Bruno’s Inc.

views updated

Brunos Inc.

800 Lakeshore Parkway
P.O. Box 2486
Birmingham, Alabama 35201-2486
(205) 940-9400
Fax: (205) 940-9568

Public Company
Employees: 23,454
Sales: $2.66 billion
Stock exchanges: NASDAQ
SICs: 5411 Grocery Stores; 5912 Drug Stores & Proprietary Stores

One of the biggest, most productive, and most profitable supermarket chains in the United States, Brunos, Inc., boasts the highest sales volume of 129 companies in Alabama and is one of Americas top 20 supermarket chains. The corporation operates more than 250 stores, including a variety of retail food stores, pharmacies, and combination food and drug stores in Alabama, Georgia, Florida, Mississippi, Tennessee, and South Carolina. Located in urban and rural settings, these stores consist of: Food World, Brunos Food and Pharmacy, FoodMax, Vincents, Food Fair, Brunos Finer Foods, Consumer Warehouse Foods, and Piggly Wiggly.

In 1932 during the Great Depression, Joe Bruno, the son of Sicilian immigrants, opened his first grocery, a 20 by 40 foot corner store in Birmingham, Alabama. Using his familys savings for an initial investment of $600, Joe would achieve the kind of success that young immigrants still dream of. Joes cash-only policy enabled him to keep prices low, and customers came from all over Birmingham to the first Brunos store. As they became old enough to work, Joes three brothers, Anthony, Angelo, and Lee, joined the business. By April 1, 1959, when the company was incorporated in Alabama as Brunos, Inc., all four Bruno sons were well established in the business.

Alabama remains at the center of Brunos operating area and is home to more than 120 of the chains 250 stores. In some parts of the state, Brunos has market shares of up to 30 percent. There are close to 100 Brunos stores in Georgia; the balance are in Florida, Mississippi, Tennessee, and South Carolina.

The success of Brunos is due in part to its variety of stores. Brunos strategy is to divide each market and open stores directed at each segment. This way, the corporation gains market share and comes to dominate each market segment. The stores have different sizes, designs, and products, and each is geared to a particular demographic or economic community.

Brunos Food and Pharmacy stores are higher-end stores that stock gourmet items from the United States and overseas while featuring the everyday low prices of the lower-end stores. With about 50,000 square feet per store, Brunos Food and Pharmacy features one-stop shopping, in-store banks, and specialty items. The combination food and drug stores are committed to customer service, with such amenities as bag boys carrying groceries to customers cars. At a 1987 opening in Huntsville, Alabama, Cajún Chef Paul Prudhomme gave a cooking demonstration, and samples from store departments included fresh strawberry shortcake, chocolate and champagne ice cream balls, and fresh Beluga caviar. The opening, called The Art of Food, was billed as a benefit for the local art museum, and invitations were sent to museum patrons, who were regarded as the cosmopolitan, affluent consumers that Brunos wanted to attract to the store.

Vincents, which also carries gourmet foods in an upscale setting, offers catering services for small gatherings and large parties. There is only one Vincents store, located in Homewood, a suburb of Birmingham. It carries fine, expensive wines, and probably stocks more gourmet items than any other store in the south.

FoodMax stores, many of which are open 24 hours a day, emphasize an everyday low-price image while attracting upscale customers. They are super-warehouse size, with between 48,000 and 60,000 square feet. A FoodMax in Mableton, Georgia, features wide aisles, 20 kinds of fresh fish, and a bakery that can produce 450 loaves of bread per hour.

Food World stores are more than 40,000 square feet in area and display shelves of food in manufacturers cartons. More than 80 Food World stores are in operationfar more than any other Brunos chain. Theirs is a no frills, economical image that encourages high sales volume and low overhead. Food World was the first chain in the region to forgo periodic sales on selected merchandise in favor of everyday low prices. The strategy has been so successful that it has been widely imitated.

Food Fair stores are similar to Food World, but smaller, at only approximately 30,000 square feet. The 58 Piggly Wiggly stores now owned by Brunos are conventional supermarkets that are typically 28,000 square feet in size. They offer store specials, double manufacturers coupons, and weekly selected merchandise specials. All of Brunos stores emphasize high volume and competitive prices.

Brunos has a reputation in the industry for aggressive, effective management and practices. For instance, it buys most of its food directly from manufacturers, rather than from wholesalers. When manufacturers want their products sold at Brunos stores, they make presentations directly to a committee of Brunos managers, many of whom are part of the Bruno family. If the committee decides to buy the products, they usually buy large quantities and qualify for the largest volume discounts. That way, Brunos can save money and pass the savings on to their customers.

Brunos store managers are compensated according to how much money their stores make. This puts pressure on them to keep inventories moving, but most Brunos managers are happy to hustle, especially knowing they may earn as much as $80,000 in a good year. Many of these managers started at Brunos while they were still in high school and have stayed, and this loyalty has served the company well.

In September 1987 Angelo Bruno, co-founder and then chairperson, signed a joint venture agreement with K Mart. Considered a bold move for Brunos, the idea was to build hypermarkets of approximately 200,000 square feet all over the country. Hypermarkets combine groceries and general merchandise, selling everything from vegetables to clothing, and featuring up to 50 checkout stands. Such shopping centers already existed in Europe, and this was not the first time hypermarkets would open in the United States. However, this venture represented the first partnership between a grocery chain with the food expertise of Brunos, and a general retailer with expertise in merchandise sales. The management of Brunos felt that the new sales could boost growth, even in the traditionally slow grocery trade. Three American Fare hypermarkets owned jointly by Kmart and Brunos opened between 1989 and 1991 in Atlanta, Georgia; Charlotte, North Carolina; and Jackson, Mississippi.

On April 20, 1988, Brunos acquired PWS Holding Corp., which held Piggly Wiggly Southern, Inc. This helped Brunos achieve a substantial expansion in northern Georgia and Florida. The acquisition of 58 Piggly Wiggly stores was Brunos first major competitive purchase. The price was 2,498,251 shares of Brunos common stock. Brunos retained some of Piggly Wigglys management, naming the former Piggly Wiggly Southern president, William White, executive vice president of Brunos for merchandising and operations.

Always on the lookout for new technology to improve operations in its stores, in the early 1990s Brunos installed minicomputers connected to the Birmingham mainframe computer in its stores. These computers are used primarily to improve direct store buying and delivery. The system also enables stores to monitor customer traffic in order to adjust labor needs. They also use the computers to keep track of store employees attendance and working hours. The warehouse is also highly computerized. Food arrives from manufacturers and is priced, inventoried, and loaded onto Brunos trucks for delivery to stores. The shipments, arrivals, pricing, and deliveries are also tracked on computer.

A tremendous test to Brunos organization came in a tragic accident on December 11, 1991, when six Brunos executives and three others were killed in the crash of the corporate jet shortly after takeoff in Rome, Georgia. The executives, including co-founders Angelo Bruno and his brother Lee Bruno, were on their annual Christmas visit to all of their stores when the crash occurred. Also killed were Sam Vacarella, the senior vice president for merchandising; Edward Hyde, vice president for store operations; Randolph Page, a vice president for personnel; Karl Mollica, produce director; Mary Faust, an advertising account executive working with Brunos; and the co-pilots Joe Tesney and Rob Stamps. The accident took an emotional toll on the family business and required much shifting of personnel. Angelos son Ronald Bruno, who had been groomed to run the company and who had already been designated president and chief executive officer, was elected to the chair. In August 1992 Brunos, Inc., bought 3.6 million shares of common stock from the estates of Angelo and Lee Bruno.

Brunos entered the 1990s in the top 40 of some 270 food stores ranked by sales volume. National competition consisted of such chains as American Stores, Kroger, Safeway, Winn-Dixie, and Jewel, while Food Lion, Albertsons, and Giant Food competed with Brunos mainly in the southeast region. Many of Brunos competitors in Georgia suffered after Brunos 1988 acquisition of Piggly Wiggly. But Brunos continues to keep watch over its competition as Warehouse clubs and Wal-Mart supercenters begin to pose a challenge to Brunos in several of its larger markets.

In June 1992 Brunos announced an end to its joint venture with K Mart. K Mart assumed full ownership of the hypermarkets, taking over Brunos 49 percent interest in Atlanta and Charlotte, and its 51 percent interest in the Jackson store. Brunos management noted We felt it was time to eliminate our loss from the American Fare stores and focus our full attention on our primary store concerns. The company took a charge of $.13 a share, or $10.8 million for the fiscal year ending in June 1992.

Also during fiscal 1992, Brunos finalized plans to consolidate the Piggly Wiggly division offices from Vidalia, Georgia to a unit in the Birmingham corporate office. According to Ronald Bruno, savings from the closed Vidalia division offices would be in the vicinity of $5 million. The offices were officially closed in 1992, but the distribution center in Vidalia remained. Brunos planned to use the facility as a jumping-off point for new operations in that geographic area.

Brunos, like many food retailers and supermarket operators, suffered during the recession of the late 1980s and early 1990s. Some store sales were slow while consumer spending plummeted. Food prices went down, and consumers were spending less money on food. The outlook brightened slightly as the economy began to improve, and Brunos management team seems to have successfully ridden out the worst of the storm. Forecasts for food retailing growth remain modest, but some analysts have expected Brunos to be able to resume its annual growth rate of 15 to 20 percent. Brunos planned to open 33 new stores in fiscal 1993. Half of these were to be FoodMax stores, and the others were to be combination grocery and drug stores.

Principal Subsidiaries

PWS Holding Corporation

Further Reading

Donegan, Priscilla, Merchandising the Store, Progressive Grocer, August, 1987; Getting Hyper, Forbes, January 11, 1988; Kindel, Stephen, Rebel Sell, Financial World, January 9, 1990; Grossman, Laurie M. and Martha Brannigan, Six Brunos Officials and Three Others Die in Jet Crash During Goodwill Tour, The Wall Street Journal, December 12, 1991; Smothers, Ronald, Crash of Private Plane in Georgia Kills 9, The New York Times, December 12, 1991; Brunos Executives Die in Plane Crash, Progressive Grocer, January, 1992; Merrefield, David, Brunos: Pulling Together, Supermarket News, March 30, 1992; Brunos Leaves American Fare Venture With KMart, The New York Times, June 11, 1992; Brunos After the Crash, Forbes, July 6, 1992.

Fran Shonfeld Sherman