BIG TOM THUMB

DALLAS -- The "little giant" has grown up. As it celebrates its 50th anniversary this year, Tom Thumb Food & Pharmacy has become a major force in the metroplex -- a far cry from the struggling independent that used the "little giant" motif to portray itself, in 1948, as the pint-sized player going up against some of the industry's major operators -- Safeway, A&P and, later, Kroger Co.

s before that was the norm, and service delis and sit-down cafes. And we offered extensive lines of nonfood, and we got into the food and drug combination store quite early, which probably had more to do with our growth than any other single thing."

Asked if he'd rather be working in the grocery business of today or the industry he grew up in, Cullum replied, "I'd prefer to be working in the industry of the 1950s and 1960s, because that was a time when there was so much growth in the retail food business.

"The supermarket revolution was in its early period, and we didn't have the huge consolidation that we have now. The action was really among small regional chains like Tom Thumb, and I'm glad I was part of that time." Tom Thumb was founded in 1948, when Charles Cullum, his older brother Robert and a business partner, J.R. Bost, took over Toro Super Markets, a financially strapped group of seven stores that was renamed Tom Thumb.

The name was selected by Bob Cullum, who thought the concept would have broad appeal in those postwar years and would also lend itself well to advertising. For years after, the chain's ads featured a small portly figure in a white grocer's apron with a pencil tucked behind his ear.

The Cullums got into the retail business by way of the family-owned wholesale company, A.W. Cullum & Co., which had been founded by their father in 1919. When the owner of Toro decided to throw in the towel, he sold the stores to the wholesaler, who was one of his major creditors.

It was tough for the small Tom Thumb operation to attract business -- until a car crashed through the front of its flagship store one day in June 1948. That incident prompted Bob Cullum to put together a newspaper ad that showed a picture of the car inside the store, with the headline, "Please, friends, don't be so eager. We're glad you're excited about shopping at Tom Thumb, but please walk -- do not crash through the nearest door."

The ad attracted a lot of attention for the small operation and boosted volume, as did the business Tom Thumb picked up and held during and after a meatcutters' strike against Safeway later in 1948.

In 1953 the brothers established Cullum Cos. as a holding company for Tom Thumb Stores and A.W. Cullum wholesale company.

The civic connections of the Cullum family -- its friendships with local bankers and developers -- helped give Tom Thumb an edge in obtaining prime real estate sites in competition with the larger chains, and by 1956 the company had 20 stores.

By the time it opened store No. 22 in 1958, Tom Thumb faced a major challenge from Kroger Co., Cincinnati, which entered the Dallas market that year through the acquisition of locally based Wyatt Food Stores.

Tom Thumb No. 22, covering 25,000 square feet, was located right across the street from a 15,000-square-foot Kroger unit. The Tom Thumb did so well, the company's history said, that it forced Kroger to sell the location. "It was our first home run in the supermarket business, [the first time] we went in and just whacked out a competitor," Charles Cullum noted. "We never had done that before. It started a new era in the company of bigger stores and a much more aggressive policy."

According to the company history, innovation was the single most important principle guiding store operations and merchandising, with the brothers picking up a lot of new ideas from attending meetings of the Super Market Institute (forerunner to the Food Marketing Institute).

"Early on, we joined the general management division of SMI," Cullum told SN, "and we attended regular meetings in Chicago with 25 or 30 other young regional chains like Tom Thumb. It was like a university of food retailing, where we all got our education. We brought in experts to teach us, and we taught each other, and together we became a creative, dynamic industry."

By the mid-1960s, Tom Thumb was no longer the little guy battling the giants -- it was one of the giants itself, with 32 stores, annual sales exceeding $50 million and a 12% market share.

The Cullum brothers were still supplying strategic direction for the company while depending on others for the nuts-and-bolts retail management, and they went after Jack Evans to oversee operations in 1966. Evans, who had been working for Wyatt Food Stores when it was acquired by Kroger, was Kroger's Dallas division manager. He was interested in moving up within the Kroger organization but didn't want to relocate to Cincinnati, so when he was asked to join Cullum, he said he would -- but only if the company committed itself to a major expansion program, including making acquisitions and going public. The Cullums agreed, and Evans was hired.

Cullum Cos. went public in 1969, "and that was probably the best moment in our history," Charles Cullum told SN, "because it changed the company's chemistry a great deal and allowed us to do a lot of things with employee incentives and stock options, which were powerful tools in developing strong people. And it also enabled us to finance the company's rapid expansion."

Moving beyond its Texas base, Cullum Cos. acquired Pantry Food Markets, a 17-store Los Angeles chain, in 1967; Page Drug Stores here in 1968; Gooch Packing Co., Omaha, Neb., a meat processor, in 1969; Rylander's, a seven-store chain based in Austin, Texas, in 1972; and later the same year Hinky Dinky Stores, Omaha, a 43-unit chain with stores in Nebraska, Iowa and South Dakota -- boosting sales volume by 1973 to $304.6 million.

The retail acquisitions gave Cullum greater flexibility in the Dallas market. For example, when Safeway dropped Gold Bond stamps in 1974, Tom Thumb eliminated S&H Green stamps and was able to handle the resulting drop in profits because of high profits at Hinky Dinky. Hinky Dinky also provided sufficient cash flow to sustain the company during the mid-1970s, when it used the nonfood expertise and merchandising of Page Drug Stores to begin rolling out combination stores.

In 1974 the company began focussing on internal expansion, primarily by rolling out its combo stores -- initially operating side-by-side with Page but eventually eliminating the dividing wall and combining the two operations under one roof.

In 1976 Bob Cullum, chairman, moved up to chairman of the executive committee; Charles Cullum moved up to chairman and chief executive officer, and Evans was named president and chief operating officer.

As store growth continued between 1976 and 1981, sales grew dramatically, with volume passing $1 billion in 1982. In 1981 Evans was elected mayor of Dallas and left Tom Thumb. Seven months into Evans' two-year term Bob Cullum died, and Evans foresook running for re-election in order to rejoin Cullum.

Over the years, Hinky Dinky had been allowed to decline while the company concentrated capital spending closer to home, and profits were down, the corporate history said.

In addition, Hinky Dinky remained one of the few union operators in an area with a growing number of non-union competitors, and, following a strike in 1984, losses accelerated, and Cullum sold the stores early in 1985. That action prompted the company to take a closer look at its Pantry operation in California, where smaller units put the company at a competitive disadvantage; Pantry was closed down in 1986.

Later that year Charles Cullum became chairman of the executive committee and Evans was named chairman and CEO.

In 1987 Wal-Mart Corp., Bentonville, Ark., approached Cullum about testing a hypermarket format, and Cullum agreed to be part of a joint venture with Wal-Mart in Hypermart USA, a 220,000-square-foot forerunner of today's supercenters.

"We had about a third of the space for the food operation, and the rest of the store had clothing, automotive products, everything that's in a Wal-Mart," Charles Cullum said in the corporate history.

"The store was averaging $3 million a week, and of that $3 million, about $2 million of it was in food. Food was the thing that drove [the hypermarket concept]. That's what drew the people in there."

The store was not particularly profitable, and once prices were raised to achieve higher grosses, volume dropped immediately. When Wal-Mart decided it had learned enough and wanted to move ahead with supercenters on its own, it bought out Tom Thumb's interest in the store.

Charles Cullum took the opportunity to retire after a leveraged buyout in 1988.

In 1992, after Cullum's LBO partner, Morgan Stanley, decided to sell, Cullum Cos. initiated talks with Randalls Food Markets, Houston, that climaxed with Randalls acquiring Cullum. According to the company history, the deal combined Randalls' first-class fresh-oriented store format with Tom Thumb's first-class operation. Randalls intended to operate Tom Thumb as a separate entity, but the combined company continued to lose money, despite increases in its sales, and in late 1994 Randalls opted to consolidate the two operations, eliminating duplicate staffs and combining buying in Houston.

The loss of local control caused morale to drop in Dallas, and as rumors proliferated that Randalls was going to sell Tom Thumb, Robert Onstead, founder of Randalls, moved to Dallas to reinforce the parent company's commitment and support for Tom Thumb.

That boosted morale immediately because the Dallas operation no longer felt like a second string to Randalls, and Onstead's presence gave local personnel clout to make decisions on the spot -- all of which helped re-establish Tom Thumb's identity.

The newly combined company had planned a major expansion, but the dropping economy cut those plans short in 1992. In May 1997 Randalls said it would sell 61% of the company to New York-based Kohlberg Kravis Roberts & Co., which invested $225 million for future growth, with most of it earmarked for expansion in the Dallas area.

Charles Cullum still maintains an office at one of Tom Thumb's warehouses, and he maintains an interest in the business he helped create.

Asked how it feels to look back 50 years later, Cullum told SN, "It's a great satisfaction to have anything last 50 years, and I'm proud I lived to see it. My only regret is that I've lost two wonderful associates who are not here to share the moment with me -- my brother Bob Cullum and Jack Evans."