WEST DES MOINES, IOWA -- As far as Hy-Vee is concerned, its age is 75 years young.
"We're very proud to be 75 years old, but still a young company with mostly new assets and growing at a very rapid rate," said Ron Pearson, chairman.
The chain's roots go back to a small store in Beaconsfield, Iowa, in 1930 and the partnership between Charles Hyde and David Vredenburg, whose names, in a shortened form, eventually became the company's name.
The two men met several years earlier, in 1921, when Vredenburg and Earl Lewis were operating a group of stores under the Vredenburg & Lewis banner. One of the men Vredenburg hired was Hyde, who eventually rose to the position of store manager.
Eight years later, Hyde and Vredenburg formed their own partnership by pooling their money -- $1,500 apiece -- to buy the Beaconsfield Supply Store in mid-October 1929, two weeks before the stock market crashed. On the theory that people still had to eat, they went ahead and opened the store in early 1930, selling groceries, dry goods and work clothes. The store operated on credit, with customers able to bring in eggs, cream or chickens to trade for merchandise.
According to a company history, Vredenburg was the up-front man -- an outgoing "people person" who handled the merchandising -- while the more reserved Hyde kept the books and managed the company's finances.
The Depression took its toll, and the original store closed on July 1, 1933, but the two men -- doing business as Hyde & Vredenburg -- were operating other stores. Because they could not be on site to run each store, they relied on managers to do the job for them, giving them the freedom to offer suggestions and make changes as needed.
In 1933, they decided to share the profits with the managers on a store-by-store basis, offering them a percentage of the net profits and letting them run their store as if it were their own. Instead of wages, managers were paid on a commission basis.
It was a concept Vredenburg borrowed from J.C. Penney, and it provided the seed for the autonomy that still exists at Hy-Vee.
"Autonomy does several things," Pearson pointed out. "It rewards people for making decisions, and it makes them feel good about it -- not only the store director but everyone throughout a particular unit. Employees at the stores are responsible for making decisions on pricing, procurement, selling, merchandising, marketing, human relations, whom they promote or how much they pay people.
"Autonomy with rewards stimulates people to do an outstanding job, and as a result it attracts the brightest and the best."
Prompted by a state tax on chain stores, Hyde & Vredenburg dissolved their partnership in April 1935, with Hyde taking ownership of the Iowa stores, which he called Hyde's Service Stores, and Vredenburg taking charge of the Missouri stores, which he continued to call Supply Stores. When the tax was declared unconstitutional later that year, the partners got back together but maintained the two store banners.
The Second Generation
In 1935, David Vredenburg's 21-year-old son Dwight joined the business on a full-time basis as manager of the 1,600-square-foot Supply Store in Unionville, Mo. By the time he moved on to manage a store in Centerville, Iowa, in 1936, Dwight Vredenburg was sharing profits monthly with all his regular employees as well as store managers.
"Naturally, they were overwhelmed," Vredenburg recalled years later. "Most of them were merely happy to have a job, but to have a share of the profits was almost unheard of. They became outstanding employees instead of good employees. They were willing to work longer hours. They began to think of ways to improve the store and its profitability. They tried even harder to serve the customers and attract new ones. They became happier people, and it became a happier store. The customers noticed it [and] business grew."
By late 1937, Hyde & Vredenburg was operating 15 stores in Iowa and Missouri under nine different partnership combinations -- an unwieldy business to administer. So on Jan. 3, 1938, 15 employees signed articles of incorporation for Hyde & Vredenburg Inc., with store managers trading ownership shares in the various stores for stock in the new corporation, beginning the tradition of employee ownership, and Dwight Vredenburg, 23, was elected president of the new venture -- a title he held for the next 44 years.
Vredenburg continued to manage the Centerville store, where a company history said he introduced several innovations to the store during the 1940s, including background music (courtesy of a plug-in radio), frozen foods, fluorescent lighting and self-service shopping carts. To encourage reluctant customers to use the carts, he threw candy bars into the baskets.
That same Centerville location became the chain's first full-scale supermarket in 1949; it was also the chain's first store built from the ground up, the first not located in a city's downtown area, the first with its own off-street parking lot, the first with a self-service meat department and the first with carry-out service.
The company was based in Lamoni, Iowa, until 1945, when it purchased a warehouse in Chariton, Iowa, and relocated its offices there. Vredenburg gave up his store-managing duties at that time to devote full time to running the company from Chariton.
Pearson said Dwight Vredenburg understood "every aspect of retailing -- people, customers, good values, clean stores, modern operation, honesty and integrity. The Hy-Vee culture -- honesty, integrity, friendliness, caring, ethics, morals, respect, love and fair play -- was developed and practiced day-in and day-out by Dwight. He was the perfect role model."
Ric Jurgens, Hy-Vee's president and chief executive officer, recalled the first time he met Vredenburg -- in 1971, when Jurgens was sacking groceries at a store in Muscatine, Iowa. "I told him I felt like a Little League baseball player meeting Babe Ruth. He got a big kick out of that remark, but he reminded me he was just a Hy-Vee employee like everyone else in that store.
"Dwight was a kind, decent, intelligent and hard-working man. Hy-Vee and everyone who is part of the company today needs to understand the importance he played in our company's history."
With Dwight Vredenburg at the helm, David Vredenburg and Charles Hyde retired on Jan. 1, 1949. Writing years later, Dwight Vredenburg said, "They were men of honesty and integrity who believed that hard work, low prices and good customer service would solve any problems. How proud they would be if they could see the gleaming high-volume stores which are the Hy-Vee of today."
In 1952, the company conducted an employee contest to come up with a new name to replace the Supply Stores and Service Stores banners, and the winner was Hy-Vee.
Hy-Vee made its debut in a major metropolitan area in 1959 when it opened its first store in Des Moines; however, because it had once owned a mill in Lamoni, Iowa, the chain retained a rural reputation and was referred to by competitors as "the cornmeal merchants."
In 1961, Hy-Vee opened two more Des Moines stores and had its first $1 million sales week.
Until 1959, employees were allowed to own Hy-Vee stock, which they had to sell back to the company when they left. However, with changes in securities laws, privately held companies like Hy-Vee were required to limit the direct sale of stock to "informed persons" or else required to offer stock to the general public. So rather than become publicly traded, Hy-Vee created a system in which the company-owned structure has direct and indirect stockholders -- creating the Hy-Vee Employees' Trust in 1960 to be the primary stockholder in the company and making every participant an indirect stockholder as well. That plan was subsequently amended to enable employees to invest in a 401(k) plan.
In 1963, Hy-Vee opened its 50th store and introduced the slogan "A Helpful Smile in Every Aisle." It also introduced a new logo -- the company name written in white on a red background shaped like a shopping cart.
Hy-Vee became interested in moving into the pharmacy business in the late 1960s but felt its stores were too small, so it opened its first stand-alone drug store in 1969 in Cedar Rapids, Iowa, under the Drug Town banner.
In 1969, Hy-Vee acquired the 12-unit Swanson's Stores group, based in Cherokee, Iowa, which moved the company into Minnesota for the first time. The transaction included a small health and beauty care distribution center, which was eventually expanded to a full-line warehouse for everything but meat and produce.
Hy-Vee was supplying other retailers out of its Chariton, Iowa, distribution center until 1977, when the warehouse was hit with a work stoppage by the Teamsters. After the dispute was settled, the warehouse dropped outside wholesale accounts and devoted itself exclusively to distributing to Hy-Vee stores.
The company opened its 100th store in 1975 in Keokuk, Iowa -- the first store in the chain to use electronic cash registers. Later that year Hy-Vee moved into South Dakota, and then into Nebraska in 1977 and Illinois in 1979.
As the trend toward warehouse stores evolved in the early 1980s, Hy-Vee converted a vacant A&P store in Dubuque, Iowa, into Save-U-More, which, aside from its no-frills approach, was the chain's first to use electronic scanners at the checkstand. Hy-Vee opened four more warehouse stores before converting them to the Hy-Vee banner, although the last store -- in Yankton, S.D. -- did not change formats until 2001.
During the 1980s, Hy-Vee acquired 12 Safeway locations in western Iowa and eastern Nebraska, including seven in Omaha and two in Lincoln. It also became the second food company in the nation to test bank debit cards.
Pearson Era Begins
In 1983, Dwight Vredenburg passed the title of president, along with day-to-day responsibilities, to Pearson, although Vredenburg remained active in the company as chairman and CEO until his retirement in 1989.
Writing in the company newsletter, Vredenburg said, "Hy-Vee has always seemed to be able to find the right person at the right time. Ron Pearson stood ready and was eminently qualified to assume leadership in store operations. He had been a highly successful store manager in Cedar Falls for 10 years and was obviously a 'comer.'
"He is futuristic but realistic. He is immersed in his concern for our people while still facing the real world of a tough industry requiring great discipline and sometimes hard choices."
Pearson said he fell in love with the grocery business working in his family's business -- Pearson's Food Store -- in Altoona, Iowa, and when Hy-Vee acquired that store in 1960, Ron stayed on as a part-time produce manager while attending Drake University here, where he majored in retail merchandising.
Looking back, Pearson said, "[Dwight] was very enthusiastic about getting me to come to work for Hy-Vee because they had very few college graduates. Dwight was the first one, and I was the second college graduate store manager. He knew that as the company grew, if it was going to stay with the type of independence and autonomy it had always had, it needed to have people with various educations."
Pearson said he turned down more lucrative offers from Kmart, Sears and Kroger to go to work for Hy-Vee. Within two years of joining the company, he was managing a store in Cedar Falls -- which, between 1965 and 1970, earned the highest profit in the company and did the second-largest volume. He was named a district manager in 1974 and became president nine years later.
According to one colleague, "Ron is Mr. Retail. He absolutely loves retail and is very knowledgeable about all aspects of it. One of the great things about Ron is he doesn't take no for an answer. If you say something can't be done, he says, 'Baloney -- there's a way it can be done.' I think that attitude of his is one of the reasons Hy-Vee has been so successful."
As president, Pearson began moving Hy-Vee in new directions, overseeing the development of larger stores -- of 75,000 square feet -- that put more emphasis on catering to lifestyle trends, including healthy living, a broader selection of general merchandise and additional services like gas stations and expanded wine and spirit sections.
Hy-Vee had sometimes sacrificed expanding and modernizing its store base to avoid debt, Pearson said, but at this point in its history, "we were at a crossroads. We were very solid on our fundamentals, but we had to start rebuilding our stores. We had some small, outdated stores that were not serving the marketplace as well as they should, let alone moving forward into the future. We had to get moving and spend some money.
"I clearly could see how the companies that failed had failed to cater to lifestyles, and the companies that were successful matched lifestyles. I am now convinced that the failure to serve current lifestyles and the tendency to 'manage behind' are the downfall of every industry, every business, every society," he said.
Hy-Vee opened its first "21st century lifestyle store" in 1997 in Mankato, Minn.
Hy-Vee moved into its seventh state, Kansas, in 1988, and with the opening of a store that year in Kansas City, the chain moved into its largest metropolitan area.
In 1989, Vredenburg retired and Pearson was named chairman and CEO.
The Last 10 Years
Hy-Vee moved its corporate office from Chariton to West Des Moines in 1995, which put it closer to the center of its operating area while providing space for training facilities. The move also put the company into an area with a broader pool of applicants for future job openings and provided more career opportunities for working spouses.
To do a better job supporting its retail stores, Hy-Vee acquired or developed several subsidiaries, including Perishable Distributors of Iowa, which was run by Ric Jurgens, who had joined Hy-Vee in 1969 after graduating from Iowa State University. Like Pearson, he also interviewed at larger companies, including Sears, he recalled, "but when I asked them whether I would have any say in what we carry or make decisions on how to buy or price merchandise and they told me no, then I asked, 'Why do you need me?' Even at 20, I realized I would have more impact at Hy-Vee than at any of the national companies I'd interviewed with."
After working his way up from store manager to regional manager, Jurgens was assigned to run PDI, and following that experience, "I knew how to run a company when I came here [to the corporate office]," he said. "I not only had retail experience but also distribution, accounting, information technology, purchasing and procurement experience. When you are in a smaller environment like that, you get your hands around all facets of business."
Jurgens was elected president of Hy-Vee in December 2001, and two years later was named the company's third CEO, with Pearson remaining as chairman.
"While Hy-Vee has had just three chief executive officers and two chairmen of the board, it would be inaccurate to say it has had only three leaders," Jurgens said. "It has had thousands of leaders. We have a company full of leaders.
"When you have a company as autonomous as ours is, where the store directors run the stores as though they own them, if you don't have leaders in every corner you're in trouble. We have had thousands of them in our company, great leaders who have made a difference."
Looking ahead, Jurgens said, "The reason Hy-Vee survives and is strong, growing and prospering in a world where most [of] our fellow companies are struggling, is our belief system, the process under which we go to market. That has been protected and remains constant. That is not something that has to change and flow with the times.
"Your buildings change, the educational level of your employees does, even the appearance of your employees has to change. Everything has to change except the heart and soul of it all, the reason it's there. And so when we look to the future, the first thing on the agenda is to protect the fundamental values of the company, protect the autonomous nature of the company and protect the spirit that was given to us, the work ethic that was given to us, the belief system that was given to us by the founders and the people who brought the company to where it is today. That's our first and most important job as we build for the future."