Super Valu Stores, Inc.
Super Valu Stores, Inc.
11840 Valley View Road
Eden Prairie, Minnesota 55344
Incorporated: 1926 as Winston & Newell Company
Sales: $10.3 billion
Stock Index: New York
Super Valu Stores, Inc. was born of a merger, and a pattern of mergers, acquisitions, and divestitures has marked its rise to eminence in the food wholesale and distribution industry. Minnesota-based Super Valu is the second-largest wholesaler and distributor in the United States, with retail support and distribution centers nationwide. The company operates and franchises retail stores and provides highly developed retail support for the independent grocery store operators who belong to its network of subsidiaries, franchises, and customers. Super Valu also owns, operates, and services a nonfood chain.
Super Valu’s origins lie in the merger of the Minneapolis wholesale grocery firms B.S. Bull & Company and Newell and Harrison in the late 19th century. A series of subsequent mergers during the early 20th century culminated in the joining of the Winston, Harper, Fisher Company with the George R. Newell Company to form the Winston & Newell Company. Winston & Newell was incorporated in 1926 in response to the threat that independent retailers faced from the emerging grocery store chains that began developing in the 1920s. Winston & Newell hoped to improve services to these independent retailers so they could withstand the competitive impact of the chain stores; this remains Super Valu’s objective today. At the time of its creation, Winston & Newell was serving some 5,000 small grocery stores and had sales of $6 million.
With Minnesotan Thomas G. Harrison at its helm, Winston & Newell became one of the first wholesale distributors in the nation to join the Independent Grocers Alliance (IGA). Harrison, the son of Perry Harrison, a principal in one of the predecessor firms, had joined Winston, Harper, Fisher Company in 1919 as an assistant sales manager. He successively became assistant treasurer and executive vice president, directing the operations of Winston & Newell and later Super Valu in a variety of executive positions from 1926 until his retirement as CEO in 1958.
Harrison, in guiding the company through the Depression, was primarily responsible for introducing many practices which changed the way in which grocery stores conducted business. Cash-and-carry and self-service shopping, almost unheard of at the time, were two of his innovations at Winston & Newell. He broke with tradition again when he stopped using a pricing structure with an arbitrary markup and began charging instead the manufacturer’s price plus a percentage fee that declined with volume. This practice gave the company impressive cumulative profits. During the 20-year period from 1942 to 1962, Fortune reported that the company’s sales volume increased from about $10 million to more than $300 million.
It was during World War II that Winston & Newell began the march to becoming Super Valu Stores and attaining its position as the world’s largest food wholesaler and distributor, a position it held until the late 1980s. Although no acquisitions were made during the 1940s, in 1942 the company ended its affiliation with IGA and formed its own association, known in the industry as a “voluntary.” Winston & Newell offered independent retailers services such as food processing and packaging, preparation of advertising for individual store use in local newspaper advertising, and store planning assistance, in addition to supplying most of the merchandise sold. This voluntary association introduced the Super Valu name and operated independently from the wholesale business. Super Valu and another voluntary association called U-Save (which was also formed under the auspices of Winston & Newell) were familiar to grocers in Iowa, Minnesota, and North Dakota. By 1942 the company had wholesale sales of $10 million and some 400 stores belonged to its wholesale-retail team.
In 1954 Winston & Newell Company changed its name to Super Valu Stores, Inc. in order to clarify the connection between itself and the voluntary association. In the 1950s Super Valu began to grow by acquiring other voluntary associations. In 1955 it purchased Joannes Brothers of Green Bay, Wisconsin, a firm which had begun serving stores in northern Michigan and northeastern Wisconsin in the 1870s. In 1961 Super Valu moved into the Ohio Valley with the purchase of the Eavey Company, one of the nation’s oldest food wholesale distributors.
Acquisition followed acquisition during the 1960s as Super Valu expanded throughout the Midwest. In 1963 the company acquired the J.M. Jones Company of Champaign-Urbana, Illinois and the Food Marketing Corporation of Fort Wayne, Indiana. Each of these companies could trace its beginnings to the early days of the grocery business. Jones began as a general store and developed into a large wholesale business; Food Marketing dated back to the early 1800s, as Bursley & Company and the Bluffton Grocery Company. The Food Marketing acquisition also brought Super Valu into the institutional market.
After acquisition, these two companies were operated as autonomous divisions in a company that has historically given its divisions and stores as much free rein as possible. Russell W. Byerly became president of Super Valu in 1958. Byerly, a North Dakota native who joined Winston & Newell in 1932 as a bookkeeper, served as president until 1964 and later was chairman of the board and chief executive officer.
In 1964 Super Valu expanded its area of operation outside the Midwest by acquiring Chastain-Roberts Company, which had begun in 1933 as a wholesale flour and feed company, and the McDonald Glass Grocery Company, Inc. of Anniston, Alabama.
In 1965 Super Valu acquired the Lewis Grocer Company of Indianola, Mississippi. The Lewis Grocer Company was founded by Morris Lewis Sr. and eventually became a multi-million dollar wholesale grocer, branching out later into the retail grocery business.
The 1960s were a growth period for Super Valu in ways other than acquisition. The company expanded its retail support services to include accounting, efficiency studies, budget counseling, and store format and design advice. In 1962 Super Valu established Planmark, a department which offers engineering, architectural, and design services to independent retailers, subsidiaries, and corporate stores. Planmark became a division in 1975; with Studio 70, its commercial design arm, Planmark uses computer-assisted design to analyze and develop plans for construction, expansion, or remodeling. This innovation, implemented in the recessionary years of the late 1970s, allows Super Valu retailers to take a project from planning to opening faster than their competition. Super Valu also began providing financial assistance for retailers building new stores, bankrolling some 500 stores in a three-year period in the 1960s. Super Valu also signed leases on its retailers’ behalf, allowing them to locate in prime space in shopping centers and other locations.
In 1968 Preferred Products, Inc. (PPI) was incorporated as a subsidiary of Super Valu. A food packaging and processing division, it was started in the 1920s as a department of Winston & Newell. At the time of PPFs incorporation, Super Valu began to develop its private label program; today PPI “processes a limited line of food products under a variety of private labels,” according to the company.
Super Valu also formed an insurance agency, Risk Planners, in 1969. This wholly owned subsidiary began by providing insurance on retail property for the company and its retail affiliates. Tailored specifically to the needs of retailers, its products have expanded to include all types of insurance for Super Valu and its stores and franchisees, as well as independent retailers’ employees and families.
Diversification was the moving force at Super Valu in the 1970s. Beginning with the 1971 acquisition of ShopKo, a general merchandise discount chain, Super Valu began what has proved to be a highly profitable program of nonfood marketing operations. ShopKo, founded by James Ruben in Chicago in 1961, opened its first store in Green Bay, Wisconsin in 1962. In 1971 Super Valu acquired Daytex, Inc., a textile goods company, but the venture proved unsuccessful and its assets were liquidated in 1976.
When Jack J. Crocker became chairman and CEO of Super Valu in 1972, he initiated another diversification venture, County Seat. A success story in its own right, County Seat opened its first store in 1973 selling casual apparel, including the complete Levi’s jeans line. By 1977 there were 183 County Seat stores, and the chain’s earnings were $8 million in that fiscal year. When it was sold for $71 million to Carson Pirie Scott and Company of Chicago in 1984, there were 269 stores in 33 states.
Crocker, a CPA who came to Super Valu from the presidency of the Oregon-based grocery and pharmacy chain Fred Meyer, Inc., also directed the company’s continuing acquisition and expansion program. Very much a part of the trend toward consolidation in the food wholesale industry, Super Valu continued to purchase smaller food wholesalers, acquiring Pennsylvania-based Charley Brothers in 1977. Charley Brothers, which began as a retail grocery store and moved into wholesaling in 1918, served Shop ’n Save stores and other independent retailers in Pennsylvania.
The advent of universal price codes and scanning equipment in the grocery business led to the introduction, in the mid-1970s, of Testmark, an independent research center providing store measurement data. This data had been available from Super Valu stores since 1965 and, during the period before Testmark was established, had been handled by Super Valu merchandising research, an internal department for clients who preferred not to use commercial research companies. In direct competition with these commercial research companies, Testmark, with Super Valu’s backing, offered its customers the advantage of cooperation within the Super Valu network and with major chains and independents nationwide. Testmark’s autonomy is enhanced by its Hopkins, Minnesota location, separate from Super Valu’s corporate headquarters.
Crocker’s tenure at Super Valu was characterized by his success in running what was one of the better-capitalized and stronger wholesalers in the country and by the casual no-frills operation he ran. Company headquarters were in a warehouse, not a plush office. Crocker personally founded a professional soccer team, the Minnesota Kicks, in 1976. They, too, were a Crocker success story, becoming popular in their home territory.
Crocker’s successes were apparent on the bottom line, as well. By fiscal 1978 earnings per share had increased approximately 50% since Crocker’s first year with Super Valu, but, Crocker explained to Financial World in 1977, “I don’t think about profits very much. If you’re doing things right, profits always follow.” By the end of the 1970s Super Valu’s sales were $2.9 billion.
Super Valu ushered in the 1980s with the acquisition of Cub Foods, a discount grocery store operation. Warehouse stores, with bare bones facilities and prices, were a phenomenon of the 1970s. Cub Foods was founded by the Hooley family, grocers since 1876 in Still water, Minnesota. The Hooleys opened their first warehouse store with the Cub name in a Minneapolis suburb in 1968. When Super Valu purchased the chain in 1980, there were five Cub stores and a Hooley supermarket in Still water. Culver M. Davis was appointed president and chief executive officer of Cub Foods in 1985. Davis had joined the Hooley organization in 1960 and was a founder, with the Hooley family, of the discount stores.
Super Valu originally acquired the Cub chain to boost its wholesale sales, but, Business Week reported in 1984, soon realized it had a “tiger by the tail,” and that Cub had “taken on a (retailing) life of its own.” The company improved the atmosphere of Cub Foods stores by using attractive decor, keeping the stores clean, and increasing product offerings, including perishables, which the early warehouse stores did not offer. As a result, Cub Foods evolved into a combination of the conventional grocery store and the warehouse store, known in the industry by the late 1980s as a “super warehouse.”
Although Cub Foods competes directly with a number of Super Valu’s customers’ stores and its own corporate stores, the company saw a benefit in the opportunity Cub offered its retailers to learn about warehouse-store operations from the inside. Several of its retailers did not totally agree, citing a 10% to 15% reduction in business when a Cub Foods store opened in their market area. To address this complaint, Super Valu started franchising its Cub stores and also developed County Market, a downsized version of Cub with the same low prices, but aimed at smaller communities and at independent retailers who could not meet the financial commitment that buying a Cub franchise required. By 1989, Cub Foods’s 74 stores (of which Super Valu owned 34) were in nine states and had sales of approximately $3 billion.
By 1986 Super Valu had introduced another variation on the Cub theme. Developed for retailers who needed to improve their stores’ look and style to meet competition, the Newmarket format combined warehouse pricing with an upscale product line and services such as video rental, check cashing counters, and baggers. The first Newmarket store opened in the St. Paul-Minneapolis area, and has been so successful that the company is offering it in other locations.
In June, 1981 Jack Crocker, at age 57, stepped down from his position as CEO. Crocker, who headed Super Valu for nine years, brought the company to just over $4 billion in sales. He is reported to have handpicked Michael W. Wright, who had joined Super Valu as an executive vice president in 1977 and become president in 1978, to be the next CEO. Wright had first come to Crocker’s attention when he handled some legal matters for the company in Minneapolis. Wright, a former captain of the University of Minnesota football team, had put himself through law school by playing professional football with the Canadian Football League.
Super Valu took its expansion west in 1982 when it acquired Western Grocers, Inc. Western had distribution centers in Denver, Colorado and Albuquerque, New Mexico; in 1984 these two centers became separate divisions. Super Valu also moved into Nebraska in 1982 by acquiring the Hinky Dinky distribution center near Omaha from American Community Grocers, a subsidiary of the Texas-based grocers Cullum Companies. In 1984 Super Valu sold the center back to Cullum.
With intentions of gaining a strong market presence in Florida, in 1983 and 1984, respectively, Super Valu purchased Pantry Pride’s Miami and Jacksonville distribution centers. In what Super Valu considered a breach of their agreement, Pantry Pride began selling off its stores. With this and the fact that the Florida market had historically been dominated by the chains, Super Valu, claiming that the Florida market would take a large amount of capital to develop, sold the Miami center to Malone & Hyde in 1985, and the Jacksonville center to Winn-Dixie in 1986.
In 1985, Super Valu created its Atlanta division when it acquired the warehouse and distribution facilities of Food Giant. Through this division the company supplies Food Giant, Big Apple, Cub Foods, and independent stores. Food Giant, according to a 1988 Financial World report, “refused to implement Super Valu’s turnaround plan for store upgrading,” and the retail stores that Super Valu owned through the original transaction and a later acquisition of stock lost money for the company. By 1988 the company had divested itself of these stores, but operated or franchised seven Cub stores in the Atlanta area.
Also in 1985, Super Valu acquired West Coast Grocery Company (Wesco) of Tacoma, Washington. Wesco, founded by the Charles H. Hyde family in 1891, was Super Valu’s largest acquisition to that time. Wesco has distribution centers in two Washington cities and Salem, Oregon and a freezer facility in another Washington city. Super Valu’s West Coast operations were hurt when the Albertson’s chain opened a distribution center to supply its own stores in Washington.
In 1986 and 1987 Super Valu acquired two more distribution centers in Albuquerque and Denver, respectively. These centers were owned by Associated Grocers of Colorado which, at the time of the Denver purchase, was in Chaper 11 bankruptcy proceedings. In December, 1988, Super Valu acquired the Minneapolis; Fargo, North Dakota; and Green Bay, Wisconsin distribution centers of Red Owl Stores, Inc. The former Denver and Albuquerque divisions of Western Grocers were moved into these new facilities.
By the mid-1980s Super Valu had developed a substantial presence in the military-commissary marketplace. The company had been supplying both product and retail support to military commissaries in the United States and abroad and, in 1986, demonstrated its commitment to international operations by appointing a military and export product director. Super Valu International had its beginnings with the Caribbean and Far East markets and now supplies fresh goods and private label canned goods, general merchandise, and health and beauty aids to most countries of the world.
During the 1980s ShopKo continued to expand and to turn in substantial profits for the company. At the end of fiscal 1989 ShopKo operated 87 stores in 11 states from the Midwest to the Pacific Northwest and had sales of $1.28 billion. Now Super Valu’s only nonfood retail operation, ShopKo has its headquarters and distribution center in Green Bay, Wisconsin, and distribution centers in Omaha, Nebraska and Boise, Idaho.
It was perhaps the successes of ShopKo and of Cub Foods that led Super Valu to its biggest venture in retailing in the 1980s—the “hypermarket,” a retailing concept that originated in Europe after World War II. The first hypermarkets introduced in America in the early 1970s were not successful, but in the mid-1980s Hyper Shoppes, Inc., a predominantly French consortium, reintroduced the hypermarket in the United States. Super Valu was a 10% investor in the venture, which opened Bigg’s, a 200,000-square-foot food and general merchandise store in the Cincinnati, Ohio area.
With the experience of this venture under its belt, Super Valu created its own version of the hypermarket, Twin Valu. A combination of a Cub Foods and a ShopKo, this 180,000-square-foot store opened in early 1989 in Cleveland. The hypermarket concept as executed by Super Valu emphasizes low prices, good selection, and brand-name merchandise.
In 1988 Super Valu lost its position as the world’s largest wholesaler when Oklahoma City-based Fleming Companies bought Malone & Hyde, a purchase Super Valu declined to make. At the end of the 1980s, Super Valu’s empire served some 3,000 independent retailers in 33 states. The company still owns and operates 70 conventional grocery stores and some Cub Foods stores and serves its corporate stores and customers from 18 retail support and distribution centers.
One of the problems that Super Valu will face in the 1990s is the loss of business through acquisition of its independent retail customers by chains. Not content to stand still, however, Super Valu began construction of a 300,000-square-foot grocery warehouse in Kenosha, Wisconsin in 1989, with plans for additional facilities to be built on the site in 1990 and 1991. Other plans for the company in the early 1990s include an additional Twin Valu store in Cleveland and expansion of the hypermarket concept to other cities. The main focus at Super Valu has always been helping its retailers stay competitive, and this remains the company’s standard for the 1990s and beyond.
Cub Foods; Food Giant, Inc.; J. M. Jones Co.; Lewis Grocer Co.; Planmark, Inc.; Preferred Products, Inc.; Risk Planners, Inc.; ShopKo Stores, Inc.; Charley Brothers; Food Marketing Corporation; Ryans; West Coast Grocery Co.; Studio 70.
"Super Valu Stores, Inc." International Directory of Company Histories. 1990. Encyclopedia.com. (September 30, 2016). http://www.encyclopedia.com/doc/1G2-2840600250.html
"Super Valu Stores, Inc." International Directory of Company Histories. 1990. Retrieved September 30, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-2840600250.html