A Family in Business

MARK HAMSTRA

Coinciding almost to the day with the 75th anniversary of its first retail food store, Price Chopper this month unveiled a significant growth plan that calls for four new stores, a huge addition to its distribution infrastructure and the construction of a brand-new headquarters building in Schenectady, N.Y.

It was just the latest step in the expansion saga of the chain, which has carved out a dominant position in the area known as the Capital Region of New York and grown its empire beyond the Empire State as well.

Now operating 116 supermarkets that generate annual sales of more than $3 billion, Price Chopper remains one of the nation's successful regional independents that have stood up to the incursion of Wal-Mart supercenters and other larger operators by focusing on its relationship with the local communities in which it operates.

SN recently visited with the Price Chopper management team who are members of the chain's founding family, the Golubs, at the Schenectady headquarters. The family, which through the Golub Corp. is the chain's largest shareholder, includes Lewis Golub, chairman; Neil Golub, president and chief executive officer; Jane Golub, director of vendor programs; Jerry Golub, senior vice president of sales and merchandising; David Golub, vice president of operations; and Mona Golub, vice president of public relations and consumer services.

The Golubs are the descendants of a Russian immigrant, also named Lewis Golub, who started a new life in America in 1900 with 50 cents in his pocket. His two sons, Bernard, known as Ben, and William, known as Bill, inherited their father's share of a successful food-wholesaling business and in November 1932 launched the first retail store in what would eventually evolve into the Price Chopper chain.

Today the chain operates in six states: New York, Vermont, New Hampshire, Massachusetts, Connecticut and Pennsylvania. Far removed from the warehouse-style locations that marked the chain in its early days, today's stores, many of which are 50,000-plus square feet, include scratch bakeries, floral, seafood and pharmacies.

With a relentless focus on innovation tempered with business savvy, the chain has been able to stay one step ahead of the competition, often buying the discarded stores of its failed rivals along the way — some of the most recent examples being Grand Union and Tops, both of which competed with Price Chopper for years before exiting parts of Price Chopper's core marketing area.

“We compete with Wegmans and do very well, we compete against Wal-Mart, we compete against Stop & Shop, we compete against Hannaford, and these are all very aggressive retailers,” said Neil Golub. “We try to make our stores theaters of entertainment and product, and we try to be great community citizens with the number of things we do to support the community.”

Although the company became a retail operation in 1932, the Golubs had other food businesses before that and ran a successful food wholesaling operation in the region. In 1930, Golub Wholesale Foods, which was generating about $500,000 a year, merged with another wholesaler operated by Joseph Grosberg. Together they had a $1 million business — “I wonder how they'd feel knowing that we have several stores that do that much in a week,” mused Lewis Golub, the chain's current chairman.

When founder Lewis Golub died following the merger, his sons, Ben and Bill, took over and quickly learned their first business lesson. According to the Golubs, Grosberg tried to tilt the ownership of the company in his favor.

“Grosberg walked in one day and said, ‘You don't bring to the party what your father did, so this is going to be a 60-40 split, and if you don't like it, you can leave.”

The two brothers accepted the deal, but years later would buy out Grosberg's stake.

The Early Supermarket

In 1931, an event took place that would steer the company in a new direction. A local businessman convinced the two brothers that retailing was where the real money could be made, describing their wholesaling business as akin to “driving a hearse,” according to Neil Golub.

“He told them they needed to go down to Long Island, and see a store called King Kullen, because they had a very interesting store — a new kind of business,” he said.

The next year the Golub brothers returned and convinced their majority partner that they should take a chance on this new format, which combined fresh foods, shelf-stable items and a host of other services under one roof.

In November 1932, Ben and Bill opened their first store in an area called Green Island, which was part of Troy, N.Y., and called it the Public Service Market. Although the 20,000-square-foot space combined several departments under one roof, some of the individual departments were leased out to independent vendors.

The next year the company opened two more stores in the area and changed the name to Central Market, taking the name from Schenectady's Central Park, located near one of the stores. It was a name they would keep for the next four decades.

In 1937, the two brothers were among the founders of the Supermarket Institute, the forerunner of today's Food Marketing Institute.

“They struggled in the early days, and there was no one they could go to for help,” Neil Golub explained of the impetus to form SMI, as it became known. “But there were families all over the country starting these types of businesses.”

The Golub brothers and Grosberg opened several more stores in the early days, and when Grosberg decided to retire after Word War II, the two brothers put together an investment consortium and bought him out.

“The consortium took a third of the stock, and Ben and Bill each took a third,” explained Lewis Golub. “They hocked themselves up to their eyeballs — everything was collateralized, because they didn't have any money.”

After they bought out their original partner, the Golub brothers brought in an outside board for the first time.

“That's when they decided they were a family in business instead of a family business, and that was very important,” said Neil Golub. “The concept is that this is a business where the decisions should be made for the benefit of the business, not for the benefit of the family.”

With shares held by the chain's 24,000-plus employees, plus some outside investors who have retained their stake, Price Chopper runs the chain as though it were a public company, even though the shares have never been publicly traded.

“The CEO reports to the board, not to the family, we have a family council to make sure the family stays in harmony, and we have developed all sort of guidelines for family members coming into the business, and how they'll be treated, and what they had to do to be successful,” said Neil Golub.

“Being a Golub gives you an opportunity, but it not a guarantee,” he said. “You have to do your job well to hold it.”

The company has always balanced bold initiatives with a practical business sense. In the early days, Bill Golub constantly pushed the company in new directions, and Ben was the more conservative voice that tried to ensure that the ideas wouldn't break the bank.

“Until the day he died, Bill always had 50 ideas and said, ‘Let's go for it,’ and Ben was always the one who said, ‘OK, let's go a step at a time,’” said Neil, who is Bill's son.

One of the most important of the bold ideas the company had was the decision to join the S&H Green Stamps program in 1951.

Neil Golub recalled the debate over the risk they would be taking by launching the Green Stamps program, which allowed customers to earn free merchandise from catalogs by spending money on groceries at Price Chopper.

“Bill said it would only cost 2% of sales, and Ben said wait, we're only making 2% of sales,” he said. “It was a struggle to get to 1% [profit] in those days.

“That's the way the two brothers set up — Bill would come in with these ideas that were outrageous, and Ben would be very practical.”

The move turned out to be the right one, however, as the chain's sales rapidly accelerated using the stamp program, which gave Price Chopper an early point of distinction against its rivals.

It also launched the chain's reputation as a destination consumers could count on for savings.

The 1950s and 1960s were a time of rapid expansion, as the chain grew to 35 stores by 1965. In 1959, the company built its first ground-up Central Market, in Pittsfield, Mass., using a warehouse-store format.

Going 24/7

Another bold initiative that turned out for the best was the decision in 1972 to keep the stores open 24 hours a day, seven days a week.

“There was a debate whether we should just test in a few stores or go all the way, and we decided to go all the way, because the cost wasn't any more than running a few circulars,” explained Neil Golub. “And the result was that we were in the newspapers and on the radio for weeks, because it was so unique to be open for 24 hours.”

The company used the song “Rock Around the Clock” to promote the new hours and the theme that the stores — still called Central Market at the time — were “always there” when customers needed them.

“In a few weeks we doubled our customer count, which was pretty spectacular,” said Neil Golub. “That was really a harbinger for the demise of Grand Union, because they watched us double our presence in the marketplace, and it took them 20 years to catch up and convert to 24-hour stores.”

The next year, the chain changed its name to Price Chopper, taking the moniker and logo from the President's Day holiday and the story of George Washington chopping down a cherry tree. The company dropped the Central Market banner as well as its Green Stamps program. It later adopted loyalty card programs, switching from the “We Do More” card to the AdvantEdge card in 1996.

“We were truly the price leader in the marketplace,” said Lewis Golub, although he said he had reservations about using the Price Chopper name because he was afraid the chain would eventually shift its positioning away from price.

The chain has continually adapted its offering to the needs of the consumers, lately adding more prepared foods and natural and organic offerings. It is one of a handful of chains that offer Wild Oats private-label products, joining its own private labels, which are marketed under the Price Chopper, Central Market Classics and Price Chopper Naturals and Always Save brands as the company appeals to an increasingly fragmented customer base.

“The demographics of our customer have changed,” said Jerry Golub. “The ethnicity of our customer has changed dramatically, and certainly that has driven the fragmentation of our customer in terms of households having different tastes and different needs, and health consciousness has increased over the years as Baby Boomers have aged.”

One of the newest offerings the company launched is a New York-style deli called Ben & Bill's in a store in Albany.

“That's probably the most popular place in Albany for corned beef and pastrami,” said Neil Golub. “Our customers love it, and it's been a good experience for us because it's a restaurant in one of our stores and we're trying to learn how to do it.”

As it competes with an increasingly diverse array of nontraditional competition, Price Chopper devotes more and more energies to the perimeter of its stores.

“We decided many years ago that in order for us to handle our future, and to be competitive with whoever comes, we would do it with great perishables,” said Neil Golub. “I know that's become a little trite these days, because everybody says it, but the question is, who delivers it. You hear people say they are passionate about food, but you go into their store and you don't see it. They have a passionate speech but they don't deliver it.

“We devoted our energies to making sure we were going to improve in every area. We're trying to find different things that are different. A lot of people say they have bakeries, but they take something out of the freezer and heat it up — we bake from scratch, and we do a good job at it.”

He estimated that Price Chopper was also the largest bagel retailer in the region, noting that all new stores over 50,000 feet have on-site bagel production.

Worker Longevity

One of the keys the company attributes to its success is its employee ownership plan, through which more than half of the shares of Price Chopper are owned by its workers. In the past year, the stock value has increased 34%, Neil Golub said.

At a recent dinner, 200 employees were recognized for achieving either 25 or more years in service, in five-year increments.

“We had two regional vice presidents there who started out as bag boys, and now 35 years later, there they were,” said Jane Golub.

The company is a strong advocate of employee education and offers scholarships, tuition reimbursement and other incentives for its workers.

“One thing that's really changed over the years is the type of associates we are working with,” said David Golub. “Kids respond very differently than they have in the past, they are much more educated about certain things, they are much more tech savvy, and different things excite and motivate them. That makes it more important that the management and supervision in our stores understand that, and make sure the associates are motivated to offer the things we need to our customers.

“Which also means it's important to focus on the development and the training, and the selection of individuals that allows us to have the best-trained workforce to run our facilities, to have the well-trained diverse workforce that takes care of all the things that our customers need.”

Tied hand-in-had with the company's employee base is its history of work with the community.

The company, winner of SN's Community Service Award for 2006, has close ties with a range of health- and community-related causes, particularly breast cancer research.

“We probably end up giving close to 20% of our net [income] in goods, time and services to community service,” said Lewis Golub. “Every staff person is required to participate in community activities.”

The family's Golub Foundation also is a major sponsor of community causes, while the chain itself takes an increasingly interactive approach to supporting events at the local level.

“Our associates often come to us and say what can we do to help out,” said David Golub. “So we see where the values and the culture are getting through the system.”

Other charitable causes the chain and the family support include the Double H Hole in the Wall Ranch for critically ill children; the Cystic Fibrosis Foundation; St. Jude Children's Hospital; and the American Cancer Society.

Price Chopper and the Golub family have also been active in seeking to help revive downtown Schenectady, an effort that was given a boost by the chain's recent announcement that it would build a new headquarters in the city.

The new, 240,000-square-foot headquarters building, occupying a nine-acre site, will serve to accommodate an aggressive expansion plan the retailer outlined.

The company said it plans new stores in Hamilton and Warwick, N.Y., and Durham and Windsor, Conn.; and store expansions are slated for Saratoga, Malta and Granville, N.Y. The company also said it plans to replace existing locations in Shrewsbury, Mass., and Colonie, N.Y. Another 30 sites are under consideration in the Northeast, the company said.

In addition, Price Chopper plans to add 524,000 square feet of warehouse space near the company's current headquarters facility, including an 89,000-square-foot addition to the perishables warehouse, a 100,000-square-foot addition to the grocery warehouse, a new, 40,000-square-foot resource recovery center and a new, 275,000-square-foot general merchandise warehouse.