ARIZONA Born and Bred

ELLIOT ZWIEBACH

As Bashas' celebrates its 75th anniversary, it sees plenty of room to grow its expanding portfolio of store banners without leaving its home state of Arizona.

While it could distribute as far north as Las Vegas, as far west as Palm Springs, Calif., and as far east as Albuquerque, N.M., it's unlikely to do so, at least in the near term, Mike Proulx, president and chief operating officer of the Chandler, Ariz.-based company, told SN.

“Arizona is one of the fastest-growing states in the country, with a population of 6 million that's expected to double in the next 25 years or less, and we intend to continue to grow as Arizona grows.

“We are Arizona. Our roots are here, and our lives are here. We've been here for 75 years and we'll be here for another 75 years and then some because this is home.

“At this point [expanding outside the state] is not really one of the top items under discussion. There's so much going on in Arizona, with plenty of opportunities to focus on to grow the business in areas where we already operate.”

Bashas' does have two stores outside Arizona — one in California, on the Arizona border, and one in New Mexico — but those stores are the exception, Proulx pointed out.

“We look at surveys of population growth and demographic patterns outside the state, but nothing hard and fast,” Proulx explained. “And while we're not looking very aggressively, if opportunities come up that make sense, we would certainly be interested in looking at them.”

Bashas' operates 161 stores under multiple banners: 83 conventional Bashas' locations; 63 Hispanic-oriented Food City units; 11 upscale AJ's Fine Foods; three upscale liquor stores called Sportsman's Wine and Spirits; and one Ike's Farmers' Market that debuted outside Tucson in mid-May.

Corporate sales are $2.1 billion, and Proulx said Bashas' anticipates a 5% boost in same-store sales, plus additional volume from the new stores it will open this year.

Near the top of its agenda is determining how and where to expand the new Ike's natural and organics format — a concept Bashas' sees as a destination store for a broad variety of specialized products. The first store, in a former Bashas' site in Oro Valley, devotes one-third of its space, in the center of the store, to produce, with aisles arranged at angles rather than front-to-back to give it a more open, less structured look.

Bashas' executives are “really excited” about customer response to the store, “and we're currently analyzing the results there to determine what we might need to do to tweak the operation before we open additional locations,” Proulx said.

“I believe we will be able to move forward on where and how to expand within three to six months, after which we could move pretty quickly to remodel and reopen stores under the Ike's name beginning in 2008.”

The first Ike's is 43,000 square feet, “and while the concept would work in a slightly smaller box, we don't want to go much larger,” Proulx explained.

Bashas' has identified four or five potential sites for Ike's — mostly in the Phoenix area, he noted — “where the neighborhoods make sense for this kind of store.”

The company is also excited about the prospects for Sportsman's Fine Wine and Spirits, a three-store operation it acquired in February — liquor stores with small restaurant areas that have operated in the Phoenix area since the mid-1960s — “because those stores enable us to add another new direction to the business we do at AJ's,” Proulx said.

Bashas' is remodeling and expanding one of the Sportsman's locations and upgrading the decor at another while importing culinary expertise from AJ's for the food operations at all three stores and adding Drinks, the Sportsman's quarterly magazine, to AJ's offerings.

“We believe Sportsman's as a brand is unique and recognizable, and our marketing department is looking at ways to expand that brand,” Proulx said. “And while we have not come to any decisions yet, we're also looking at possibly interfacing the AJ's and Sportsman's names, though the jury is still out.”

Bashas' anticipates opening five more new stores through the balance of this year, including two new Bashas', scheduled for Gilbert, Ariz., in September and Surprise, Ariz., in October; and two AJ's, scheduled to open in Scottsdale in October and Chandler in December. A store acquired from Albertsons LLC, on the west side of Phoenix, is scheduled to reopen at the end of this month under the Food City banner.

Future Acquisitions

While much of its growth over the last 15 years has come from multi-store acquisitions of other local operators, any future acquisitions are likely to involve one- and two-store operations, Proulx pointed out.

The company has already reopened two other stores it acquired this year: a former IGA in Wilcox, Ariz., that opened in mid-June under the Food City banner, and a former Albertsons on the east side of Phoenix that opened late last month as a Bashas'.

“There are other Albertsons locations we'd be interested in, but LLC is continuing to operate those,” Proulx said.

Bashas' opened five new stores in 2006, “and I think five to seven a year would be our strategic growth plan going forward,” Proulx said.

Asked how the company decides which format to put where, he replied, “We're always looking for locations that make sense, and if a location is being serviced in a conventional arena, for example, then we would look for an opportunity to go in a different direction and open one of our niche stores there.”

Most of Bashas' long-term growth will occur in the Phoenix area, where two-thirds of the state's population lives, though the company will also continue to expand its presence in the Tucson market as well as expanding its Food City format in several cities on the Arizona-Mexico border, Proulx said.

Bashas' is Arizona's fourth-largest supermarket operator, according to local sources, with a share of 18%, running behind Kroger-owned Fry's, which has a 24% share; Wal-Mart Stores (encompassing supercenters and Neighborhood Markets), which has 22%; and Safeway with 19%.

In Phoenix local sources said Bashas' and Safeway are running neck-and-neck in third place with about 17% each — “depending on which of us opened a store last, which usually puts that company ahead of the other,” Proulx said — with Fry's on top with 27% and Wal-Mart with 22%.

In Tucson Bashas' is in third place with a 12% share, behind Fry's at 24% and Safeway at 21%, and ahead of Wal-Mart at 10% and Albertsons at 8%, according to Metro Market Studies, based there in Tucson.

Bashas' picked up some volume from Albertsons last year “while those stores were going through the ordeal of being acquired by the LLC — especially in areas where they closed stores — but over the last six or seven months, LLC has stepped up the stores' marketing and advertising activity, with loss leaders every week.

“But we're holding on and gaining market share, not because of anything Albertsons is doing but because we're providing customers with what they tell us they want us to carry, with prices that are highly competitive and items that are unique,” he said, including the introduction of USDA Choice beef instead of Angus Select.

Tesco Coming

Competition may heat up once Tesco begins rolling out its Fresh & Easy Neighborhood Markets in Arizona later this year, Proulx said, though he doesn't anticipate too much impact early on.

“Tesco has announced it will open 27 locations in Arizona, which would affect about 20% of our stores. But so far, we've seen only three to five locations where remodeling is taking place in existing vacant buildings, so the impact in the beginning will be much, much less.”

Over the long term, Proulx added, “we are concentrating on the things we can control in our differentiated formats, including fresh, quality perishables, clean stores and exceptional customer service.”

Bashas' remains the state's only surviving home-grown supermarket operator, having outlasted A.J. Bayless and Smitty's locally and one-time regional giants Lucky, Alpha Beta, Smith's and Mayfair while continuing to compete with Safeway, Fry's, Wal-Mart and Albertsons LLC.

Asked how Bashas' held on while others fell, Proulx replied, “We've always been agile and quick and nimble in our ability to respond to customers' needs. And being Arizona-based, we've developed friendships and relationships with the state's decision-makers that have enabled us to grow.”

It was one of those friendships — with Noah Billings, owner of a single Food City store — that enabled Bashas' to acquire the Hispanic-oriented store in 1994 and use it as a base for developing its own Hispanic format that now accounts for more than 40% of its sales base, Proulx pointed out. And it was the chain's agility that enabled Eddie Basha, chairman and chief executive officer, to respond immediately to an offer from the Navajo Nation in 1981 to open the first of several stores on Native American reservations around the state, he added.

Family ownership has played a major role in Bashas' ability to survive for 75 years, Proulx said. With the chain's second generation still in place and the third generation of Bashas coming into its own in mid-level management, he said he does not anticipate any significant changes in the company's family-owned status or the way it does business.

“The Basha family is still very active and involved in day-to-day operations, and they are out and about at the stores,” he noted. “That makes for a tight connection across the company and a knowledge that everyone is moving in the same direction.

“That's important when it comes to making decisions, and it's an advantage because the decision-makers are all right here.”

The Basha family's future involvement in the company seems secure, with Eddie Basha Jr., son of co-founder Eddie Basha, continuing as chairman and CEO, and Johnny Basha, son of co-founder Ike Basha, continuing as vice-chairman.

Next Generation

Looking at the next generation, Eddie Basha has six sons, four of whom work at the company: Trey Basha as senior vice president, financial and legal; Ike Basha, senior vice president, store support services; Michael Basha, senior vice president, logistics and warehousing; and David Basha, an analyst in the real estate department; the other two sons, Jeremy and Joshua, are in high school and college, respectively. Johnny Basha has a son and three daughters: Ike Basha, who works in the advertising department; Melanie Basha Ryan, who works in the public relations department; Laurice Basha, who works at an AJ's store; and Mary Basha, who's still in college.

With a couple of Trey Bashas' sons working at store level, a fourth generation is already in place, Proulx pointed out.

Despite its size, Bashas' is still family-centered, he added, with employees called “members.”

“When I started with this company 41 years ago, we had 16 stores and 500 members, and everyone knew everyone else by name. Now, although we're up to 161 stores and 14,000 members, we still use first names at all levels.

“It's like we're all part of an extended family because most of us have grown up with this company, and this is all that we know.”

The description of Bashas' employees as an “extended family” does not jibe with the way the United Food and Commercial Workers Union views the company. According to a recent press release, “The happy ‘members’ of [Bashas'] corporate family might better be described as dysfunctional, [with] employees feeling powerless” as they seek to form a union at a handful of stores.

The UFCW here has formed a group called the Hungry for Respect Coalition that is asking Bashas' to negotiate in good faith to reach an agreement for workers at a handful of stores.

Proulx said the union's statements are part of a smear campaign that began in 1993, after Bashas' acquired 11 stores from two companies that had union contracts. Bashas' honored those contracts when it hired the majority of employees at those stores, “but we were never able to reach agreement on a subsequent contract,” he said.

“We asked the union to work with us to settle the matter by letting our members at those stores vote for or against union representation at one store where the members requested an election, but the union turned us down.”

Bashas' corporate office is on the site of the original Bashas' store, which provides a certain continuity with the company's past, Proulx said.

Of particular importance to him, he added, are the five principles on which the business was built 75 years ago: people, community, compassion, respect and friendship.

“I guess those principles are close to my heart because as president, I need to make sure I'm centered as I make decisions every day on what the company is, what it represents and where it's going. Knowing where you came from helps keep you centered.”

Bashas' Thrives Generation After Generation

CHANDLER, Ariz. — Bashas' is celebrating its 75th anniversary this year, stressing both its local and family-based roots with the slogan, “Dedicated to serving Arizona families for 75 years.”

It almost didn't make it past its 36th.

It was October of 1968, and co-founder Eddie Basha Sr. had just died, 10 years after his brother Ike, leaving 31-year-old Eddie Basha Jr. as chairman and chief executive officer and facing a heavy debt load that threatened to put the company out of business.

Besides operating 16 supermarkets, Bashas' had been diversifying to make itself more self-sufficient, operating dairy farms, cattle herds and citrus groves in California and Nevada and an alfalfa farm to support the dairy operation.

“There was too much going on in too many places,” according to a company history. “No one questioned that Eddie Sr.'s grand vision of a grocery chain that covered its bases from farm to market was brilliant in conception. In reality, however, it was proving to be a plan whose reach may have exceeded its grasp.

“There was so much debt that Arizona banks wouldn't loan Bashas' money for expansion, and the company wallowed.

“Eddie Jr.'s leadership skills were challenged immediately. He respected his father tremendously, but he had to acknowledge that the company was in terrible debt and seemed to have no prospect of getting out of that situation.”

Eddie Basha Jr. began working in the family business in 1949, when he was 11. While attending Stanford University, he considered becoming a history teacher or joining the Marines, but when his uncle, Ike Basha, died during his junior year, Eddie decided to join the business full-time when he graduated.

“There was never a mandate,” he recalled years later. “I just had a natural inclination to do it.”

As he told SN at the time of the company's 70th anniversary, “My grandparents came to Arizona to build a better life. They had four children, including my father. Dad followed his parents and uncles and aunts, and I'm the next generation, and I'm committed by culture and by blood to continue to make this an even better place.

“Money is not the almighty goal for me or the most important notion in my life. My goal is creating and building a successful company — that's constant and continuous and fulfills the dreams of my grandparents.

“They didn't come here to make a big fortune and then walk away. They came to make a living and to build a better store and create a higher quality of life for people here. Operating this business is the way I can continue to invest and build in the community and the state.”

When his father died and the company was over-burdened with debt, Eddie Basha Jr. had to make decisions, and quickly.

“I didn't have the luxury of time to choose our direction,” he said. “I had to decide whether to focus on the business or stay involved in all these other interests, and I chose to focus. The grocery chain was the main thing. Everything else was ancillary.”

Basha sold the non-grocery assets — which enabled the company to pay down its debt and obtain new working capital — and launched an aggressive growth program that enabled the business to thrive.

The original business was established by Najeeb and Najeeby Basha, who had emigrated separately from Lebanon in the late 1800s, met and married in New York and moved in 1910 to Arizona, where Najeeby's sister and brother-in-law had a mercantile business.

A few years later the Bashas opened a general store in Sonora, Ariz., where they sold a small assortment of groceries along with clothing and other items.

In 1932 Ike and Eddie Basha began operating a general merchandise store in Goodyear, Ariz. (which later became Chandler, Ariz.), and put their name on the building — the first store to carry the Bashas' banner and the same property on which the company's headquarters is still located.

Although that first store originally devoted two-thirds of space to dry goods, with a little grocery mixed in, and one-third to furniture, Ike and Eddie's sister Camille suggested renting out the furniture area and converting the rest to groceries.

Bashas' was always very much a family enterprise. After Najeeb Basha died in 1932, his wife, Najeeby, played a major role in the business, helping to select produce at the wholesale market in Phoenix three times a week.

Daughter Laurice served as grocery buyer, Camille as bookkeeper and Connie handled customer service along with Eddie Jr.'s wife Esma. “If there was a line between business and family, nobody in the Basha household knew about it,” the company history pointed out. “To Najeeby the grocery chain was a member of the family as surely as if it were one of her children.”

Once Eddie Jr. succeeded his father and kept the company from going under, Bashas' began an aggressive expansion program. From the 16 stores he inherited, the chain added 10 units in the 1970s, 25 in the 1980s, 40 in the 1990s and 65 more since 2000 — mostly, over the last 15 years, through acquisitions.

Among those acquisitions were seven units from Arizona Supermarkets, including the first two AJ's Fine Foods, in 1993; the original Food City, which catered to Hispanic shoppers and spawned an entire division for Bashas' in 1994; 16 Megafoods in 1996; and 22 Southwest Supermarkets in 2001.

Besides conventional Bashas' stores, the upscale AJ's format and the Hispanic Food City operation, Bashas' also operates Bashas' Dine [pronounced Dee-nay] — Dine is a Navajo word meaning The People — on seven Indian reservations; Eddie's Country Store, a single-unit format with a limited selection in the resort area of Pine Top in northern Arizona, and its latest addition, Ike's Farmers Market, a fresh format just outside Tucson.

A strong sense of family continued to be a cornerstone of Bashas' as it grew, providing a link between past, present and future. “I wanted the company to be cohesive,” Eddie Basha Jr. said. “I wanted us to be joined by common goals and aspirations.”

One way he did that was to give employees — or members, as the company likes to call them — the kind of freedom, empowerment and trust he'd always felt as a member of the Basha family.

“I extracted the word ‘employee’ from our business lexicon more than 40 years ago, because to me, ‘employee’ connotes a division or schism between employer and employee,” Basha told SN. “We've believed from the outset that we are all one, together — a family of companies and a family of people working together to promote a business.

“That's why the greatest success I can envision is the number of 10-, 15-, 20- and 25-year service awards we give annually, because that, to me, represents the pinnacle of success and achievement in our family of companies.”

Basha told SN he plans to retire someday but not to fade away, noting that he'd like to be named chairman emeritus at some point.

“I'd probably like to exit from this job sooner rather than later,” he told SN four years ago. “I believe in passing the torch — it's just a matter of timing. I would never recuse myself from the company, though — I would always want to have an office here.”

A third generation of family members is already on deck, and little is likely to change. According to Eddie's oldest son, “Trey” Basha, “As members of the third generation, we have worked hard and tried to learn all that we could from those that came before in an effort to carry on the great legacy that will be left to us.

“We have all grown up hearing the stories and understanding the important role played by the early family members and all who joined them in building this company. Those important lessons have become a part of who we are individually and collectively, and we bring them to work with us each and every day.”
— E.Z.