Giant Eagle, Inc.

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Giant Eagle, Inc.

101 Kappa Drive
Pittsburgh, Pennsylvania 15238
U.S.A.
Telephone: (412) 963-6200
Toll Free: (800) 553-2324
Fax: (412) 968-1617
Web site: http://www.gianteagle.com

Private Company
Incorporated: 1931
Employees: 36,000
Sales: $6.06 billion (2006)
NAIC: 445110 Supermarkets and Other Grocery (Except Convenience) Stores; 445120 Convenience Stores; 446110 Pharmacies and Drug Stores; 447110 Gasoline Stations and Convenience Stores

Giant Eagle, Inc., one of the largest privately owned and family-operated companies in the United States, is a grocery chain headquartered in Pittsburgh, Pennsylvania. It is the number one food retailer in Pittsburgh and the surrounding region, with 144 corporate and 84 independently owned and operated stores throughout western Pennsylvania, central and northern Ohio, northern West Virginia, and western Maryland. In addition to a complete range of food items, Giant Eagle supermarkets also offer pharmacies, banking services, video rental, photo processing, floral shops, dry cleaning, and supervised child learning and activity centers. The chain operates more than 100 GetGo convenience stores that offer fresh foods and discounted gasoline.

Giant Eagle is proud of its involvement in the communities served by its stores. It donates to area food banks and charities, and in 1988 created a program called Apples for the Students whereby portions of sales are used to help procure computers and other equipment for area schools. Ranked by Forbes as the 32nd largest private U.S. firm in 2006, Giant Eagle recorded 2006 sales of $6.06 billion and employs a workforce of approximately 36,000. Chairman and CEO David Shapira is the grandson of one of the original company founders.

ORIGINS

The origins of Giant Eagle may be traced to Pittsburgh, Pennsylvania, and the early part of the 20th century. Joe Goldstein, the son of a Jewish immigrant who peddled dry goods from a horse-drawn carriage, worked for a grocery wholesaler until he eventually teamed up with two of his customers (Ben Chait and Joseph Porter) to form Eagle Grocery in 1918. That enterprise was very successful, and over the next ten years it grew to become a chain of some 125 stores. The men sold the chain to the Kroger Company in 1928 and agreed that they would not compete in the industry there for three years. When that time elapsed, they teamed up with the two founders of OK Grocery (Hyam Moravitz and Morris Weizenbaum) and began to build again, this time calling the chain Giant Eagle. Eventually, Kroger would be driven out of the Pittsburgh market, and Giant Eagle would become the number one food retailer in Pittsburgh and the surrounding region.

During the Great Depression, the newly established chain of small grocery stores overcame a slowdown in business and sought to expand, competing against larger rivals such as Acme, A&P, and Kroger. The stores, which began as mom-and-pop operations with over-the-counter service, would eventually begin converting to the modern self-service model in the 1940s. During this time, founder Joe Goldstein’s daughter Frieda married Saul Shapira, her college sweetheart, and the two went on to earn advanced degrees at Columbia University, hers in social work and his in law. Saul Shapira joined his father-in-law’s grocery business in 1945. He would eventually become its CEO.

In the 1950s the company expanded the average size of its stores to nearly 15,000 square feet. Shapira was responsible for opening the company’s first supermarket. As a pioneer of the modern supermarket, during this time Giant Eagle established a gourmet food section, introduced vertical glass-front freezer cases, and offered seasonal consumer products such as plastic lawn furniture and snow shovels.

The company also launched its own trading stamp program, Profit Sharing Blue Stamps, which stimulated customer loyalty and more growth for the chain. By the 1960s, however, in response to consumer demand and industry trends, Giant Eagle decided to discontinue the Blue Stamps program, replacing it with a focus on everyday low prices.

The company computerized its buying system and mechanized its order filling and loading procedures during this time. In 1968 Giant Eagle acquired the former Kroger warehouse in Lawrenceville, Pennsylvania, which more than doubled its storage capacity. Also in that year the company opened its first 20,000-square-foot Giant Eagle store and updated many of its other stores, as its commitment to growth and improvement continued. In 1968, a second generation of leadership took the helm at Giant Eagle. Irwin Porter, a son of one of the founders who had joined the company in 1933 and steadily rose through the ranks, was named chairman of the board, while Shapira became president and CEO.

INNOVATION, EXPANSION, AND LEADERSHIP

In the 1970s, a time marked by rising inflation, Giant Eagle reaffirmed its pledge to the lowest possible prices for its customers, with the introduction of generic products and the Food Club line, a corporate brand produced in conjunction with wholesaler Topco. Additional innovations put into practice by company stores included expanded deli sections, the first in-store bakeries for the production and sale of baked goods made “from scratch,” and open-code dating of products. For the first time, customers had the option of shopping seven days a week, as the company began keeping stores open on Sundays.

Company expansion continued as well, with the building of a 481,000-square-foot warehouse in Pittsburgh’s West End. By 1979, Giant Eagle had become the top supermarket chain in Pittsburgh. Many other major chains, such as Kroger, Acme, and A&P, had decided to move out of the city all together by this time.

Giant Eagle celebrated 50 years in business as an industry leader as the 1980s unfolded. In 1981, with 52 stores in operation, Giant Eagle acquired Tamarkin Cos. Inc., a wholesale and retail grocery chain in Youngstown, Ohio, owned in part by the Monus family. The purchase not only propelled the company into the franchise business, with the opening later that year in Monaca (just outside Pittsburgh) of the first independent Giant Eagle store, but also spurred an alliance between Michael Monus, a Tamarkin shareholder, and CEO David Shapira, grandson of Joseph Goldstein, one of the company’s original founders. Together, in 1982, the two men created Phar-Mor Inc., a deep-discount drugstore chain, with Monus as president and Shapira as CEO.

COMPANY PERSPECTIVES

In addition to a wide variety of the region’s freshest and high quality produce, meat, and seafood, Giant Eagle customers enjoy products and services ranging from convenience stores and fuel stations to dry cleaning, and on-site supervised child learning and activity centers.

Within the Giant Eagle grocery stores, ongoing innovations in the 1980s helped the company to retain its place as an industry leader. The company augmented its store-within-a-store concept with the addition of several new departments: pharmacy, automotive, housewares, books, greeting cards, floral, photo development, and video rentals. Bar-code scanners were installed at checkout registers, and automated teller machines (ATMs) were provided for patrons’ use. Giant Eagle implemented a pricing policy, called Absolute Minimum Pricing, which attracted national attention as it helped to drive food prices in the Pittsburgh area down from one of the highest in the country to one of the lowest. The company displayed a commitment to community service, as well, with its involvement with Round-Up for the Hungry, the Smash ’em Cash ’em recycling program, and education initiative Apples for the Students, which provided millions of dollars for computer equipment, software, and other learning tools to outfit the classrooms of local schools.

In 1984 Giant Eagle began converting Valu King stores in Ohio operated by Tamarkin to Giant Eagle stores. Competitors had taken note of the company’s Absolute Minimum Pricing campaign, which involved no weekly specials and no “games” but did offer overall lower prices. As the store conversions continued, however, by the end of 1986 Giant Eagle was added by the local food workers union as a target of broadening strike action in Ohio. Union-supported picketing of Giant Eagle stores was prompted by new contract offers made by the company, with one union organizer referencing the company’s Absolute Minimum Paychecks. Court-ordered arbitration eventually resolved the strike issues.

PURSUING FURTHER GROWTH AT CENTURY’S END

In the 1990s Giant Eagle pursued further growth. The number of stores in the chain would reach 137 by the end of the decade. The stores ranged in size from 106,000-square-foot superstores to much smaller neighborhood markets. The company’s largest acquisition to date, that of Cleveland, Ohio-based wholesaler and supermarket chain Riser Foods Inc. for $403 million in 1997, contributed to the growth of the business with its 36 stores operating under the Rini-Rego Stop-n-Shop name. In 1998 these stores were converted to Giant Eagle stores, along with an additional 18 independent Stop-n-Shop stores. Riser also owned American Seaway Foods, distributor of food, general merchandise, and health and beauty products to 500 wholesale outlets. After the merger, Riser became a subsidiary of Giant Eagle, which would operate or supply 196 retail stores in Pennsylvania, Ohio, and West Virginia, with wholesale operations in both Pennsylvania and Ohio. Retail food industry analysts applauded the merger, noting its strategic significance for increasing sales volume in an industry marked by shrinking profit margins. Both companies enjoyed strong name recognition in the region and their consolidation was considered a logical and shrewd move to ensure continued success.

Giant Eagle rolled out many new programs and in-store services in the 1990s. Dry cleaning and laundry operations and an in-store supervised learning activity center for children up to age nine, known as the Eagle’s Nest, were established. In response to consumer interest in health and fitness issues, the company established Nature’s Basket, a department in its stores devoted to food and information resources for health-conscious shoppers.

In July 1998, Giant Eagle announced plans to build a $23 million distribution center in Pittsburgh to consolidate the company’s existing perishable foods operations. Not only would 160 existing jobs be retained, but 45 new jobs were to be created by the time the warehouse opened in November 1999. The new facility would be operated by OK Grocery, Giant Eagle’s distribution arm.

KEY DATES

1931:: The Giant Eagle grocery chain is launched.
1968:: Giant Eagle acquires the former Kroger warehouse in Lawrenceville, Pennsylvania, more than doubling its storage capacity; the company opens its first 20,000-square-foot store.
1981:: Giant Eagle acquires Tamarkin Cos. Inc.
1982:: Phar-Mor Inc., a deep-discount drugstore chain, is created.
1997:: Giant Eagle acquires Cleveland, Ohio-based wholesaler and supermarket chain Riser Foods Inc.
2000:: Giant Eagle signs an agreement with FreeMarkets, Inc., the world’s leading online auction marketplace.
2002:: The company is named Progressive Grocer ’s 2002 Retailer of the Year.
2004:: Company is recognized as an Energy Star Retail Partner of the Year by the U.S. Environmental Protection Agency.

In February 2000, Giant Eagle announced that it had signed an agreement with FreeMarkets, Inc., to use their Web-based “reverse” auction site to conduct strategic purchasing, procuring products, operational supplies, and services. In a press statement, Giant Eagle Chairman and CEO David Shapira (son of Saul) offered the following assessment: “We turned to FreeMarkets to explore ways of using their business-to-business auction marketplace to increase our profitability.” Industry analysts noted that Giant Eagle was the first supermarket chain to adopt such a service.

CONTINUING SUCCESS IN THE EARLY YEARS OF THE NEW CENTURY

With the fall 2000 opening of its first stores in the Columbus, Ohio, area and the 2001–02 purchase of the independently owned County Market stores in Maryland and Pennsylvania added to the 1997 acquisition of Riser Foods, Giant Eagle operated more than 200 company-owned and franchised stores throughout western Pennsylvania, central and northern Ohio, northern West Virginia, and western Maryland at the start of the 21st century. The company employed more than 35,000 people in its stores, warehouses, and corporate offices. Its newest stores, exemplified by those opened in Columbus, Ohio, averaged 120,000 square feet and included store-within-a-store departments such as a two-level café with seating for 150 people, a 72-foot-long deli counter, a bakery featuring a tortilla machine, a 6,000-title Iggle Video department, a 2,800-square-foot Nature’s Basket natural foods department, a Chef’s Shelf cookware and appliances department, and a Baby Shop boutique.

At this time, as well, Giant Eagle sharpened its focus on developing and managing independent and contract foodservice and catering operations through its expansion of a new division and wholly owned subsidiary, Custom Cuisine Catering. Executive Director Richard Iams noted that the move was a “natural extension” of the grocery chain’s interest in providing prepared meals in its stores and that the catering business would operate foodservices for a full range of venues, including museums, sports arenas, corporations, and universities. Indeed, Giant Eagle had, in June 2002, completed the acquisition of the Bradley House of Catering, one of the largest independent catering companies in the Pittsburgh area.

In recognition of its place as a dominant player in the supermarket industry, especially in the ultracompetitive age of the Wal-Mart–type supercenter, Giant Eagle became Progressive Grocer ’s choice for 2002 Retailer of the Year. The retailer was praised for its ability to excel both at price strategies and providing a unique shopping experience for customers. Observers noted that the company maintained an advantage with its ideal balance of professional management and family ownership and its combination of retail chain and corporate wholesaler.

Next came the creation and opening of Giant Eagle’s first GetGo convenience stores. The stores ranged in size from 600-square-foot gas kiosks to 1,800-square-foot convenience stores complete with onsite baking and sandwich preparation. The birth of GetGo came about one year after Giant Eagle had entered into a partnership with the Guttman Group, operator of the Crossroads convenience store chain. The joint venture encompassed operations of Guttman’s 27 Crossroads convenience stores and the 15 Giant Eagle fuel stations in Pennsylvania and Ohio. The new plans called for all of Giant Eagle’s onsite gas stations to be converted to the GetGo brand and for some of the Crossroads stores to be converted. Separate, freestanding stores also would be established under the GetGo brand. Also during this time, Giant Eagle acquired eight Big Bear supermarkets, from Penn Traffic Company, in central and southern Ohio, and these were soon converted to Giant Eagle stores.

In February 2004 Giant Eagle was recognized as a 2004 Energy Star Retail Partner of the Year by the U.S. Environmental Protection Agency. By the end of that year, Giant Eagle had become the nation’s first grocer to operate a Leadership in Energy and Environmental Design certified supermarket at one of its newer locations in northeastern Ohio. The designation indicated that Giant Eagle met required standards by incorporating environmentally responsible features and systems into the building, underscoring its ongoing commitment to efficient use of energy resources.

One of Giant Eagle’s responses to competitive market environments was to lower its prices. In late 2005, the company enacted more price cuts, averaging about 10 percent per item, on about 1,000 health and beauty products and about 2,000 grocery, dairy, and frozen items throughout its stores for the third time in less than a year. The company attributed its ability to cut prices to its efforts to reduce expenses and promote greater efficiency.

THE FUTURE

Envisioning Giant Eagle as truly one-stop marketplaces, in 2006 the company began testing a nurse-staffed health clinic in one of its locations in addition to its relatively new eyecare facilities.

The company expanded and remodeled two of its existing stores in the Pittsburgh area, reopening them as “Market District” stores, prototypes that emphasized food service, upscale and specialty products such as organics and imported foods, and culinary demonstrations. A new premium store brand, called Market District, was introduced to complement Giant Eagle’s existing Valu Time brand products. The company also sought to capture the attention of both consumers and competitors with its spotlight on the Brazilian-style churrasco at the center of the prepared foods departments. The open-flame grill, with beef tenderloins, baskets of vegetables, and Cuban pork roasts cooking on it all day were impressive additions to the new stores. Moreover, fresh pasta stations, a brick pizza oven, and a salsa bar were instituted. More than 50 chefs, bakers, and certified cheesemongers were hired to help staff the new stores and educate the consumers about different products. A permanent demonstration station was set up in each store and the company scheduled appearances by celebrity chefs, such as Rick Bayless of the PBS television series, Cooking Mexican.

This move into the gourmet grocery market occurred at a time when such specialty retailers as Whole Foods Market and Trader Joe’s, along with discount giant Wal-Mart Stores, were expanding in the area and gaining in popularity with consumers. Other traditional retailers, including Safeway, A&P, and Kroger, also were attracting customers with an increased focus on upscale offerings. Giant Eagle expected to draw shoppers to the Market District stores from neighboring Pennsylvania towns as well as from nearby Ohio and West Virginia.

In October 2006, Giant Eagle announced that it would purchase from Royal Ahold N.V. one-third of rival Tops Markets LLC’s 46 Ohio stores. Giant Eagle already had 112 stores in Ohio, constituting a 42 percent market share in the Cleveland area. Some of the stores were slated to become Giant Eagle stores, while others would keep their identities as Gillombardo’s Giant Eagle and Dave’s Supermarkets.

With more than 220 stores located in four states, Giant Eagle was the top supermarket in the region. The company had successfully fended off a range of formidable rivals, such as the ubiquitous Wal-Mart and emerging players such as Whole Foods, Costco, and Festival. Much of the company’s ongoing success was attributed to the leadership of CEO David Shapira who, along with his daughter Laura Karet, senior vice-president of marketing, and other long-term members of company management, carried on the dual mission of ongoing improvements for the consumers as well as the employees.

Robynn Montgomery