chains to its corporate portfolio: Shoppers Food Warehouse, Washington, D.C.; Metro Foods, Baltimore; and Farm Fresh, Norfolk, Va.
Super Valu Stores Becomes Supervalu
In 1992, on the 50th anniversary of the company's first use of the Super Valu name on its customers' stores, Super Valu Stores decided "to freshen up our name and develop a more streamlined logo," Wright said. It renamed the company, simply, Supervalu.
On the distribution front, Supervalu sought to strengthen its warehouse operations during the 1990s by launching Advantage, an initiative designed to develop a more efficient supply chain infrastructure.
"After relying for years on forward buying as a profit center, we had allowed a lot of inefficiencies to creep into our business," Wright explained. "So when manufacturers began tightening up on promotional deals, we developed Advantage to take costs out of distribution so we would not have to raise costs to our retail customers.
"Advantage was designed to supply customers as efficiently as we could, and if they were willing to work with us to take costs out on their end, that would be reflected in what we charged them for what they bought from us," he said.
In 1998, Supervalu launched Advantage Logistics, a third-party service provider that tailors its logistics efficiencies, information technology and marketing expertise to serve retailers and manufacturers.
Noddle Takes Over
Wright retired in 2001 and was succeeded by Jeff Noddle, who had joined the company in 1976 as sales manager for Supervalu's Champaign, Ill., division after working for Supermarkets Interstate, which ran the food sections in J.C. Penney stores and other discounters.
Among the first major decisions Noddle faced was whether or not to expand Supervalu's business with Kmart Corp. when Kmart decided it wanted a single supplier to handle its grocery needs. Noddle decided not to pursue the deal (see sidebar, Page 18), leaving the account to Fleming. (Within two years of Supervalu's decision, both Fleming and Kmart filed for bankruptcy protection, with Fleming ultimately deciding to liquidate its wholesale assets and Kmart reorganizing as a smaller company.)
In 2002, Supervalu acquired Deal$ - Nothing Over a Dollar, a St. Louis-based chain of dollar stores; the following year, it developed a hybrid combination-store format for Save-A-Lot featuring an assortment of Deal$ merchandise.
In 2003, Supervalu did an asset swap with C&S Wholesale Grocers, Keene, N.H., in which it gave up its New England operations in exchange for additional holdings in the Midwest that had formerly been operated by Fleming, but were not owned by C&S.
The company also introduced a business-to-business Internet portal for retail customers in 2003 called SV Harbor, which enables retailers to access real-time data. The portal was expanded to include manufacturers and brokers earlier this year.
Now, on the eve of its 135th year, with sales of just under $20 billion, Supervalu stands at the top of the wholesale industry: a long-term survivor.