WHIPPANY, N.J. -- Wakefern Food Corp. marked the end of an era last month.
That's when Thomas P. Infusino ended his 34-year run as chairman of the nation's largest supermarket cooperative, where he served as a uniting force that helped the company become a regional powerhouse. Under Infusino's leadership, the ShopRite stores in the Wakefern cooperative have grown their sales nearly tenfold, from $969 million to nearly $9 billion.
"That's proof that our co-op system is a viable way of doing business," Infusino said last month here at the company's annual meeting, where Infusino formally surrendered the Wakefern chairmanship to Joseph Colalillo, a second-generation Wakefern member who has been groomed for his new position for several years.
During a lengthy tribute to Infusino at the annual meeting, his current and former colleagues recounted how the 81-year-old ShopRite owner helped shape what Colalillo referred to as a "family of family businesses."
The Wakefern cooperative, based in Elizabeth, N.J., includes 42 ShopRite operators who run about 200 stores in New York, Connecticut, New Jersey, Pennsylvania and Delaware. The ShopRite banner has the No. 1 market-share position in New Jersey, and its stores are among the highest revenue generators in the country, with average weekly sales of $864,000. Insiders and outside observers say the company deftly blends the spirit and innovation of entrepreneurship with the leverage of operating a regional chain.
The future didn't look nearly as bright as it turned out to be for Infusino when he became the first person to hold the CEO and chairman titles in 1971. The company had recently lost a significant chunk of its business when Supermarkets General -- the company that evolved into Pathmark Stores -- seceded from Wakefern, taking some $48 million in buying power with it and cutting the co-op nearly in half.
After the departure of Supermarkets General, a fierce battle for control of Wakefern ensued, leading to a redistribution of the company's class A, B and C shares in a way that put every member on equal footing, no matter how many stores they operate. That "one-member, one-vote" principle is still seen as one of the company's strengths today.
"Now we have the presidents of 43 different companies pulling together in the same direction, shoulder to shoulder," Infusino said. "We have probably the most democratic organization I can think of."
In a filmed tribute to Infusino at the annual meeting, Dominick Romano, chairman of ShopRite Stores, the division of the company that operates supermarkets, said, "Thomas believed that if Wakefern was to become a true cooperative, there would have to be true equality."
Observers said the fact that smaller members have as much input into the running of Wakefern as its larger members is one of the keys to its success. Both Infusino, who continues to operate the Nutley Park ShopRite in Nutley, N.J., and Colalillo, who operates three ShopRite stores in Hunterdon County, N.J., are among the smallest operators in the Wakefern co-op.
A LIFETIME WITH WAKEFERN
After serving in North Africa in World War II, Infusino partnered with relatives to begin operating supermarkets in 1946, the same year Wakefern was founded by seven retailers who joined forces to better compete against the emerging chain-supermarket phenomenon. Infusino joined Wakefern as a retailer member seven years later, in 1953, and began serving on the board of directors in 1959.
"His passion for growing and strengthening Wakefern has never wavered," said Dean Janeway, president of Wakefern, during a lengthy tribute to Infusino at the annual meeting. "There have been many challenges in our history. Some of those challenges would have torn another company apart, but Tom kept us together. Tom has taught us to be honest, truthful and ethical.
"Tom has had to step up and make a lot of difficult decisions. All of his decisions have always been based on one question: How will it benefit Wakefern?"
At the annual meeting, Infusino's integrity was a frequent topic of speakers, who included current and former executives of Wakefern and several of its member retailers. The week before the meeting, Seton Hall University presented Infusino with an honorary doctorate of humane letters in recognition of his business ethics.
Colalillo said one of the most important things he learned from Infusino was the importance of maintaining the moral high ground.
"He taught me that your name and reputation are truly all you own in life, and you should take care of it," Colalillo said in his address at the annual meeting.
With his reputation for integrity as a backdrop, Infusino has been an influential force in bringing Wakefern's members together on various issues, from the legal disputes over stock ownership to technology rollouts to new business ventures.
One second-generation ShopRite operator in New Jersey, speaking during the tribute to Infusino at the annual meeting, said he remembered the former chairman as a uniting influence during disagreements among various ShopRite operators.
"As a child I was able to see discussions between the Wakefern members, and Tom would, with a few simple words, bring everyone back together," said Larry Inserra Jr., president and chief operating officer, Inserra Supermarkets, Mahwah, N.J.
Infusino also has been very active in state and national associations, and helped form the New Jersey Food Council, along with Joe Azzolina of Food Circus and Alan Bildner of Kings Super Markets. In addition to being a former chairman of the board of the NJFC, he also is the only board member who has served on the board since the association's incorporation. The Trenton-based association recognized him with its first Lifetime Achievement Award in 2001.
"Tom has always been and remains steadfast in his determination to keep our mission pure and focused on government-relations issues," Linda Doherty, president of the NJFC, told SN. "Today, we are a powerful and driven association because of Tom's insightfulness.
"While Tom remains modest, he is larger than life. He is genuine and honest, so if you want the truth, you'll get the truth."
Doherty also credited Infusino with helping drive the success of Wakefern.
"Fair-minded and tough, Tom is a competitor who only settles for excellence from his company, its associates and our trade association," she said.
Infusino's talents in building consensus and in keeping the company on the right track are only partially responsible for Wakefern's success. The company has made several decisions through the years that have helped it maintain a leadership position in the markets in which it operates.
The company had humble beginnings in 1946 as a 20,000-square-foot warehouse on two floors of a storefront property in Newark, N.J.
It was named after four of the seven retailers who each invested $1,000 to launch the warehouse: Lou Weiss, Sam Aidekman, Al Aidekman, Abe Kesselman, Dave Fern, Sam Garb and Albert Goldberg. (The "W" is for "Weiss," the "A" is for "Aidekman," the "K" is for "Kesselman," and Fern contributed his entire last name to the new company; the "E" was added in the middle to make it easier to pronounce.)
Perhaps the most important decision the company made, however, came five years later, when the retailers involved in the co-op agreed to change the names on their stores to ShopRite to facilitate advertising.
"As you can imagine, it was very difficult to get a retailer to take his own name off of his business," Infusino told SN in an interview at the annual meeting.
It provided an impetus for the company to grow, however, as the new ShopRite banner attracted the attention of other independents in the area. Within the first year of changing to the ShopRite name, the company added 50 new stores to the co-op.
Having a single name continues to give the company clout as an advertiser, observers said.
"There's no other supermarket co-op where all the members go by the same trade name, and Wakefern leverages that," said Barry Silver, managing director, National Cooperative Bank, Washington, which specializes in providing financing for cooperatives and their members.
With a unified banner for their stores and a concentrated geographic reach in the high-density markets of the Northeast, Wakefern is able to go to its vendors with high-volume commitments to sell product in its stores and obtain low-price deals. That's how the company manages to stage twice-yearly "can-can" sales, by promoting rock-bottom prices on canned products that leave competitors scrambling to keep up.
ShopRite set the tone for its aggressive stance on price in 1958 with its decision not to jump on the trading-stamp bandwagon. While other stores in the area were encouraging consumers to collect trading stamps to earn discounts on merchandise, the ShopRite operators collectively decided to forgo that merchandising tactic and instead lowered their prices by 10%.
In 1995, the company began operating a discount format called PriceRite in Springfield, Mass., that further solidified Wakefern's position as the low-price leader. The banner now includes 25 stores in five states that generate nearly $400 million annual sales, the company said at the annual meeting.
The stores operate under the ShopRite Stores corporate division, which includes more than 50 stores generating nearly $1 billion in annual sales.
Wakefern and its members have a symbiotic relationship, Silver said, in which the wholesaler provides a great deal of support to its individual retailers, who in turn must meet very high standards of performance that are monitored through inspections.
"Many of the cooperatives around the country that have failed have failed because it wasn't a two-way street," Silver said, noting that the 50-plus supermarket cooperatives that populated the nation 20 years ago have been whittled down to 23. "Wakefern has committed to keep its members financially healthy. They help their members do everything, from floor planning to machine acquisition to architectural design to zoning and individual financing."
Individual Wakefern members serve on a broad range of committees that hash out strategies for every department, from pharmacy to produce, and for various specialized functions, such as sanitation and advertising. Each committee involves the participation of anywhere from a handful of operators to more than a dozen, and serving on the committees is often part of the training process for the members' children before they take over the management of their parents' businesses.
"We ask all our members to participate in the committees," Infusino told SN in an interview after the annual meeting. "We think everybody can contribute something to help the others."
Colalillo estimated that retail members originate about 50% of the ideas that come before the board.
"We have entrepreneurs who bring things to the table," he told SN. "Our members are looking at ways to enhance their business, and that could be the next service that's rolled out at Wakefern."
34 Years of Growth
ELIZABETH, N.J. -- Wakefern Food Corp. has grown significantly under the chairmanship of Thomas Infusino, who retired as chairman last month after 34 years. During a presentation at the company's annual meeting, Wakefern detailed the company's growth since 1971, when Infusino was elected chairman. The cooperative has added 23 new members since then.
59 million warehouse units shipped
1 million square feet of warehouse space
$645 million in warehouse sales
$969 million in retail sales
$1.7 million in patronage dividends
132 million warehouse units shipped
1.7 million square feet of warehouse space
$1.6 billion in warehouse sales
$2.4 billion in retail sales
$9.3 million in patronage dividends
$238,000 average weekly store volume
182 million warehouse units shipped
2.2 million square feet of warehouse space
$2.9 billion in wholesale sales
$4.4 billion in retail sales
$38.1 million in patronage dividends
$473,000 average weekly store volume
323 million warehouse units shipped
2.9 million square feet of warehouse space
$5.6 billion in wholesale sales
$8.4 billion in retail sales
$92.4 million in patronage dividends
$864,000 average weekly store volume
Owners Pact Holds Wakefern Together
ELIZABETH, N.J. -- The split that almost ruined Wakefern Food Corp. led to the creation of the glue that has held it together ever since.
In 1966, Supermarkets General, a Wakefern member that represented 48% of the company's business, decided to leave the co-op and go off on its own, forming the Pathmark chain. The two parties agreed to a two-year separation agreement, and Wakefern launched an aggressive campaign to open new stores to replace the lost volume.
In addition, all of the remaining members increased their investment in Wakefern.
Although Wakefern survived the transition, it caused an internal rift over control of the remaining company. Stock in Wakefern had been divided into class A, B and C shares, with founding members holding A shares and many newer members holding C shares.
After Wakefern reacquired the stock from Supermarkets General, some of the A shareholders sought to gain greater control over the company by having the Supermarket General shares redistributed among only those shareholders, while the C shareholders sought to have the shares redistributed evenly among Wakefern members.
"The founding members said they wanted something to reflect their original investment," said Karen Meleta, a spokeswoman for Wakefern.
During the several years of litigation that followed, the class-C shareholders prevailed, and the company created the "one member, one vote" system in which all shares are now treated equally.
The original stockholders' agreement was refined through the ensuing years to include provisions requiring members to purchase a minimum amount of product through Wakefern and to prevent members from selling stores to competitors. In addition, the agreement levies substantial penalties against members who leave the co-op, essentially requiring them to compensate Wakefern for the lost business.
"Wakefern did this to convince the financial institutions that its members were going to stay with them," said Barry Silver, managing director, National Cooperative Bank, Washington. "Most banks are skeptical of cooperatives because its members can leave at will -- but Wakefern's agreement says they can't leave for a number of years, and it gives the banks confidence."
Since the Wakefern agreement, several other supermarket cooperatives around the country have shifted toward the type of agreement that Wakefern has, Silver said.
"There used to be this sense that if members had the freedom to leave, they would choose to stay," Silver said. "But clearly, those cooperatives that are still around have moved toward tightening their membership agreements."
The Wakefern stockholders agreement was put to the test in 2000 when one of its members, Big V Supermarkets of Florida, N.Y., filed for Chapter 11 bankruptcy protection after seeking several times to leave Wakefern and launch a new supply agreement with C&S Wholesale Grocers, now based in Keene, N.H.
The U.S. Bankruptcy Court in Trenton, N.J., ruled that Big V, which operated 32 ShopRite stores, would have to compensate Wakefern for the lost sales volume, estimated by Wakefern at the time to be about $280 million. Although other suitors emerged for Big V, in the end the exit fee made the sale prohibitive to anyone but Wakefern itself, which ended up buying the stores for $150 million and folding them under its ShopRite Stores division.
-- MARK HAMSTRA
Colalillo Ready for Transition
ELIZABETH, N.J. -- Joseph Colalillo has some big shoes to fill.
The 43-year-old chairman of Wakefern Food Corp. here is succeeding Thomas P. Infusino, 34-year veteran of the position who is already a legend both within the ShopRite cooperative and in the food retailing industry in general.
But Colalillo said he is well-prepared to step out from behind his mentor and take charge of the co-op, which generates more than $7 billion in wholesale sales and ranks No. 20 on SN's list of the Top 75 food retailers in the U.S.
He is a second-generation ShopRite operator whose father joined the Wakefern cooperative in the early 1950s, after having worked for Acme Supermarkets. Now Colalillo's company, ShopRite of Hunterdon County, N.J., where he is president, operates three stores in the New Jersey towns of Flemington, Clinton and Greenwood.
"I have a tremendous amount of confidence in Joe," said Infusino during a presentation at Wakefern's annual meeting last month in Whippany, N.J. "He's been my selection all along. I intend to be tremendously supportive of him, because he has the integrity to lead Wakefern."
Colalillo takes over as chairman at a time when the competition is undergoing significant transition. Pathmark Stores, Carteret, N.J., just received a cash infusion from an outside investor that will be used to upgrade stores, and Montvale, N.J.-based A&P is seeking to sell its Canadian operations to bolster its presence in its core New York-New Jersey market.
"We have to focus on whatever we have to do to give our customers the best possible shopping experience," Colalillo told SN in an interview at the company's annual meeting. "We have to have good customer service, good prices and good perishables in order to compete. We will focus on our customers and our associates -- that's what Wakefern has always helped us do."
Colalillo said he hopes to continue the entrepreneurial drive that has been at the core of Wakefern's success over the years.
"The beauty of Wakefern is that we are all a bunch of independent grocers that all have our own ideas, and we all work together," he said.
Colalillo has been working side by side with Infusino for the past seven years and has been active on behalf of Wakefern in the industry, through associations like the New Jersey Food Council and, at the national level, National Grocers Association and Food Marketing Institute. He is also the vice chairman of FMI.
"This has been in place for seven years, and that is why it will be a smooth transition," Wakefern President Dean Janeway said. "Both of them have a strong belief in the co-op.