Gristede’s Sloan’s, Inc.

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Gristedes Sloans, Inc.

823 llth Avenue
New York, New York 10019-3535
Telephone: (212) 956-5770
Fax: (212) 247-4509

Public Company
1913 as Gristede Brothers, Inc.
Employees: 1,323
Sales: $157.5 million (1998)
Stock Exchanges: American Boston
Ticker Symbol: GRI
NAIC: 42241 General Line Grocery Wholesalers; 42248 Fresh Fruit & Vegetable Wholesalers; 44511 Supermarkets & Other Grocery (Except Convenience) Stores; 446199 All Other Health & Personal Care Stores; 551112 Offices of Other Holding Companies

Gristedes Sloans, Inc., composed of two once distinct supermarket chains, is a holding corporation that owns and operates 40 supermarkets in the New York City metropolitan area, including 35 in Manhattan. Twenty-nine were operating under the Gristedes name and 11 under the Sloans name at the end of 1998, but all were scheduled to be under the Gristedes name at the end of 1999. The company also owns and operates a warehouse that supplies these supermarkets with groceries and fresh produce and sells wholesale fresh produce to third parties. Gristedes Sloans is 91 percent owned or controlled by John A. Catsimatidis, sole owner of Red Apple Group, Inc., a private holding company.

Gristede Brothers: 18911987

Charles Gristede and his brother Diedrich came to the United States from Germany in 1888, found work in grocery stores, and in 1891 opened a tiny gaslit store at 42nd Street and Second Avenue in Manhattan. This site was then far uptown from the central shopping area but close to housewives who walked or rode in private carriages to the store. A second store opened in Harlemthen a middle-class white neighborhoodin 1896. The business flourished and expanded, reaching suburban Westchester County in 1920 and Connecticut in 1926. Gristede Brothers also opened a wine and liquor store in Manhattan in 1933. When Charles Gristede died in 1948, the chain consisted of 141 stores in Manhattan, the Bronx, Westchester, and Connecticut. In 1956 it opened its first Long Island store, in Garden City.

In Manhattan, Gristede Brothers remained concentrated on the more affluent East Side, where it specialized in personal service and gourmet items and charged premium prices. It shipped items to customers around the world, including, for example, a Greek who wanted melons sent to him in Paris by air freight. The company had annual sales of about $60 million and 115 stores in allincluding six liquor stores in Connecticutwhen it was sold in 1968 to The Southland Corporation, owner of the 7-Eleven convenience store chain, for Southland stock valued at $11.5 million.

Southland retained the prior Gristede Brothers management and for more than a decade left the chain to its own devices. In 1977 Gristedes consisted of 120 stores, mostly ranging in size from 6,000 to 11,000 square feet and carrying 7,000 to 8,000 gourmet items, including size 23 grapefruitabout the size of a large cantaloupestrawberries picked in California only 36 hours earlier, large Idaho potatoes already wrapped in tin foil, quiche Lorraine, and Beluga caviar.

By the early 1980s, however, Gristedes, as well as other supermarket chains with outlets in New York City, was reeling from a number of adverse conditions, including the small size of the stores, the high cost of delivery in the city, escalating rents, and competition from gourmet shops and specialty food stores. In 1980 the chain still consisted of 100 outlets, including 24 Charles & Co. sandwich shops, but by 1983, when Gristedes fell into the red, there were only 84. During 198384 Gristedes concentrated its operations in Manhattan, closing 36 stores and its warehouse. In 1985 there were 18 conventional supermarkets; 17 generally smaller service stores featuring telephone ordering, home delivery, and charge accounts; ten Charles & Co. sandwich shops and one gourmet shop; and one liquor store. Sales came to about $105 million in 1985.

Southland sold the Gristedes and Charles & Co. stores to Red Apple Co. in 1986 for an estimated $50 million. Red Apple, owned by John A. Catsimatidis and operating in the Bronx as well as Manhattan, now became the largest supermarket chain in New York City. Gristedes and Red Apple remained distinct, however. Red Apple had completed 14 Gristedes remodels by the fall of 1987, including adding in-store delicatessens, bakeries, salad bars, hot takeout foods, and upscale cheese, prime-meat, and seafood sections. The Charles & Co. stores were closed.

Sloans Supermarkets: 195697

Born in the Bronx and reared by foster families after his mother died, Max Sloan left school after the eighth grade to sell fruit and vegetables from a pushcart. A small vegetable and fruit store he opened in 1940 with $500 grew into the Orange Grove chain. Sloan and his partner, Lou Meyer, also ran a wholesale produce operation supplying fruits and vegetables to many grocery stores in Manhattan and the Bronx. They entered the supermarket business in 1956 with two Manhattan stores. There were 25 Sloan Supermarket Storesmostly on Manhattans West Sidein 1973, when the chain purchased seven more from Bohack Corp. By this time Sloan had annual sales of $42 million.

Meyer died in 1969, and Sloan retired in 1977. His successor was a son-in-law, Jules Rose. By 1982 the 42-store Sloans Supermarkets Inc. chain had estimated sales of $150 million a year. Its viability, Rose said, rested on seeking to market items with the greatest profit margin, such as meat, frozen items, produce, and gourmet foods. The citys consumer affairs agency had consistently listed Sloans as one of the most expensive food chains in Manhattan. Sloans success also rested on careful monitoring of the boroughs ethnically diverse clientele. A store on the Lower East Side, for example, had a large line of Goya-brand products for Hispanics and kosher products for Orthodox Jews. Another, close to the United Nations, had full international foods sections. Located in a high-income area, it also had a higher proportion of frozen food and dairy products sales and included health and natural foods sections.

Sloans Supermarkets had 38 stores in early 1990, when it was first reported on the auction block. Cynthia Rigg of Crains New York Business wrote, Over the past decade Sloans reputation for quality has fallen dramatically. The privately held chain has done little to upgrade its stores while [its competitors] have undertaken extensive expansion and modernization programs. She also reported that industry sources said the four principals of Sloans were often at loggerheads, which stymies decision making. Despite its problems, Sloans was said to hold a 20 percent share of Manhattans grocery business.

After selling three stores to various companies in 1990, Sloans Supermarkets sold 21 more to Red Apple during 199192. One observer explained to Richard Turcsik of Supermarket News, Gristede is definitely considered upscale. Sloans is somewhere in between and Red Apple is considered low-end. By keeping the Sloans name, Red Apple will be able to service all three segments of the customer base from one distributor. The acquisition had its hazards, however, because three of Sloans owners were, in 1993, being charged with fraudulently redeeming at least $3.5 million of discount coupons clipped from newspapers, an action that threatened 15 of the acquired units with forfeiture to the federal government. The three Sloans partnersRose, Max Sloans other son-in-law, and Meyers soneventually went to jail.

Despite these problems, Red Apple bought the remaining 11 Sloans supermarketsten in Manhattan and one in Brooklynin 1993 for $8.8 million plus certain accounts payable. This purchase was not assigned to Red Apple itself but to Designcraft, Inc., a publicly owned shell corporation whose main stockholder was Catsimatidis. Following the sale the federal government agreed to withdraw all claims against Sloans Supermarkets. Designcraft then took the Sloans Supermarkets name and continued operations under Red Apple Group management.

This transaction raised the number of supermarket stores in the New York area controlled by Red Apple to 75. In 1994 the Federal Trade Commission filed a complaint, seeking the sale of ten Red Apple-controlled stores in four Manhattan neighborhoods because of possible anticompetitive effects, such as higher food prices and lower quality and selection. Supermarkets under the Red Apple, Gristedes, and Sloans names were serving 37 percent of Manhattans food shoppers on a regular basis, according to a survey. Catsimatidis agreed later in 1994 to divest six stores in order to settle the complaint. In 1997, however, he and three of his firms agreed to pay a $600,000 penalty for failing to comply with the FTC order. Only one of the stores had been divested, according to the agency.

The Red Apple name virtually disappeared during this period, its outlets sold to Rite Aid Corporation or converted to Gristedes or Sloans supermarkets. Sloans acquired three more supermarkets from a subsidiary of Red Apple Group in 1995 for $5 million plus the cost of inventory. It also opened an additional supermarket and a Brooklyn health and beauty aids store in 1996.

Key Dates:

Charles and Diedrich Gristede open their first store.
Max Sloan opens his first supermarket.
Gristede Brothers is sold to The Southland Corporation.
Southland sells Gristedes to Red Apple Co.
Red Apple completes the purchase of Sloans begun in 1991.
The two chains are combined as Gristedes Sloans, Inc.

Gristedes Sloans: 199799

In 1997 Sloans Supermarkets acquired 19 Gristedes and 10 Sloans supermarkets, plus a produce distribution center, from Red Apple for $36 million worth of stock plus the assumption of $4 million in debt. The company was then renamed Gristedes Sloans, Inc. During fiscal 1998 (the year ended November 30, 1998), Gristedes Sloans acquired another supermarket from an affiliate of Catsimatidis and remodeled ten stores at a cost of $10 million. The company also closed four stores and combined two adjacent ones into a single store. Company sales came to $157.5 million, with a net loss of $288,339. Gristedes Sloans had a long-term debt of $21.6 million at the end of the fiscal year. Catsimatidis, the chief executive officer, owned or controlled 91 percent of the company in February 1999.

Of the 40 Gristedes Sloans stores in 1998, 35 were in Manhattan, one was in Brooklyn, three were in Westchester County, and one was on Long Island. They ranged from 3,200 to 23,000 square feet in selling space, with an average of 9,000, and were all leased. City Produce Operating Corp., on leased premises in the Bronx, was a warehouse operation supplying the companys supermarkets with groceries and fresh produce and selling fresh produce wholesale to third parties.

Gristedes Sloans supermarkets were offering broad lines of merchandise, including nationally and regionally advertised brands and private-label and generic brands. Their food items included fresh meats, produce, dry groceries, dairy products, baked goods, poultry and fish, fresh fruits and vegetables, frozen foods, delicatessen items, and gourmet foods. Nonfood items included cigarettes, soaps, paper products, and health and beauty aids. The company also was operating an in-store pharmacy in one of its supermarkets. Check-cashing services were available to qualified customers, and groceries were being delivered to apartments for a small fee. The stores were open 16 hours a day, seven days a week, and on holidays. At least one was open around the clock.

Gristedes Sloans was planning to remodel 12 more stores in fiscal 1999 and to open two new stores and four in-store pharmacies. Of the 11 stores operating under the Sloans name, four had been converted to Gristedes by May 1999, when the company announced that the remaining seven would also take the Gristedes name by the end of the year. Catsimatidis told Supermarket News that the Gristedes banner is a better name, with better marketing potential.

Principal Subsidiaries

City Produce Operating Corp.; Gristedes Operating Corp.; Namdor Inc.; RAS Operating Corp.; SAC Operating Corp.

Principal Competitors

Associated Food Stores Inc.; C Town Supermarkets DAgostino Supermarkets, Inc.; The Great Atlantic & Pacific Tea Company Inc. (for A & P Food Stores and The Food Emporium); Key Food Stores Co-operative Inc.

Further Reading

Charles Gristede, Grocer 77, Is Dead, New York Times, October 31, 1948, p. 88.

Clark, Chapin, Ex-CEO of Sloans Begins Prison Sentence, SN/Supermarket News, March 9, 1998, pp. 1, 73.

Collins, Glenn, Red Apple to Sell up to 20 Stores, New York Times, November 30, 1994, p. D3.

Finklea, Robert W., The Gristedes Link in Southlands Chain, New York Times, July 17, 1977, Sec. 3, p. 3.

Gristedes Flag Will Fly Over Remaining Sloans, SN/Supermarket News, May 3, 1999, p. 8.

Holders Approve Purchase of Stores from Chairman, Wall Street Journal, October 31, 1997, p. B4.

Nagle, James J., Gristede-Southland Merger Set, New York Times, October 16, 1968, pp. 59, 64.

Pace, Eric, Max Sloan, 83, Whose Pushcart Grew into a Supermarket Chain, New York Times, August 7, 1995, p. B10.

Paikert, Charles, Jules Rose: Manhattans Food Market Maven, Chain Store Age Executive, January 1982, pp. 48, 5556, 59.

Reckert, Clare M., Bohack Sells 7 Units, New York Times, August 14, 1973, pp. 43, 47.

Rigg, Cynthia, At Sloans, the Specials for Investors Are Stakes, Crains New York Business, December 6, 1993, p. 4.

, Fraud Case Threatens Sloan Sale, Crains New York Business, March 22, 1993, pp. 3, 36.

Schmitt, Eric, Red Apple Buying Gristedes, New York Times, February 6, 1986, p. D4.

Tanner, Ronald, How Jules Rose Nourishes His Broadway Baby, Progressive Grocer, February 1983, pp. 105, 108, 110, 112.

Turcsik, Richard, Red Apple Starts Sloans Store Buyout, Supermarket News, July 2, 1991, pp. 1, 34.

Washington Briefs, Supermarket Business, February 1997, p. 9.

Robert Halasz