Executives Recall Kroger Transformations

MARK HAMSTRA

CINCINNATI — In the great race to build supermarkets that emerged after World War II, Kroger Co., as befits its conservative personality, was more like the tortoise than the hare.

After the company famously passed up its chance to go down in history when it let Michael Cullen leave the company to found King Kullen, which became known as the originator of the self-service supermarket concept, Kroger now sits comfortably ahead of the pack.

Robert Aders, who worked at Kroger for 13 years before becoming its chairman from 1970 to 1974, told SN in a recent interview that in the 1950s and 1960s the industry was still “learning what it means to be a supermarket.”

“A supermarket didn't mean then what it means now,” he said. “There were these stores that were 15,000 or 18,000 square feet, offering meat and produce and grocery, and that was about it.”

During that period, he recalls, A&P was the largest national grocer, followed by Safeway and Kroger, and companies were focused on growth through acquisition.

“One of the things that made that work was the fact that we were all so much alike — everybody felt you could just take over another store, put your name on it, and it was that simple,” Aders recalled. “That turned out not to be the case. But that had yet to be discovered.”

Bill Kagler, who spent 22 years at Kroger, including three as its president in the early 1980s, credited former Chairman James Herring with leading Kroger to success in converting its vast network of corner stores into what has become its current stable of food-and-drug combo supermarkets.

“I don't know if people recognize what he did,” Kagler told SN in a recent interview. “He moved us from small stores to big stores and really got us watching our expenses more than had been done during previous administrations.”

Herring was a former drug store operator who joined Kroger in 1960 through an acquisition, and his expertise in pharmacy helped Kroger grow its own prescription business and incorporate a full drug store offering into its stores.

“The pharmacy business initially provided a driver for customer count,” Kagler said. “When I think how relatively few scripts we filled in those early days, it was fantastic.”

He also credited Herring with streamlining the business by eliminating unprofitable operations, including the sale of stores in Pittsburgh, Chicago and Los Angeles. “We took that money and invested in Atlanta, Nashville [Tenn.] and in the Carolinas, and it worked,” Kagler said.

During that time, Kroger also changed the way it handled union negotiations, said Kagler.

“We became more creative,” he explained. “Instead of beating them over the head, we sat down with them and explained our financials. We explained how we operated the company, and we got very favorable contracts as a result. We respected the guys across the table.”

Aders said the 1960s and 1970s were a period of transformation for Kroger and the supermarket industry as a whole for several reasons: the advent of scanning in 1970, the initiation of federal price controls and the emergence of consumer activism. Product-labeling laws added new dimensions to the way products were positioned and marketed.

“It wasn't so much a feeling of pressure from the consumer as it was a period of awakening by the retailer to the opportunity for supermarkets to add to the value of what they did,” Aders said. “All those things — technology, consumers, regulation — all came together to reshape the industry in the 1970s.”

He credited the company's founder, Barney Kroger, with establishing a strong foundation for the company in its early years that has always helped Kroger retain its steady course and no-nonsense Midwestern values.

“One of the things that helped Kroger survive was that it had such a strong sense of place,” Aders said. “It is Cincinnati, and Cincinnati is Kroger, and that's the way it's always going to be.”