Fleming Companies, Inc.

6301 Waterford Boulevard
Post Office Box 2664
Oklahoma City, Oklahoma 73126–0647
U.S.A.
(405) 840–7200

Public Company
Incorporated: 1915 as the Lux Mercantile Company
Employees: 24,600
Sales: $10.5 billion
Stock Index: New York

Fleming Companies is the largest food wholesaler in the United States. The company stocks the shelves of more than 5,000 supermarkets and other retail food stores nationwide, including such familiar names as I.G.A., Piggly-Wiggly, Thriftway, Sentry, Food-4-Less, Shop ’n Bag, and United Supers. Fleming has shown exceptional innovation in meeting the changing needs of the independent grocer over the years. The company’s taste for the most up-to-date technology and its knack for making healthy acquisitions has catapulted it to the forefront of the wholesale foods industry. Today the company not only supplies its customers with food products but also assists with new store planning and financing, marketing, accounting, and operations management.

In 1915, O. A. Fleming, E. C. Wilson, and Samuel Lux founded the Lux Mercantile Company in Topeka, Kansas to sell produce to local merchants. The company’s name was changed to Fleming-Wilson three years later. In 1921, Ned Fleming, the son of the company’s co-founder, joined the firm. He was promoted to general manager a year later, and held that position until he was elected president in 1945.

Throughout the 1920s, the Fleming-Wilson Company operated locally in Kansas. In 1927, it joined the Independent Grocers Alliance (I.G.A.), a voluntary grocery store chain and one of the largest independent chains today. In such voluntary chains, affiliated stores agree to buy most or all of their merchandise from one distributor and receive collective buying power in exchange, enabling them to compete with larger corporate supermarket chains. Voluntary chains have historically made up the largest share of the wholesaler’s business, and they contributed significantly to Fleming-Wilson’s growth.

The Depression took a particularly heavy toll on the lower Midwest and the Southwest. Though many industries in the region were virtually paralyzed, Fleming-Wilson managed to survive. In 1935, it acquired the Hutchinson Wholesale Grocery Company, another Kansas-based distributor, the start of a period of growth that has continued virtually unbroken to the present day.

In February, 1941 the company changed its name to Fleming Company, Inc. That same year it branched out of Kansas when it acquired the Carol-Braugh-Robinson Company of Oklahoma City. By the end of World War II the fate of the independent grocer was uncertain, Ned Fleming was faced with new challenges. Americans were moving out of the cities and into the suburbs. As shoppers drove their new automobiles to the new supermarkets, independent “mom and pop” corner stores fell by the wayside and supermarket chains grew at a frantic pace. It was the voluntary chain concept that rescued the independent grocer. Voluntary chains expanded tremendously after the war, and as a result so, too, did Fleming. The company reported steadily increasing earnings throughout the late 1940s and the 1950s.

In 1956, Fleming Company bought Ray’s Printing of Topeka, renamed General Printing and Paper. Fleming itself was General Printing and Paper’s biggest customer, consistently accounting for more than half the company’s sales.

The 1960s were a decade of exceptional growth, as Fleming expanded nationwide through the acquisition of other regional wholesalers. Throughout the early 1960s, the company acquired several companies and facilities in the Midwest and Southwest, including the Schumacher Company of Houston, Texas in 1960.

In 1964, Ned Fleming became chairman of the board of directors and Richard D. Harrison became the company’s president. Under this new leadership, Fleming began an even more ambitious campaign of expansion and acquisition. In 1965, Fleming purchased Thriftway Foods, which operated in the East. Thriftway, which is headquartered in King of Prussia, Pennsylvania, is one of Fleming’s most active units today. Three years later, Fleming tapped West Coast markets when it bought Kockos Brothers, Inc in California. But at the end of the decade profits slowed for the first time in many years.

Fleming began to diversify again in the 1970s. The company bought a semi-trailer manufacturing unit in 1970, and in 1972 it created the Fleming Foods Company, which ran the food distributing operations as a semi-autonomous unit. Later that year Fleming bought the Quality Oil Company, of Topeka, Kansas. Quality Oil operated about 50 retail gas stations in the Midwest and proved to be a wise investment. A year after the acquisition, the subsidiary was contributing more than 10% of Fleming’s pretax profits. Fleming also branched into health foods distribution when it bought Kahan and Lessin in 1972. At that time, K&L delivered to about 1,200 health food stores and 1,000 supermarkets. Fleming’s venture into health foods proved to be less profitable than petroleum: K&L lost money in 1973 and showed only a slight profit in 1974.

In 1974, Fleming bought Benson Wholesale Company and the Dixieland Food Stores retail chain, both headquartered in Geneva, Alabama. In 1975, the company pushed into the New Jersey and New York markets by purchasing Royal Food Distributors. Finally, in 1979 Fleming acquired Blue Ridge Grocery Company of Waynesboro, Virginia, capping off a decade of acquisition and growth.

In 1981, Fleming Companies reincorporated in Oklahoma and its corporate headquarters moved to Oklahoma City. In March, 1981 Richard D. Harrison was elected chairman of the Fleming Companies board of directors, and E. Dean Werries, who had previously headed the Fleming Foods division, replaced him as president, while Harrison remained CEO.

This new leadership steered Fleming in a slightly different direction. Harrison and Werries stressed wholesale food distribution over diversification. Throughout the 1980s, Fleming made more and larger acquisitions of food wholesalers as part of its growth strategy. In 1981, it bought McLain Grocery in Ohio. In 1982, it bought the Waples-Platter Company for $91 million, which included the White Swan Foodservice division in Texas. A month later, in January, 1983, it purchased the bankrupt American-Strevell Inc. for $14 million. Fleming also purchased Giant Wholesale of Johnson City, Tennessee, that year. In 1984, Fleming acquired United Grocers, a cooperative wholesaler in California. It further strengthened its hold on the northern California region by purchasing a huge distribution center in Milpitas, California, from the Alpha-Beta Company a year later. In 1985, Associated Grocers of Arizona, Inc. was purchased for $47 million. In 1986, it purchased the Frankford-Quaker Grocery Company in Philadelphia, and the Hawaiian distribution warehouse of Foodland Super Markets. In 1987, Fleming acquired the Godfrey Company of Wisconsin, and in July, 1988 Fleming became the largest wholesaler in the country when it acquired the nation’s fourth-largest wholesaler, Malone & Hyde Inc.

Fleming’s incredible spree of acquisitions was not completely free of complications. In particular, the acquisition of Associated Grocers of Arizona posed some new problems for Fleming. Because the wholesaler had previously operated as a cooperative, owned by those supermarkets it serviced, Fleming had difficulty implementing its own corporate style of management. Associated Grocers customers were not at first supportive of the changes which were necessary to transform the company into a profitable unit for Fleming. Despite such minor setbacks, Fleming continues to look for possible mergers to strengthen the company. Cooperative distributors who lack the capital to reinvest in new facilities and find it increasingly difficult to compete with the streamlined, efficient corporate wholesaler are likely candidates.

At the same time Fleming concentrated on acquiring food wholesalers, it divested some of its other units. In 1982, it sold Quality Oil, and in 1983 it sold General Printing and Paper. In 1984, it sold its health foods specialty distributor, Kahan and Lessin. K&L’s performance had been inconsistent ever since its acquisition in 1972. In addition, the Justice Department charged the subsidiary, along with three other health food distributors, with fixing prices in 1982. The company was fined $75,000; Fleming reported a $862,000 expense as a result of the litigation.

Wholesale food distributors traditionally operate on profit margins of less than one percent. Increased productivity of even fractions of a penny on each dollar of volume can make a noticeable difference in earnings. For this reason, Fleming has been quick to implement technological developments to increase productivity. In its newest warehouses, a computer breaks down orders by product, allowing a worker to fill several orders at once. The worker puts the total number of cases of one product ordered on a conveyor belt. A laser scanner sends each unit to the proper shipping bay to be loaded for delivery. This new system increased productivity an average of 11% in those warehouses where it was employed. In those warehouses in which it was impossible to mechanize without significantly disrupting operations, Fleming established standards of productivity as an alternative way to increase its profit margins. The procedure improvement program (PIP) measured each worker’s productivity by computer. Before doing a specific task, a worker inserted a card into a computer, which calculated the standard amount of time for the task and evaluated his performance. If a worker consistently fell below standard, he faced dismissal. Such work standards programs were, naturally, not always popular. In early 1986, workers went on strike at Fleming’s warehouse in Oaks, Pennsylvania in opposition to the work standards program and an increase in the standard number of cases moved per hour, from 125 to 150. The strike was settled when the Teamsters agreed to the new standard and the company lengthened the five-step disciplinary review procedure to six steps.

The wholesale food industry is not expected to grow much domestically in the future. The aggressive expansion of corporate supermarket chains puts pressure on wholesalers distributing to independent retail stores. Although Fleming’s most recent acquisitions give it a very solid share of the market, the company will have to stay innovative to stay on top. International markets are one potential area of growth for wholesale distributors. In the meantime, Fleming expects to continue to expand by acquiring healthy competitors and to improve profit margins by increasing productivity.

Principal Subsidiaries

Crestwood Bakery; Dixieland Food Stores, Inc.; Fleming Co. of Alabama, Inc.; Fleming Finance Co., Inc.; Godfrey Company, Inc.; Malone and Hyde, Inc.; Royal Food Distributors, Inc.; Fleming Foods of Ohio, Inc.; Fleming Foods of Pennsylvania, Inc.; Fleming Foods of Tennessee, Inc.; Fleming Foods of Texas, Inc.; Fleming Foods of Virginia, Inc.; Fleming Foods West; Fleming Guardian Group, Inc.; Fleming Insurance, Ltd.; Fleming Transportation, Inc.; Hub City Foods, Inc.; Selected Products, Inc.; Sentry Markets, Inc; Thrift-Rack, Inc.