Coborn’s, Inc.

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Coborn’s, Inc.

1445 East Highway 23
St. Cloud, Minnesota 56302
U.S.A.
(320) 252-4222
Fax: (320) 252-0014

Private Company
Incorporated: 1957
Employees: 4,082
Sales: $480 million (1998 est.)
NAIC: 44511 Supermarkets & Other Grocery (Except Convenience) Stores; 44711 Gasoline Stations with Convenience Stores; 445310 Liquor Stores, Package

Coborn’s, Inc. is a supermarket, convenience, and liquor retailer which ranked number 21 in Corporate Report’s listing of top 100 private companies in the state of Minnesota. Most of the company’s facilities are located in the upper Midwest, with 13 Coborn’s supermarkets, ten Cash Wise Food Stores, 15 Little Dukes convenience stores, six stand-alone video rental stores, 14 Coborn’s and Cash Wise Liquor stores, 18 pharmacies (mostly in stores), and Coborn’s Central Bakery and Central Floral in St. Cloud, Minnesota. In 1999 Coborn’s was named one of the ten most generous companies in the United States by George magazine.

Beginning with Produce: 1921

Coborn’s was founded in 1921 by Chester Coborn who opened a produce market in Sauk Rapids, Minnesota. Within a few years Chester added dry goods and grocery items to the selection, as the company continued to prosper. Having lived through the Great Depression era, Chester resisted the use of borrowed funds to fuel expansion, although he allowed his customers to buy on credit. The small-town business was carefully tended and the company enjoyed steady growth. After his death, Chester’s two sons, Chester, Jr., and Duke, continued running the family market. The Coborn brothers purchased a walk-in cooler in 1936, enabling them to enter the meat-retailing business. Consistent with rural practices of the time, cattle were bought and bartered for, then slaughtered and packaged on the store premises. Chester, Jr., left the business during that period and moved near Walker, Minnesota, to start a resort business. He died in 1959.

Coborn’s implemented a cash and carry policy in 1952—no longer extending credit—reflecting the problems involved in offering credit to friends, neighbors, and others who were the company’s mainstay. Keeping pace with the times, the company changed from a sole proprietorship to a corporation in 1957. Three years later Duke Coborn died, leaving management of the business to his four sons: Dan, Ron, Bill, and Robert. They soon realized that expansion was necessary in order to provide solid incomes for each of them and their families. The brothers worked on the development of a growth strategy based on demographic studies of niche markets, including markets in surrounding states. They planned to expand by means of acquisitions in areas where they believed they could become the dominant food retailer. Coborn’s purchased a supermarket in Willmar, Minnesota, but it failed miserably due to strong competition by larger retailers. Reacting to that situation, Coborn’s changed from a conventional supermarket layout to a discount warehouse format, named it Cash Wise, and leased a 30,000-square-foot space to try out the new concept. The format change was inspired by Supervalu’s Minnesota-based Cub Foods chain of warehouse stores. Cash Wise became number one in that market within two years. Serving as corporate headquarters, a more modern store was built in Sauk Rapids, which featured the company’s first deli, a scratch bakery, and sausage kitchen. Since that time, the company strategy focused on using the traffic flow generated by the grocery business to boost sales for new ventures.

Continual Expansion: 1960s–80s

A second store was opened in Foley, Minnesota, purchased from Red Owl in 1963. Recognizing the potential for marketing near the State College and the St. Cloud downtown area, Coborn’s bought an old brick building from the local power company, using the facility for its market. Later, an off sale liquor store was established adjacent to the supermarket. That proved so successful that Coborn’s decided to locate future liquor stores in or adjacent to the company’s supermarkets or warehouse stores. At the Willmar Cash Wise site, Coborn’s added a pharmacy, floral department, deli cafe, and a meat/fish department. Another warehouse-format store was opened in Waite Park, Minnesota, with a liquor store that was later relocated across the parking lot to allow room for easy shopper access to the deli/bakery, video, floral, and dry cleaning businesses.

Next in its expansion efforts, Coborn’s bought the fixtures and inventory of the Piggly Wiggly grocery store in St. Cloud, reopened the site as its own supermarket, and expanded to include room for a pharmacy. Close in proximity to Sauk Rapids, Little Falls became the location of a 60,000-square-foot building, erected by the company for use as a mall-supermarket/liquor store—and with space to spare, part of the building was leased to White Mart. Later expansion of the site provided room for a pharmacy and a Hallmark store. Coborn’s purchased a small supermarket in a strip mall near St. Cloud in Sartell, Minnesota. Within a few years the thriving business justified the construction of a new store directly behind the old one. Following on the successful establishment of the Sartell strip mall business, the company anchored another supermarket in touristy Clearwater, Minnesota, in 1979 and again added a liquor store adjacent to the market.

Complementing its meat and deli-foods operations, Coborn’s bought Hunstiger’s Sausage Kitchen, making it into a state-of-the-art centralized processing facility. The plant, DBC Foods, supplied all of the Coborn’s stores with sausage, smoked meats, and other specialty items as well as deli salads and other prepared deli foods. Their food brand, called Aunt Mabel, was prepared at DBC. Coborn’s central bakery was moved to St. Cloud, accommodating all of its stores with daily fresh baked goods.

First Out-Of-State Location: 1985

A great deal of discussion and debate preceded the decision to open a Cash Wise Foods store in a strip center in Mason City, Iowa. It became the first food store with a wine and liquor department inside the store premises, an amenity not legally sanctioned in the state of Minnesota. Another Cash Wise Foods was established in Hutchinson, Minnesota, located in a building previously occupied by a Pamida Discount Store. The new store was so successful that a newer store was built directly across the street, doubling the size of the first location. Also during this time period, the company moved into Fargo, North Dakota, opening the largest of its stores to date, which included a floral and parcel pick-up department.

Coborn’s acquired the Elks Club building in St. Cloud and converted it to a new corporate headquarters, followed by the construction of a 26,000-square-foot warehouse Distribution Center. The company also centralized its dry cleaning operations. Coborn’s purchased Top Cleaners of St. Cloud and invested in new equipment to maximize efficiencies which provided cleaning services for Coborn’s other dry cleaning operations. In 1986, the company completed its first Little Duke’s convenience store in St. Cloud. The convenience store format, offering gas and groceries, was considered a natural extension to the company’s supermarket and liquor stores. Dan Coborn explained the company’s rationale: “All the Little Dukes sell gasoline, and the grocery stores bring a lot of cars to the site.” The company’s first car wash introduced at the Little Dukes of Waite Park and was so well received that a second “touchless” car wash was added. Prior to 1998, 11 Little Duke’s stores were opened, typically on or near existing properties already owned by the company. Always striving for efficiencies, the company implemented a service called Mobile Speedpass, a payment system which worked when customers waved a one-inch plastic transponder (in the form of a key tag) before a sensor on the gas-pump. The customer did not need to carry a wallet or credit cards because gas bills were paid electronically and automatically, allowing the customer to drive away after fueling without ever having to enter the store. Under the system payments were automatically withdrawn from the customer’s pre-designated credit card.

Four new stores were purchased from Holiday Foods in 1996. Holiday Stationstores was a retail division of Holiday Companies of Minneapolis, owners of Fairway Foods, a North-field, Minnesota-based wholesaler. The purchased stores were located in Long Prairie (which included a deli and sit-down eating area), Morris, Mora, and Princeton, Minnesota. Under their agreement, Coborn’s made Fairway its primary supplier rather than buying almost equally from Fairway and the Nash Finch Company of Minneapolis. Nash Finch continued as a secondary supplier for the chain. It was expected that the new Coborn’s markets would increase sales by 12 percent for the year. Two more Holiday Stationstores were converted to the Coborn’s and Cash Wise banners by 1997.

Striving to compete with establishments in the Twin Cities area, Coborn’s acquired the Sax Food and Drug Store in Elk River, which featured two entrances and a sit-down deli with glass atriums extending two stories high. Another upscale supermarket followed, newly constructed in Sauk Centre with an attached offsale liquor store complementing the grocery business. Other markets were opened in Owatonna, Moorhead, Brainerd, and Austin, Minnesota; and another North Dakota operation was opened in Bismarck.

Company Perspectives:

Our mission is to operate efficiently, which will allow for future growth and stability. Our business practices will follow the Golden Rule: Treat all with dignity and respect: We will strive to exceed our customers’ expectations by surpassing our competition in all areas of business operations. We will be the preferred employer providing fair and consistent treatment and opportunities for growth, while expecting the employee’s best. We will develop effective long-term business relationships that best serve the needs of our customers. We will support the communities we serve with our time, talent, and financial resources. Our future is dependent on working as a team in fulfilling the above commitments and responsibilities to be the best.

Recognizing the great potential for profit in the video rental business, Coborn’s upgraded the video rental departments in two of the five stores it acquired from Holiday Companies and several other of their stores were also being considered for the video rental program. Managers increased the number of new releases and modified the pricing to give the customer better value, along with upgrading and refurbishing new signs. Coborn’s President Don Wetter said that the reasons for developing multi-dimensional holdings that rotate around the food business had to do with convenience. In his words, “Certainly today, with dual-working family members, they’re looking for convenience. The more we can provide in one location, a one-step type of thing, the better the consumer likes it.” The company planned to continue evaluating different types of services consumers might appreciate in the food distribution arena, including the expansion of marketing via computers and electronics. Wetter noted in an interview with Mike Killeen of the St. Cloud Times that in some parts of the country consumers have already begun shopping via computer, which involved having the goods picked up and delivered to them.

In May 1999, Coborn’s was honored by George magazine for being one of the ten most generous companies in America. Selected from more than 400 nominees, the award was sponsored by actor Paul Newman and George, published by the late John F. Kennedy, Jr., and was meant to honor good citizenship through philanthropy. Other finalists included Bell South, The Home Depot, Kenneth Cole Productions, and MTV Networks. At the award ceremony, John F. Kennedy, Jr., said he hoped the award encouraged “more companies like Coborn’s to give back to their communities by investing in and supporting causes that effectively address local, regional, or national problems,” according to the St. Cloud Times. CEO Dan Coborn said, “The community has been very good to us and it was our responsibility to put something back,” adding, “we’re not unique in the community by any means.” The Coborn family symbolized a heritage of community volunteerism and instilled the same beliefs in the day-to-day operations of its business. Coborn’s promoted charitable contributions through: donations to nonprofit agencies and organizations in all communities in which it conducted business; development and promotion of a community leaders volunteer program for employees; initiation of social and human service programs to meet community need; support for education of youth and scholarship programs; and as a leading contributor to such organizations as United Way. Coborn’s provided more than $2 million in annual contributions through direct financial support, in-kind products and services, and human resources, a significant amount considering the notoriously slim profitability margins in the grocery trade.

Confident that a capable management team was in place, Dan Coborn stepped down as CEO of Coborn’s in July 1999, after leading the family business for over 37 years. He remained active as a board member. Of the other three brothers, only Bill continued in management, as the company’s vice-president and secretary. (Robert had retired in 1989 and Ron had died in 1993.) Nonfamily member and CPA Don Wetter moved up from his position as president to fill Dan’s shoes as CEO. He had been with the company since 1974, beginning as a corporate controller. Wetter told Lisa McClintick of the St. Cloud Times that his “strengths are in the finance arena.” For the future he anticipated numerous mergers and consolidations in the grocery industry. Coborn’s, Inc. planned to maintain its family atmosphere, but could be expected to expand its operations in existing stores and continue prudently buying or building new ones.