Kroger Founded on Hard Work

ELLIOT ZWIEBACH

CINCINNATI — Bernard Henry Kroger — Barney or simply B.H. to those who knew him well — learned the value of good business practices early on.

Born in 1860, he was about 15 when he went to work selling coffee, tea and sugar door-to-door for The Great Northern and Pacific Tea Co. in Cincinnati. After two years on the job, he realized sales were falling off because the store owners were cutting corners in buying while continuing to charge the same price.

“That was my first experience with the principle that you can't fool people on food,” he said, according to a company history.

Moving on to William White & Co., another Cincinnati business, Kroger sold tea and coffee, drove a delivery truck and worked behind the counter, learning the value of customer service in the process.

At his next job, with Imperial Tea Co., Kroger again worked in sales and deliveries. But as that business began to fail, the owners asked him to manage the company. Kroger made a counter-offer: He would agree to run the business, but rather than be paid a salary, he wanted 10% of the profits and sole authority to make business decisions.

When the owners accepted his offer, he fired all but one employee, a delivery boy. Then he hired a cashier to help wait on customers, and the three of them ran the business.

Kroger had three strong personal traits that contributed to his success, according to the company history:

“In the early days I have many times started from my store with my room key in my hand, so dead-tired that I climbed the steps, unlocked the door and tumbled into bed without being able to remember what I had done,” he is reported to have said. “Many a time I have dropped down on my bed with my clothes on and slept until morning without getting under the covers. I would get up at 4 o'clock, crawl out, get something to eat at the market house and go at it again.”

Kroger was also committed to giving customers the quality they paid for. “I meant to sell things that I would want to have myself,” he said.

As Kroger's customers learned they could depend on quality and fair prices, Imperial Tea Co. began to turn profitable, with net income of $3,100 at the end of his first 11 months operating it.

Kroger told the owners he wanted to become a full partner, with a one-third ownership stake. He had $62 in the bank and $310 he was owed for his share of the profits, and he offered to put all of it back into the business.

“They laughed at me,” he recalled.

Rather than make him a partner, they offered to increase his pay to $15 a week and give him 15% of the profits. “That ended it,” he said. “I drew my profits and quit.”

Deciding to go into business for himself, he convinced a friend to become his partner. Taking his own $372 and adding $350 his partner borrowed from the bank, Kroger used the $722 to open his own store in Cincinnati in July 1883.

To attract public attention, he painted the storefront fire-engine red and spelled out the name in large gold letters: The Great Western Tea Co.

To enable him to make deliveries, he also purchased a delivery wagon and a horse. Two weeks later, however, the horse was killed and the wagon destroyed by a train. The accident put the partners down $538, leaving just $184 of their original capital.

Through hard work, however, the store was out of debt within a year, with assets of $2,260, and Barney Kroger bought out his partner for $1,500.

Kroger was buying in larger quantities, turning goods over quickly and taking a small profit on multiple sales rather than depending on fewer sales at larger margins.

He was also learning the value of buying direct from producers and selling at lower prices than the competition.

His formula, he said, was simple: “Do it first. When seasonal goods come onto the market, have them first. When prices go down, be the first to reduce them. Never sell anything except for what it is, and don't sell it if it isn't good. Advertise as liberally as business income permits. Sell on a small margin and make the turnover rapid.”

In 1884, 24-year-old Barney Kroger opened his second store, and within a year he added two more. His mother managed one, and his brother William another.

Following the business depression of 1893, Kroger bought additional stores wherever a competing store was failing. By the end of the year he had 17 stores and a profit of $112,000.

In 1902 Kroger reorganized The Great Western Tea Co. as The Kroger Grocery & Baking Co. and began expanding outside Cincinnati. As the company's 25th anniversary approached in 1908, he acquired two area chains and ended the year with a total of 136 locations in Cincinnati, Dayton, Columbus and northern Kentucky, along with 200 horses and delivery wagons.

In 1912 Kroger expanded with 25 stores in St. Louis.

Kroger took his company into manufacturing in 1928, starting with baked goods. He was able to cut bread prices to 2.5 cents a loaf, considerably below the market price.

Barney Kroger was said to be quick to anger if an employee failed to do a job the way he thought it should be done. He had no patience for anyone who did sloppy work and no forgiveness for those who lied to him.

Still in good health at age 68, Kroger decided to retire in 1928, selling his shares for more than $28 million. At the time he left it, the company had 5,260 stores.

The older he got, the less he spoke of his involvement in the grocery industry. He once said, “Give me $722 and my youth again, and I would start tomorrow to build a business as big or bigger. The thing that matters is an attitude toward values.”

He died July 21, 1938.