Giant Food, which has dominated the Washington market behind service and innovation, turns 75
Like any power player calling the nation's capital as its home, Giant Food owes its success in some measure to charisma and influence: No food retailer is as closely linked to Washington's communities as Giant, and no chain ever worked any harder to win that trust.
As Giant marks its 75th anniversary in 2011, it remains a mainstay of the Washington community. And though it's been more than a decade since Giant has been operating as a division of the international retailer Ahold, its executives endeavor to uphold the core values of its founding family, whose recipe for quality, service and value is still served at Giant's 179 stores.
“Izzy [Cohen] built a company based on people,” Mike Conlon, a Giant regional vice president and a Giant employee since 1972, told SN in a recent interview. “And the people he built it with were the people working in the stores. That to me is what has held until this day. It is a foundation of the company.”
Giant was founded in 1936 as a partnership between the Cohen and Lehrman families. Nehemiah Myer “N.M.” Cohen was a kosher butcher who immigrated to central Pennsylvania from Palestine following World War I. Samuel Lehrman was a dry goods distributor in Harrisburg, Pa. Intrigued by the success of self-serve supermarkets such as King Kullen in New York, the partners moved to establish a similar offering — but did it in Washington, D.C., where they saw the potential for stable employment, and would later realize the benefits of the surrounding area's explosive growth.
The first Giant store — located at Georgia Avenue and Park Road in Washington — was a phenomenon from the start. Still smarting from the Great Depression, Washingtonians welcomed the concept of one-stop shopping, self-service and especially market-low prices. Its influence caused food prices throughout the city to drop by 35% within a year, according to a company history. Within three years, the chain had grown to three stores, and within five years Giant ventured outside of the city to Arlington, Va.
N.M. Cohen, who served as Giant's chief executive through 1964 and its chairman until 1977, used his charisma to forge a “quality, service and price” positioning at Giant that continues to this day, sources said. His son Israel, known around Giant as “Izzy,” continued that tradition while leading store expansion, innovation and vertical integration that helped Giant achieve a dominant position in the Washington market by the 1970s.
Bernie Stein, a 30-year employee of Giant who at one time led the company's food operations, remembered N.M. Cohen as a demanding and peculiarly warm boss.
“I remember being at a dinner with N.M. and some other Giant people at the Mayflower Hotel,” Stein recalled to SN at a recent event for Giant's 75th anniversary. “I was sitting beside N.M. At that point we had gone into general merchandise stores, and he was upset that we ran a promotion on Arrow shirts. He loved the Hathaway shirt. And he said to me, ‘Why are we running a promotion on Arrow shirts, when the Hathaway is so much better?’
“I told him, ‘The Hathaway is a better shirt, but there are more Arrow shirts sold in a week than Hathaways sell in a year. It's the shirt that the public buys.’ He yelled at me. ‘You're in food! What do you know about shirts!’ I was very upset.
“N.M. was not the kind of man who ever apologized to anyone for anything,” Stein continued. “About a week later he asked me to drive him back to the Mayflower. We went downstairs to the barber shop, where he got his hair cut. He told me, ‘Get in one of the chairs.’ Turns out he was buying me a haircut as his way of saying he was sorry.
“That was N.M.,” Stein said with a laugh. “He was relentless in his drive for quality.”
Izzy Cohen, who had worked for his father since before Giant was born, became Giant's chief executive officer in 1977, succeeding Joseph Danzansky. Giant people describe Izzy as sharing his father's passion for quality and for giving employees wide authority to make decisions to help the business. He kept a low public profile but endeavored to know store employees by name. Cohen, Giant executives noted, was careful never to use to the word “employee,” preferring instead to refer to workers as “members of the Giant family.”
“What set us apart for so many years was having a board of directors with so much authority we could literally make decisions in the halls,” Barry Scher, the company's longtime director of public affairs, told SN. “We could move very quickly when it was time to do something. Whether it was a merchandising decision or a new store design, we got it done.
“Izzy installed all the officers. At the peak there were 14 of us,” Scher, who was one of those officers, added. “He instilled that we work together as a team, but to make your own decisions, and seek his advice only on those decisions you're having trouble with. That was an awful lot of autonomy to the officers. His attitude was: Do what's right for the customer, and don't make any mistakes. He was a good taskmaster, very smart, but he had a lot of latitude for the officers to run their departments.”
A vertically integrated organization that did nearly all of Giant's work in-house supported those quick decisions. This integration dated to the 1940s when Giant leased its own slaughterhouse to provide meat to its stores and purchased a bakery in Silver Spring, Md. — renamed the Heidi Bakery after the daughter of Jacob Lehrman, Samuel's son. To support store expansion, Giant created its own construction division and real estate department. Later it would create an in-house advertising department, and its own warehouse and manufacturing facilities. This self-supporting arrangement not only helped to distinguish Giant from competitors but supported profits that were the envy of the industry.
“We had our own bakery, our own dairy, an ice cube plant, an ice cream plant. We bottled our own soft drinks,” Scher said. “We built our own stores. We had an internal advertising department, which we ran under the authority of the company so we could save the 15% commission that other agencies would charge.
“Izzy always said, ‘Why should I call the plumbing company to set up plumbing in a new store, when they'll say, ‘Thanks for your business, we'll see you in two weeks,’” Scher recalled. “Izzy instead could call the construction division at Giant and say, ‘We need this now,’ and they'd do it.”
Giant grew to more than 20 stores in the 1950s and in 1958 established headquarters in Landover, Md. The business would diversify over the years, encompassing at different times department stores, a chain of carpeting stores, a gourmet food store known as Someplace Special and a clothing store called Pants Corral that began as a way for Giant to sell Levis jeans when the brand became popular in the 1970s. The majority of those businesses would be sold off or closed, although the combination food and drug store — a concept Giant introduced to the Washington market in 1962 — remains a strength.
Giant's innovations included its claim to be the first chain in the world to use computer-assisted checkouts, in 1970. Supporting what was then a radical change required the chain to keep up a dialogue with consumers and other stakeholders to explain the system's benefits to a suspicious public, and in this regard Giant had few equals in the industry.
Giant in fact was innovative in telling its story, beginning with the hiring of Esther Peterson in 1970. Peterson was a pioneer in women's rights, consumer advocacy and labor who served Presidents Kennedy and Johnson when she was hired as Giant's first consumer advocate.
The idea of hiring a high-profile consumer advocate with a background in labor relations is almost unimaginable today — and was difficult for some Giant executives even then, Scher noted.
“No chain brought in a consumer advisor literally to tell management, ‘Here's what you've got to do.’ A lot of other retailers looked at us askance. They said, ‘You're really bringing in an outsider, with no retail food experience, to tell your top management what to do?’” said Scher. “We ran ads that she authored, telling customers, ‘Don't buy beef’ when prices skyrocketed in the early '70s. Instead, buy seafood or poultry. We did things that literally set the industry on edge.”
Peterson stayed at Giant only five years but had a lasting impact. Her advocacy for product labeling sparked national food policy, and her position with Giant forged an emerging “consumer culture” in the 1970s. Peterson was succeeded by Odonna Matthews, who served as Giant's consumer advocate for 33 years. Scher, who joined Giant in 1966, served as a spokesman for the company and its liaison with press and government officials for 43 years.
“When I began with this company, Esther was a real presence,” recalled Rob Harman, a regional vice president at Giant who began his career there during Peterson's early 1970s tenure. “When Esther spoke, we listened. When she said, ‘Labeling is important,’ we knew we'd have to do labeling in a way that people can understand. She brought a really interesting point of view that still lives with us. We try to do everything by asking, ‘How does this affect the customer? How does this affect the staff?’”
Though Giant had been publicly traded since the early 1960s, its family control lasted until the 1990s. In 1994, the Lehrman family sold its stake in the business to London-based retailer J. Sainsbury. And when Izzy Cohen passed away a year later at age 83, analysts speculated it would only be a matter of time before Giant belonged to Sainsbury fully.
However, executives loyal to Cohen maintained a one seat advantage on the board of directors and continued to run the company under a group they called 1224 Corp. (the name referred to numerals resembling the spelling of I-Z-Z-Y). That group in 1998 finally sold to Ahold, which also purchased Sainsbury's stake, for $2.6 billion in total.
The Ahold era did not get off to a good start. Although Ahold brought buying power to lower prices and introduced a frequent-shopper program at Giant, sales fell as moves to eliminate redundant business lines with Stop & Shop — a New England chain purchased by Ahold two years earlier — robbed Giant of much of its intimacy with Washington-area shoppers, sources said. In the meantime, an aging store base in need of capital spending went largely untouched as Ahold wrestled with an accounting scandal and heavy debt burden. Executives with oversight of Giant came and went quickly. Competitors smelled blood and rushed to Washington to absorb sales and share, with Food Lion, Harris Teeter and Wegmans all arriving in the market as Giant struggled.
“We were all excited by the Ahold acquisition,” Scher said. “Here was a foreign company with deep pockets and a lot of experience taking over, but what happened didn't turn to be the best, and the numbers showed it. Customers were voting with the feet and their wallets. They were leaving us.”
To be fair, the need for capital at Giant's stores pre-dated Ahold's arrival, noted Conlon. And though the company changed when it was sold, the degree to which it changed for the worse has been overstated, he said.
“I heard that said more than I felt it,” he maintained. “So even when Izzy left, there were a lot of things he taught that are still the basis of the things we do today, in terms of his passion for having the best quality and the best people.”
What's more, Giant under Ahold eventually reversed the trend of falling sales, as a program of new merchandising, low prices and much needed investment in stores by 2008 helped reverse a six-year slide. Observers noted that Robin Michel, who joined the company in 2008, helped bring those changes by convincing Ahold to grant Giant more autonomy after largely collapsing the organization in 2005. (Michel recently left Giant, and a search for a new president has begun, officials said.)
“Robin shook up Quincy,” Scher said, referring to the Massachusetts city where Ahold consolidated much of Giant's operations with that of Stop & Shop. “She said in order to turn around this company I need more authority to make changes at the local level, and she convinced the company to spend $100 million on store renovations.”
Project Refresh, as it is known around Giant, got underway in 2008 and has since resulted in renovations to two-thirds of Giant's store base, officials said. In combination with Ahold's Value Improvement Program — a comprehensive strategic reset that brought lower everyday prices and a shared branding to Stop & Shop and Giant, including a new logo — its stores, like the original Giant in 1936, were in the right place to benefit from a wounded economy.
“We were ahead of the curve on our plan with the turn in the economy,” Conlon said. “We had already planned on the price investments, we had already planned on the store refreshes, and so the timing couldn't have been more perfect for us when it all come together. Had we not done all that, the economy would have brought more people in, but we would not have had quite as nice a picture as we have now.”
Giant's progress was recognized by SN in 2009 when it, along with Stop & Shop, was named winner of the magazine's annual Retail Excellence Award. Burt P. Flickinger III, managing director of Strategic Resource Group, New York, called Giant “one of the great comebacks of the decade.”
A new gas rewards program with Shell stations in Washington is bringing further value to Giant shoppers, said Harman, with participants already having saved $20 million since its introduction last year.
Giant executives are bullish on the future, having regained some momentum in a market that continues to offer attractive demographics and opportunities to grow. For Giant the 75th anniversary is an opportunity to reinforce its ties with the community, including in-store promotions highlighting moments in its history and reminding shoppers of its support of organizations including area food banks and education. Giant, for example, has provided funding for schools under its A+ program since 1989, and supported the television quiz show “It's Academic” for 50 years.
Conlon has twin sons who recently graduated from college and both are working as Giant store managers. “I wouldn't have steered them there if I didn't believe in the company,” he said.
“My philosophy has always been to say what I think, and not what people want to hear. That's a responsibility I have to the business,” he added. “That's probably the thing that in my mind has been a stalwart with me. It has always been a strength here. Frankly, I don't believe a company can get strong any other way.”