20. GARY PHILLIPS

Julie Gallagher

Key Development: Gained 225 member stores, increased sales 22.9%.

What's Next: Expansion of specialty foods and dollar merchandise.

The past year has been one of unprecedented growth for Associated Wholesale Grocers, and this year is shaping up to bring more of the same.

AWG gained 225 member stores in 2004, helping the retailer-owned cooperative bump its sales 22.9% to $4.6 billion. That was on top of an 18.5% sales increase the previous year, said Gary Phillips, president and chief executive officer, AWG, Kansas City, Kan.

The co-op's sales began climbing dramatically (47.7% over the past three years) after Phillips, 58, took the reins in 2000. Prior to that, Phillips -- who's dedicated 31 years of service to AWG -- led the cooperative's Springfield, Mo., division and was its chief financial officer. He looks forward to another successful year.

"[AWG] is expecting double-digit sales increases for the coming year, based on existing retailers' sales and acquisitions [by member stores]," Phillips said. AWG ranks No. 3 on SN's list of the largest grocery cooperatives. Its 500 members operate approximately 1,500 stores. AWG also owns two subsidiaries that operate 78 stores independent of the cooperative.

"We're most proud of the way our [wholesale] associates handled the sales increases with no disturbance to service levels," said Phillips, who cited growth of its member stores' sales as the cooperative's most important objective.

A portion of its success is owed directly to its specialty food assortment, which grew from AWG's acquisition of six Fleming distribution centers, including a specialty food operation, in 2003. (Of the six warehouses, three were kept, two were closed, and one was sold.) "[Specialty foods] enhanced our retailers' competitiveness, allowing them to increase sales and profitability," Phillips said.

AWG plans to add 35% to its specialty-goods assortment and is on track to sell $50 million to $75 million in specialty food this year, said Jerry Garland, executive vice president, AWG. That's more than double its specialty-food sales last year. About half of the cooperative's owned and supplied stores take advantage of AWG's specialty offering.

Phillips also counts AWG's dollar-merchandising business as a contributor to its improved sales. It will expand its dollar offerings in the coming year.

AWG will also dedicate resources toward the growth of business through acquisitions made by the retailers it supplies, Phillips said. Of the 225 member stores that it obtained in the past year, 46 were acquired by its existing retailer members, and 18 were new stores opened by existing members, with the remainder coming from other wholesalers.

"We provide [retailers] with assistance for developing new locations, expansions and remodeling," Phillips said. "We try to make available any and all national chain services in order to enhance their operations. That is a big part of why our independent retailers are successful and still growing."

More than 50 seminar topics are offered on what Phillips describes as a "break even" basis. Available topics include site development, lease negotiation, financing, loyalty and marketing. Last year more than 7,000 people attended 207 seminars.

Education is one way AWG helps its retailers compete with supercenters and other nontraditional formats. "We believe that independents must recognize and understand their own strengths and weaknesses as well as their competitors' strengths and weaknesses, and then very specific strategies can be developed," Phillips said.