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Roundy’s Inc.

Roundys Inc.

23000 Roundy Drive
Pewaukee, Wisconsin 53072
U.S.A.
Telephone:(262) 953-7999
Fax: (262) 953-7989
Web site: http://www.roundys.com

Private Company
Founded:
1872 as Smith, Roundy & Co.
Employees: 13,151
Sales: $3.6 billion (2002)
NAIC: 445110 Supermarkets and Other Grocery (Except Convenience) Stores

Founded in 1872, Roundys Inc. is among the oldest and largest grocery wholesalers and retailers in the nation, with annual sales near $4 billion. The companys nine distribution centers supply more than 800 supermarkets in Wisconsin and 13 other states. Further, Roundys has built the biggest supermarket chain in Wisconsin, where it operates under the names Pick n Save and Copps Food Centers. Roundys is known for pioneering the warehouse store concept in the 1970s with its successful Milwaukee Pick n Save chain. Once structured as a cooperative owned primarily by the retailers it served, Roundys underwent a major financial restructuring in 2002, when it was acquired by Willis Stein & Partners, a Chicago investment firm.

Origins of a Wisconsin Institution: 18721939

Roundys founder, Judson A. Roundy, came to Milwaukee from Rhode Island. In 1872 he and two partners, Sidney Hauxhurst and William A. Smith, founded a wholesale grocery company called Smith, Roundy & Co. Smith went on to become governor of Wisconsin six years later. The company grew out of its first quarters and moved to a larger building at Milwaukees Broadway and Buffalo Streets in 1885. This building was destroyed by a famous Milwaukee firethe 3rd Ward Firein 1892. By 1895, the company completed new headquarters at the same location.

The firm took on new partners and reincorporated in 1902 as Roundy, Peckham & Dexter Co. Its president was Charles Dexter, who had been a partner since 1880 and who continued as president and chairman until his death in 1939. Roundys began to offer its own private Roundys brand beginning in 1922, when it introduced Roundys Salt. The company expanded in the first half of this century until its stockholders numbered about 60, most of whom had inherited their holdings.

Moving Forward As a Grocery Cooperative: 1950s60s

In 1953 the firm reorganized as a grocery cooperative, with only independent retailers allowed to hold Roundys stock. Even the president and other top executives were required to sell their stock and assets unless they were themselves retailers. After this change, Roundys management set out to offer services to independent grocers that would allow them to compete with large chains. Roundys retailer-stockholders were offered bookkeeping and payroll services at low cost, and the company held seminars on grocery-related business topics, such as store security and job training.

Roundys opened a grocery distribution center in Wau-watosa, Wisconsin, in 1955, which grew into a 450,000-square-foot complex on ten acres of land. The company began to expand rapidly around this time, becoming one of the largest grocery distributors in Wisconsin. Sales reached $50 million in 1962 and then doubled to $100 million in the next nine years. The huge Wauwatosa warehouse stocked close to 9,700 items, including both Roundys private label and national brand foods. Using rail sidings and more than 40 truck loading docks in the early 1970s, the company moved more than 5,000 tons of merchandise a week. The Roundys private label had grown to include about 800 items, and sales in 1972 were close to $115 million. As early as 1972, ordering was controlled by computer, and the companys processing system also was mechanized. Roundys believed in using the most modern technology available to run its business and was often at the forefront of grocery innovation, particularly in its landmark warehouse stores.

Launching the Pick n Save Concept in the 1970s

During the recession that began in 1974, the warehouse stores became important. Roundys management detected changing consumer attitudes as the economy worsened and decided to experiment with a new type of store that would appeal to the budget-conscious. Roundys rented a vacant discount store in Milwaukee on a short-term lease and opened Pick n Save Warehouse Foods in March 1975. The store had minimal decoration and very few perishable items, including no fresh meat and very little produce. The store stood in sharp contrast to the traditional supermarket: packing crates and cases served as the main decor, and untiled floors and plywood walls emphasized the cost-cutting environment. Unique at the time, Pick n Save at first drew customers curious to shop in this innovative establishment. Customers used crayons to mark prices on items because the store saved labor by not price-marking, and customers also did their own bagging. The store catered to people doing large-volume shopping. Pick n Save became quite popular, and the store at times had long lines of customers waiting to get in. The warehouse concept proved so successful that Roundys opened almost 20 more such stores in the next five years, spreading from metropolitan Milwaukee across southern Wisconsin and northern Illinois. Other grocers imitated the warehouse concept as well.

Roundys sales expanded in the late 1970s even as the economy pulled out of its slump, proving that the warehouse was not just a fad. The companys warehouse stores evolved, however, to include more produce and a more finished decor. They began to have brightly painted walls and tiled floors, bringing the look closer to that of the traditional supermarket. But low prices remained the essential difference that set the warehouse stores apart. The stores flourished by moving large volumes of stock, most of which was bought at deal prices. Low-priced merchandise coupled with the low overhead and inexpensive fixtures of the warehouse kept prices below those of competitors. Labor costs were also kept in check. To avoid running a labor-intensive fresh meat counter, most stores offered smoked meats only, and stockwork was simple and fast because much merchandise was displayed on pallets at the ends of aisles. Sales per employee hour at Pick n Save were said to be almost triple the average at traditional supermarkets, and one Roundys executive claimed Pick n Save could sell 100 cases of groceries for the same labor cost a traditional store would take to sell only ten. Use of electronic scanner technology also allowed Roundys warehouse stores to control costs. Information from scanners was used to determine exactly which brands and sizes sold best, which was crucial for management to know when buying deal merchandise. By keeping costs down, Roundys warehouse stores offered consumers consistently low prices, and by 1980 a survey of Milwaukee-area stores found all the companys major competitors losing market share, while the Roundys Pick n Save chain gained.

Roundys had 27 Pick n Save stores in Wisconsin by 1983. With four stores in the Chicago area, Roundys strengthened its position in the Chicago market by purchasing Wayco Foods, a suburban grocery. The Wayco acquisition gained Roundys a 218,000-square-foot warehouse near Chicagos OHare airport. Now with a base from which to service its Chicago stores, Roundys made plans to open 10 to 15 more Pick n Saves in the area. This move put Roundys in competition with other established warehouse-type chains, such as Cub Foods, owned by Supervalu Inc. of Minnesota.

Rapid Expansion in the 1980s

Roundys continued to expand in the 1980s, with somewhat mixed success. Returns on sales began to slip in 1982, and in 1984 and 1985 revenues were stagnant. Profits also fell, and in those two years Roundys did not pay rebates (equivalent to stockholder dividends) to its member retailers. The company spent $40 million in 1984 to buy Scot Lad Foods, a grocery distributor in Lansing, Illinois. Although this acquisition doubled corporate sales, it also increased debt. Sales by 1986 were $1.8 billion, coming from the Pick n Save chain, wholesale distribution, and stores Roundys operated under the names Roundys, Shop-Rite, and United Foods. The four Chicago Pick n Save stores were not doing well, however, and Roundys decided to sell them. Another venture, a gourmet food retailer, also was not doing well. Roundys had spent between $1 million and $2.5 million to open the gourmet store, called V. Richards, but the store did not quickly turn a profit.

Roundys Chairman and CEO Vincent R. Little took early retirement in 1986 after 12 years at the post. After Littles exit, the new CEO appointed two outside directors to Roundys board and added two new trustees as well. The new directors and trustees came from outside the grocery business and so brought new perspectives on running a firm as large as Roundys. After this management shift, Roundys continued to expand through acquisitions. In 1988, the company bought Cardinal Foods Inc., an Ohio-based food distributor, and another Ohio firm, a health and beauty aid distributor called American Merchandising Associates Inc. A year later, Roundys spent an undisclosed amount of cash on Viking Foods, Inc. This food distributor, based in Muskegon, Michigan, had 1988 sales of $100 million. That same year, Roundys reported a significant increase in sales, which were now up to $2.4 billion.

Company Perspectives

Roundys strives to become the premier retail support company throughout our region by providing value driven goods and services and maintaining the ultimate in customer satisfaction. We are committed to: communicating openly and honestly with our customers, our associates and our vendors; the on-going success and growth of our customers; creating an environment of opportunity and development for all associates; working as a team to carry out business activities.

As Roundys grew, it required more warehouse space to service its retailers. The company leased a new warehouse in Mazomanie, Wisconsin, in 1989, as it ran out of space in its old Wauwatosa facility. Roundys grew by more than 20 percent between 1988 and 1991, and warehouse space continued to be a problem. In January 1991, the company announced plans to replace its 30-year-old Wauwatosa plant with a one-million-square-foot warehouse center it would build in Waterloo, Wisconsin. Roundys wanted to spend $50 million building a state-of-the-art warehouse facility to service more than 170 stores in Wisconsin and Illinois. This decision, however, set off a storm of protest from the companys Wauwatosa workers, who were represented by the Teamsters Union. The company would not say whether its 900 employees at the Wauwatosa plant would be offered jobs at the new warehouse, which was about an hours drive away. Because the Waterloo plant would also be in a county different from Wauwatosa, it would be outside the jurisdiction of the existing union contract. When the Teamsters Union contract expired in July 1991, negotiations on a new contract quickly broke down. Workers objected to Roundys insistence on its right to relocate its entire warehouse operation at any time. To preempt a strike, Roundys management decided to lock out its workers. Workers picketed and called for a consumer boycott of stores supplied by Roundys.

During the bitter contract dispute, another issue surfaced. The Roundys warehouselike that of its major competitors in the areawas run by a computer, which filed orders from customer stores electronically and then calculated how long it should take human workers to fill each order. The computer set a productivity standard, and workers were required under the old contract to achieve 85 percent of that standard. In its new contract negotiations, Roundys demanded that workers achieve 100 percent of the computers productivity standard. Workers complained that such a goal was impossible and that Roundys was trying to gain an advantage over its competitors at their expense. Roundys ended its lockout after three weeks, then announced that it was changing its plans to build a new warehouse in Waterloo. The company would instead relocate the work done at the Wauwatosa warehouse even farther away, to Westville, Indiana. The company already had a warehouse in Westville, a small town between Gary and South Bend. Although drivers would have to go through Chicago to service Wisconsin stores, Roundys claimed that it had excess capacity in Westville, and the move was reasonable.

Roundys and the Teamsters Union finally signed a five-year contract in late September 1991. The company abandoned its plans to move either to Westville or to Waterloo, and workers gained a small wage increase and a new productivity standard of 95 percent. Then in April 1992 Roundys announced plans to add capacity at its Wauwatosa plant and move some work from a Fort Wayne, Indiana warehouse to its other Wisconsin warehouse in Mazomanie. Without actually adding jobs in Wisconsin, this move did seem to emphasize Roundys commitment to keeping work in its home state.

By 1994, Roundys supplied more than 1,800 grocery stores, with distribution centers in Wisconsin, Illinois, Michigan, Indiana, and Ohio. Its Pick n Save chain continued to grow in the Milwaukee area. Roundys had 42 stores in metropolitan Milwaukee in 1994, with a growing market share said to be between 39 and 47 percent. The newest stores were quite different from the original warehouse stores, though Pick n Save continued to be distinguished by low prices. Whereas the early stores had no fresh meat and unadorned walls, one newer store boasted an $18,000 imported Italian cappuccino machine in its coffee bar and a reputation as a fine meat market. The stores were tailored to individual neighborhoods and to the owners tastes, and, except for sheer size, there was little to tie them to the bare bones warehouses of the 1970s.

Roundys suggested in 1994 that it might make a public offering in order to fund future expansion. Then in October 1994, the company announced that it would merge with Spartan Stores, another grocery wholesale cooperative based in Grand Rapids, Michigan. The merger of Roundys, the nations sixth largest food wholesaler, and Spartan, the seventh largest, would have made the new combined corporation the third largest in the United States. But the merger was called off a month later. The companies announced that they would pursue separate growth strategies, and a Roundys vice-president declared that the time was not right for the merger.

Retail Expansion: 19952003

In 1997, Roundys celebrated its 125th anniversary. Having achieved $2.6 billion in sales the preceding year, the company ranked as the largest food corporation in Wisconsin, and the sixth largest grocery wholesaler in the country. Jerry Lestina, who had been named CEO in 1993, seemed intent on staying the course. Although Roundys had purchased five Ron and Lloyds stores earlier that year, Lestina explained that the purpose of these acquisitions was only to maintain Roundys supply chain and its customer base, and that the company would be seeking buyers for these stores. Further, at this time Roundys viewed its corporate stores merely as a means of maintaining knowledge of the industry and conducting research and development, rather than as a significant source of revenue. As Lestina told the Post-Crescent on September 29, 1997, We are primarily wholesalers. It is not our intent to grow our base of corporate stores.

Key Dates

1872:
Judson A. Roundy and two partners, Sidney Hauxhurst and William A. Smith, found a wholesale grocery company called Smith, Roundy & Co. in Milwaukee, Wisconsin.
1902:
The firm takes on new partners and incorporates as Roundy, Peckham & Dexter Co.
1922:
The company begins to offer its own private Roundys brand.
1953:
The firm reorganizes as a grocery cooperative, with only independent retailers allowed to hold Roundys stock.
1975:
Roundys opens its first Pick n Save Warehouse Foods.
1991:
Roundys and the Teamsters Union sign a five-year contract, ending a bitter labor dispute.
1999:
Roundys undertakes a new strategy to expand the retail side of its business.
2002:
Roundys is acquired by Willis Stein & Partners, a Chicago investment firm.
2003:
Fleming Companies sells 31 Rainbow Foods stores to Roundys.

The 1990s, however, was a decade of rapid consolidation in the grocery industry, and it soon became apparent that Roundys would have to adjust its business strategy in order to remain competitive with such industry giants as Minneapolis-based Supervalu or Oklahoma City-based Fleming Companies. Although roughly 90 percent of the companys revenue came from the wholesale business, the profit margin on these sales was only about 7.5 percent in 1998, and there were few opportunities to substantially increase this percentage. By comparison, the profit margin on retail operations in 1998 was 21 percent.

By 1999, Roundys was on a mission to compete with Jewel-Osco, Wal-Mart, Target, and others to become one of Wisconsins leading retail supermarket chains. Key to realizing this goal was a flurry of acquisitions. In November 1999, Roundys reached an agreement to purchase seven Pick n Save stores in eastern Wisconsinthe supermarket assets of Ultra Mart Inc.whose annual sales topped $150 million. Also that month, Roundys announced plans to buy Mega Marts, Inc., the operator of 17 Pick n Saves in Wisconsin and Illinois. Together, the deals were expected to increase annual revenue from $2.58 billion to about $3.2 billion.

Roundys made another auspicious acquisition in 2001 when it bought Copps Food Centers, then the largest family-owned supermarket chain in Wisconsin, for $95 million. While the Mega Marts and Ultra Mart acquisitions were located mainly in southeastern Wisconsin, the purchase of Copps Corporations 21 supermarkets significantly increased Roundys presence in central Wisconsin and the Upper Peninsula of Michigan. Moreover, as the Copps stores were already well-run and enjoyed strong brand recognition, Roundys was able to take them over, keeping the Copps name, with little additional investment. The acquisition was expected to increase annual sales by more than 20 percent and to bring the retail percentage of the companys overall sales up to 42 percent. Ultimately, according to Lestina, the companys goal was to bring retail sales close to 50 percent of overall earnings.

Roundys fared very well with these acquisitions, realizing a 15.6 percent increase in sales in 2001, for a total of $3.5 billion. The companys cooperative, grocer-owned business model was not ideal for its ongoing growth strategy, however, as it did not afford access to the funds needed for major capital investments. In order to finance the $95 million Copps purchase in 1999, for example, Roundys had to assemble a $300 million credit agreement with various lenders. To keep pace with the aggressive expansion strategies of its competitors, Roundys underwent a major financial restructuring in 2002, whereby the company was acquired by Willis Stein & Partners, a Chicago investment firm. Under the agreement, which was valued at $750 million, Roundys retained its independent status as a grocery wholesaler and retailer. With new access to investor capital, growth objectives included ongoing expansion of the retail business through the introduction of new product lines and through further acquisitions. A major example of the latter occurred in May 2003, when Roundys announced plans to purchase 31 Rainbow Foods storesall but one located in the Minneapolis-St. Paul metropolitan areafrom Fleming Companies, Inc. in a deal worth nearly $120 million. With a proven record of success, Roundys appeared well positioned to maintain its competitive edge in the industry.

Principal Subsidiaries

Shop-Rite, Inc.; Ultra Mart Foods, Inc.; Mega Marts, Inc.; Rindt Enterprises, Inc.; Village Market, LLC; The Copps Corporation.

Principal Operating Units

Pick n Save Stores; Copps Food Centers.

Principal Competitors

Fleming Companies, Inc.; The Great Atlantic & Pacific Tea Company, Inc.; Supervalu Inc.

Further Reading

Bennett, Stephen, Good As Gold, Progressive Grocer, June 1994, pp. 4244.

Daniel, Tina, Growing Pains at Roundys, Milwaukee Journal, July 27, 1986, pp. 1D, 4D.

Daykin, Tom, Grocery Wholesaler Announces Plan to Buy Eastern Wisconsin Supermarkets, Milwaukee Journal Sentinel, November 3, 1999.

, Grocery Wholesaler to Buy Milwaukee-Based Supermarket Operator, Milwaukee Journal Sentinel, November 5, 1999.

, Pewaukee, Wis.-Based Supermarket Operator to Buy Grocery Chain, Milwaukee Journal Sentinel, February 11, 2001.

Fanelli, Christa, Willis Stein Checks Out Roundys, Buy Outs, April 29, 2002.

Fauber, John, Changes at Roundys Expected to Stabilize Employment Here, Milwaukee Journal, April 19, 1992, p. D4.

, Jobs Hang in Balance at Roundys, Milwaukee Journal, August 11, 1991.

Food Stores Scrap Plans to Merge, Wisconsin State Journal, November 22, 1994.

Gunn, Erik, Productivity Is Key to Roundys Dispute, Milwaukee Journal, July 7, 1991.

Horst, David, Grocery Industry Pioneer Looks to the Future, Post-Crescent, September 29, 1997.

Johnson, Paul, Roundys, Spartan Finalize Merger, Wisconsin State Journal, October 11, 1994.

Lank, Avrum D., Roundys Acquires Firm in Chicago Area, Milwaukee Sentinel, May 23, 1983.

Riddle, Jennifer, Roundys Makes Mazo Move, Wisconsin State Journal, March 9, 1989.

, Roundys Plans Waterloo Move, Wisconsin State Journal, January 11, 1991.

Roundys Buys Michigan Food Company, Capital Times, April 18, 1989.

Roundys Inc.: Spartan Stores Plan Merger with the Food Wholesaler, Wall Street Journal, October 4, 1994, p. C17.

Roundys Locks Out Employees, Capital Times, July 1, 1991.

Roundys Marks Its Centennial, Milwaukee Journal, October 15, 1972, pp. 1415.

Roundys Realigns Top Management, Milwaukee Journal, January 2, 1974.

Roundys Relocation Called Union Busting, Wisconsin State Journal, January 11, 1991.

Roundys Says It Wants to Talk, Capital Times, July 2, 1991.

Roundys Squares Off, Chain Store Age Executive, November 1990, pp. 12425.

Roundys Suspends 15 Union Workers, Capital Times, July 23, 1991.

Roundys, Teamsters Talks Break Down, Capital Times, July 12, 1991.

Roundys Thinking of Moving Jobs, Milwaukee Journal, August 4, 1991.

Roundys to End Lockout Sunday, Capital Times, July 19, 1991.

Roundys to Move to Mazo, Capital Times, March 9, 1989.

Roundys Union OKs 5-Year Pact, Capital Times, September 23, 1991.

Tanner, Ronald, Roundys Latest: Barebones with a Difference, Progressive Grocer, February 1980, pp. 8190.

A Temporary Solution, Progressive Grocer, November 1990, p. 40.

Three Teamsters Are Arrested, Capital Times, July 11, 1991.

A. Woodward

update: Erin Brown

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Roundy’s Inc.

Roundys Inc.

23000 Roundy Drive
Pewaukee, Wisconsin 53072
U.S.A.
(414) 547-7999
Fax: (414) 547-4540

Private Company
Founded: 1872 as Smith, Roundy & Co.
Employees: 5,000
Sales: $2.5 billion (1993)
SICs: 5141 Groceries General Line; 5411 Grocery Stores

Roundys Inc. is the sixth-largest U.S. food wholesaler, supplying more than 1,800 supermarkets across the Midwest. Roundys serves primarily independent grocers and also operates its own franchise, Pickn Save. The company is structured as a cooperative, owned primarily by the retailers it serves. Its member stores range from 5,000-square-foot superettes to giant warehouse stores. Roundys pioneered the warehouse store concept with its successful Milwaukee Pickn Save chain. These stores range from 24,000 to 100,000 square feet, and stock from 4,000 to 5,000 items. Warehouse stores compete to offer the lowest prices in each market area by cutting costs in a variety of ways.

Roundys founder, Judson A. Roundy, came to Milwaukee from Rhode Island. In 1872 he and two partners, Sidney Haux-hurst and William A. Smith, founded a wholesale grocery company called Smith, Roundy & Co. Smith went on to become governor of Wisconsin six years later. The company grew out of its first quarters and moved to a larger building at Milwaukees Broadway and Buffalo Streets in 1885. This building was destroyed by a famous Milwaukee firethe 3rd Ward Firein 1892. By 1895, the company completed new quarters at the same location.

The firm took on new partners and incorporated in 1902 as Roundy, Peckham & Dexter Co. Its president was Charles Dexter, who had been a partner since 1880 and who continued as president and chairman until his death in 1939. Roundys began to offer its own private Roundys brand beginning in 1922, when it introduced Roundys Salt. The company expanded in the first half of this century until its stockholders numbered about 60, most of whom had inherited their holdings. In 1953 the firm reorganized as a grocery cooperative, with only independent retailers allowed to hold Roundys stock. Even the president and other top executives were required to sell their stock and assets unless they were themselves retailers. After this change, Roundys management set out to offer services to independent grocers that would allow them to compete with large chains. Roundys retailer-stockholders were offered bookkeeping and payroll services at low cost, and the company held seminars on grocery-related business topics, such as store security and job training.

Roundys opened a grocery distribution center in Wauwatosa, Wisconsin, in 1955, which grew into a 450,000-square-foot complex on 10 acres of land. The company began to expand rapidly around this time, becoming one of the largest grocery distributors in Wisconsin. Sales reached $50 million in 1962 and then doubled to $100 million in the next nine years. The huge Wauwatosa warehouse stocked close to 9,700 items, including both Roundys private label and national brand foods. Using rail sidings and over 40 truck loading docks in the early 1970s, the company moved more than 5,000 tons of merchandise a week. Roundys private label had grown to include about 800 items, and sales in 1972 were close to $115 million. As early as 1972, Roundys ordering was controlled by computer, and its processing system was also mechanized. Roundys believed in using the most modern technology available to run its business and was often at the forefront of grocery innovation, particularly in its landmark warehouse stores.

In the recession that began in 1974, the warehouse stores became important. Roundys management detected changing consumer attitudes as the economy worsened and decided to experiment with a new type of store that would appeal to the budget-conscious. Roundys rented a vacant discount store in Milwaukee on a short-term lease and opened Pickn Save Warehouse Foods in March 1975. The store had minimal decoration and very few perishable items, including no fresh meat and very little produce. The store stood in sharp contrast to the traditional supermarket: packing crates and cases served as the main decor, and untiled floors and plywood walls emphasized the cost-cutting environment. Unique at the time, Pickn Save at first drew customers curious to shop in this innovative establishment. Customers used crayons to mark prices on items because the store saved labor by not price-marking, and customers also did their own bagging. The store catered to people doing large-volume shopping, stocking up for a week or two. Pickn Save became quite popular, and the store at times had long lines of customers waiting to get in. The warehouse concept proved so successful that Roundys opened almost 20 more in the next five years, spreading from metropolitan Milwaukee across southern Wisconsin and northern Illinois. Other grocers imitated the warehouse concept as well.

Roundys sales expanded in the late 1970s even as the economy pulled out of its slump, proving that the warehouse was not just a fad. However, the companys warehouse stores evolved to include more produce and a more finished decor. They began to have brightly painted walls and tiled floors, bringing the look closer to that of the traditional supermarket. But low price remained the essential difference that set the warehouse stores apart. The stores flourished by moving large volumes of stock, most of which was bought at deal prices. Low-priced merchandise coupled with the low overhead and inexpensive fixtures of the warehouse kept prices below competitors. Labor costs were also kept very low. To avoid running a labor-intensive fresh meat counter, most stores offered smoked meats only, and stockwork was simple and fast because much merchandise was displayed on pallets at the ends of aisles. Sales per man hour at Pickn Save were said to be almost triple the average at traditional supermarkets, and one Roundys executive claimed Pickn Save could sell 100 cases of groceries for the same labor cost a traditional store would take to sell only 10. Use of electronic scanner technology also allowed Roundys warehouse stores to control costs. Information from scanners was used to determine exactly which brands and sizes sold best, which was crucial for management to know when buying deal merchandise. By keeping costs down, Roundys warehouse stores offered consumers consistently low prices, and by 1980 a survey of Milwaukee-area stores found all Roundys major competitors losing market share, while Roundys Pickn Save chain gained.

Roundys had 27 Pickn Save stores in Wisconsin by 1983. With four stores in the Chicago area, Roundys strengthened its position in the Chicago market by purchasing Wayco Foods, a suburban grocery. The Wayco acquisition gained Roundys a 218,000-square-foot warehouse near Chicagos OHare airport. Now with a base from which to service its Chicago stores, Roundys made plans to open 10 to 15 more Pickn Saves in the area. This move put Roundys in competition with other established warehouse-type chains, such as Cub Foods, owned by Super Valu Stores Inc. of Minnesota.

Roundys continued to expand in the 1980s, with somewhat mixed success. Returns on sales began to slip in 1982, and in 1984 and 1985, revenues were stagnant. Profits fell, and in those two years Roundys did not pay rebates (equivalent to stockholder dividends) to its member retailers. The company spent $40 million in 1984 to buy Scot Lad Foods, a grocery distributor in Lansing, Illinois. Although this acquisition doubled Roundys sales, it also increased Roundys debt. Sales by 1986 were $1.8 billion, coming from the Pickn Save chain, wholesale distribution, and stores Roundys operated under the names Roundys, Shop-Rite, and United Foods. However, the four Chicago Pickn Save stores were not doing well, and Roundys decided to sell them off. Another venture, a gourmet food retailer, was also not doing well. Roundys had spent between $1 and $2.5 million to open the gourmet store, called V. Richards, but the store did not quickly turn a profit.

Roundys chairman and chief executive officer, Vincent R. Little, took early retirement in 1986 after 12 years at the post. After Littles exit, the new C.E.O. appointed two outside directors to Roundys board and added two new trustees as well. The new directors and trustees came from outside the grocery business and so brought new perspectives on running a firm as large as Roundys. After this management shift, Roundys continued to expand through acquisitions. In 1988, the company bought Cardinal Foods Inc., an Ohio-based food distributor, and another Ohio firm, a health and beauty aid distributor called American Merchandising Associates Inc. A year later, Roundys spent an undisclosed amount of cash on Viking Foods, Inc. This food distributor based in Muskegon, Michigan, had 1988 sales of $100 million. Roundys sales had increased significantly by 1988, up to $2.4 billion.

As Roundys grew, it required more warehouse space to service its retailers. The company leased a new warehouse in Mazo-manie, Wisconsin, in 1989, as it ran out of space in its old Wauwatosa facility. Roundys grew by more than 20 percent between 1988 and 1991, and warehouse space continued to be a problem. In January 1991, the company announced plans to replace its 30-year-old Wauwatosa plant with a 1-million-square-foot warehouse center it would build in Waterloo, Wisconsin. Roundys wanted to spend $50 million building a state-of-the-art warehouse facility to service more than 170 stores in Wisconsin and Illinois. However, this decision set off a storm of protest from the companys Wauwatosa workers, who were represented by the Teamsters Union. The company would not say whether its 900 employees at the Wauwatosa plant would be offered jobs at the new warehouse, which was about an hours drive away. Because the Waterloo plant would also be in a different county from Wauwatosa, it would be outside the jurisdiction of the existing union contract. When the Teamsters Union contract expired in July 1991, negotiations on a new contract quickly broke down. Workers objected to Roundys insistence on its right to relocate its entire warehouse operation at any time. To pre-empt a strike, Roundys management decided to lock-out its workers. Workers picketed and called for a consumer boycott of stores supplied by Roundys.

During the bitter contract dispute, another issue surfaced. Roundys warehouselike that of its major competitors in the areawas run by a computer, which filed orders from customer stores electronically and then calculated how long it should take human workers to fill each order. The computer set a productivity standard, and Roundys workers were required under the old contract to achieve 85% of that standard. In its new contract negotiations, Roundys demanded that workers achieve 100% of the computers productivity standard. Workers complained that such a goal was impossible and that Roundys was trying to gain an advantage over its competitors at their expense. Roundys ended its lock-out after three weeks, then announced that it was changing its plans to build a new warehouse in Waterloo. The company would instead relocate the work done at the Wauwatosa warehouse even farther away, to Westville, Indiana. The company already had a warehouse in Westville, a small town between Gary and South Bend. Though drivers would have to go through Chicago to service Wisconsin stores, Roundys claimed it had excess capacity in Westville, and the move was reasonable.

Roundys and the Teamsters Union finally signed a five-year contract in late September 1991. The company abandoned its plans to move either to Westville or to Waterloo, and workers gained a small wage increase and a new productivity Standard of 95 percent. Then in April 1992 Roundys announced plans to add capacity at its Wauwatosa plant and move some work from a Fort Wayne, Indiana, warehouse to its other Wisconsin warehouse in Mazomanie. Without actually adding jobs in Wisconsin, this move did seem to emphasize Roundys commitment to keeping work in its home state.

By 1994, Roundys supplied more than 1,800 grocery stores, with distribution centers in Wisconsin, Illinois, Michigan, Indiana, and Ohio. Its Pickn Save chain continued to grow in the Milwaukee area. Roundys had 42 in metropolitan Milwaukee in 1994, with a growing market share said to be between 39 and 47 percent. The newest stores were quite different from the original warehouse stores, though Pickn Save continued to be distinguished by low price. Whereas the early stores had no fresh meat and unadorned walls, one newer store boasted an $18,000 imported Italian cappuccino machine in its coffee bar and a reputation as a fine meat market. The stores were tailored to individual neighborhoods and to the owners taste, and, except for sheer size, there was little to tie them to the bare bones warehouses of the 1970s.

Roundys suggested in 1994 that it might make a public offering in order to fund future expansion. Then in October 1994, the company announced it would merge with Spartan Stores, another grocery wholesale cooperative based in Grand Rapids, Michigan. The merger of Roundys, the nations sixth-largest food wholesaler, and Spartan, the seventh largest, would have made the new combined corporation the third largest in the United States. However, the merger was called off a month later. The companies announced that they would pursue separate growth strategies, and a Roundys vice president declared that the time was not right for the merger. Nonetheless, Roundys did seem interested in further expansion, according to a statement by its president in the June 1994 Progressive Grocer. Whether that took the form of a different merger, a public offering, or more acquisitions, remained to be seen.

Further Reading

A Temporary Solution, Progressive Grocer, November 1990, p. 40.

Bennett, Stephen, Good as Gold, Progressive Grocer, June 1994, pp. 42-44.

Daniel, Tina, Growing Pains at Roundys, Milwaukee Journal, July 27, 1986, pp. ID, 4D.

Fauber, John, Changes at Roundys Expected to Stabilize Employment Here, Milwaukee Journal, April 19, 1992, p. D4.

, Jobs Hang in Balance at Roundys, Milwaukee Journal, August 11, 1991.

Food Stores Scrap Plans to Merge, Wisconsin State Journal, November 22, 1994.

Gunn, Erik, Productivity Is Key to Roundys Dispute, Milwaukee Journal, July 7, 1991.

Johnson, Paul, Roundys, Spartan Finalize Merger, Wisconsin State Journal, October 11, 1994.

Lank, Avrum D., Roundys Acquires Firm in Chicago Area, Milwaukee Sentinel, May 23, 1983.

Riddle, Jennifer, Roundys Makes Mazo Move, Wisconsin State Journal, March 9, 1989.

, Roundys Plans Waterloo Move, Wisconsin State Journal, January 11, 1991.

Roundys Buys Michigan Food Company, Capital Times, April 18, 1989.

Roundys Inc.: Spartan Stores Plan Merger with the Food Wholesaler, Wall Street Journal, October 4, 1994, p. ?17.

Roundys Locks Out Employees, Capital Times, July 1, 1991.

Roundys Marks Its Centennial, Milwaukee Journal, October 15, 1972, pp. 14-15.

Roundys Realigns Top Management, Milwaukee Journal, January 2, 1974.

Roundys Relocation Called Union Busting, Wisconsin State Journal, January 11, 1991.

Roundys Says It Wants to Talk, Capital Times, July 2, 1991.

Roundys Squares Off, Chain Store Age Executive, November 1990, pp. 124-25.

Roundys Suspends 15 Union Workers, Capital Times, July 23, 1991.

Roundys, Teamsters Talks Break Down, Capital Times, July 12, 1991.

Roundys Thinking of Moving Jobs, Milwaukee Journal, August 4, 1991.

Roundys to End Lockout Sunday, Capital Times, July 19, 1991.

Roundys to Move to Mazo, Capital Times, March 9, 1989.

Roundys Union OKs 5-Year Pact, Capital Times, September 23, 1991.

Tanner, Ronald, Roundys Latest: Barebones with a Difference, Progressive Grocer, February 1980, pp. 81-90.

Three Teamsters Are Arrested, Capital Times, July 11, 1991.

A. Woodward

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"Roundy’s Inc.." International Directory of Company Histories. . Encyclopedia.com. 19 Aug. 2017 <http://www.encyclopedia.com>.

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