The Southland Corporation

views updated May 23 2018

The Southland Corporation

Post Office Box 7119
Dallas, Texas 75221-0711
2711 Haskell Avenue
Dallas, Texas 75204
U.S.A.
(214) 828-7011
Fax: (214) 828-7848

Public Company
Incorporated: 1961
Employees: 35,646
Sales: $7.48 billion
Stock Exchanges: NASDAQ
SICs: 5411 Grocery Stores; 5541 Gasoline Service Stations

The Southland Corporation is the worlds largest operator, franchisor, and licensor of convenience stores, with more than 13,700 stores in 20 countries carrying the 7-Eleven banner. The company began as a brainstorm of John Jefferson Green. In 1927 Green approached Joe C. Jodie Thompson, one of five founding directors of the Dallas Southland Ice Company, with a new idea. He wanted to sell milk, eggs, and bread through his retail ice dock. You furnish the items, he suggested, and Ill pay the power bills. Thompson agreed, and together they established the first known convenience store.

The newly formed Southland Ice Company was comprised of four separate ice companies and operated eight ice plants and 21 retail ice stations. An early attempt at advertising occurred after one Southland manager visited Alaska in 1928. Upon his return to Texas, he planted a souvenir totem pole in front of his store. The pole attracted so much attention that the employee suggested placing one at every Southland-owned retail ice dock and naming the stores Totem Stores, since the consumers toted away their purchases.

Southland decided to go with the new name, sensing that it unified the companys diversified stores and provided a distinct identity, a key ingredient in the successful operation of numerous retail outlets. Jodie Thompson, secretary-treasurer of Southland Ice, unified the stores further by training staff with daily sales talks. He also chose a company uniform for ice station service men. Thompson recognized early on that consumers should receive the same quality and service at every store. During this time Southland also began to experiment with constructing and leasing gasoline stations at ten of its Dallas-area stores.

The Depression plunged Southland into bankruptcy in 1931. During a period of receivership and reorganization, Jodie Thompson was named president, a move which ensured continuity during the rocky period. The management team chosen during this time was especially strong and led Southland for a number of years. W. W. Overton Jr., a Dallas banker, helped disentangle the young companys finances by organizing the purchase of all Southland bonds for seven cents on the dollar, which eventually put ownership of the company under the control of the board of directors. Despite the financial confusion, profits from the Totem Stores continued to climb, and with the repeal of Prohibition in 1933, ice and beer sales surged.

Once it was on more stable footing, Southland began vertical integration with construction of Oak Farms Dairies in 1936, using public relations to market its new dairy products by offering a free movie ticket in return for six of its milk-bottle caps. A crowd of 1,600 attended the Dallas theater sponsoring the event. By 1939 Southland operated 60 Totem Stores in the Dallas-Fort Worth area, triple the number operating when the company had been founded 12 years earlier.

With the onset of World War II, demands for ice peaked. Southland became the chief supplier of ice for the construction and operation of Camp Hood, the U.S. Armys largest training camp. The dramatic increase in business prompted reorganization of the company. Southland bought City Ice Delivery, Ltd., which included two modern ice plants, 20 retail stations, and property on Haskell Avenue, where the new company headquarters was sited. Southland became the largest ice operator in Dallas.

By 1945 Southland owned stores scattered over north-central Texas. These stores offered convenient hoursoperating from seven in the morning until 11 at nightseven days a week. When the Tracy-Locke firm was commissioned to create a new name, they chose 7-Eleven to emphasize the companys commitment to serving customers. At this time Southland remodeled all 7-Eleven stores, doubling the amount of floor space at each retail outlet.

In the late-1940s, Americans, freed from the ration system of World War II, were eager to purchase consumer goods. Because refrigerators were not yet readily available to the public, demand for block ice peaked. Southland bought Texas Public Utilities, owners of 20 ice plants, in 1947. This acquisition made Southland the largest ice operator in Texas. In 1948 Jodie Thompsons oldest son, John P. Thompson, was named to the board of directors.

At a management meeting in Washington, D.C. in 1956, a blizzard blanketed the city. John Thompson noticed that in densely populated areas, people could walk to the stores even when the weather made driving impossible. Seven-Elevens long operating hours and diversified stockfrom canned soup to tissues to aspirincould provide exactly what customers might need. In light of this revelation, Southland began to focus on the traffic patterns around potential store sites, choosing high-volume corners whenever possible.

Southland extended its area of operations outside of Texas during the late-1950s when John Thompson, now vice-president, introduced 7-Eleven stores in Virginia, Maryland, and eastern Pennsylvania. The company noted demographic shifts and opened more suburban stores in response to mass migration to these outlying areas. Southland also refined its marketing by studying customer traffic in its stores and eliminating products that moved slowly.

In 1961 Jodie Thompson named his sons to executive positions in Southland; John Thompson became the second president of Southland and Jere W. Thompson was elected vice-president of sales. Upon the elder Thompsons death that year, the Dallas Morning News credited him with transforming the ordinary corner ice house from an ice dispensary to a multi-million-dollar drive-in grocery enterprise. His son inherited his entrepreneurial drive; John Thompsons first goal as president was to propel Southland from $100 million in annual sales to one billion dollars within ten years.

Incorporated in 1961, Southland moved quickly to national prominence. The companys unprecedented expansion began with dairy acquisitionsnotably Midwest Dairy Products in 1962yielding production plants and branches in Illinois, Arkansas, Louisiana, and Alabama.

After acquiring 100 SpeeDee Marts in California in 1963, Southland was introduced to the concept of franchising, a system already in operation at the very successful SpeeDee Mart stores. The company developed two-week training sessions for prospective franchisees, allowing greater decentralization of stores. In January of 1965, 1,519 7-Eleven stores were operating and Southland had climbed to 49th in Fortunes top 50 merchandising firms.

Purchasing continued through the 1960s and 1970s, as Southland bought existing convenience market chains in Arizona, New Jersey, Colorado, Illinois, Georgia, and Tennessee. In addition, Southland experimented with its first 24-hour store, in Las Vegas, and expanded to the East Coast and Canada in 1969. By December of 1969 the number of 7-Eleven stores had exploded to 3,537. But with such growth, problems began to surface. Management noted high employee turnover and insufficient security systems in 24-hour stores. The company nonetheless remained committed to the 24-hour store, and the number of 24-hour 7-Eleven stores rose from 817 in 1972 to 3,703 by the end of 1975.

Southland reached one billion dollars in sales by 1971 and became a member of the New York Stock Exchange the following year. The first regional distribution center was opened in Florida in 1971, and by 1977 several such centers were fully functioning and serving more than 3,000 7-Eleven stores. Jere Thompson, named president of Southland in 1973, continued Southlands American retail store expansion.

Through a new computer inventory system, 7-Eleven was able to pinpoint its strengths and discover that single-purchase items were its best sellers. To make stops more convenient for customers, Southland began using microwaves for fast-food sales and introduced self-service gasoline through its newly acquired Pak-a-Sak stores. In 1974 the five thousandth 7-Eleven store opened in Dallas at the site of John Jefferson Greens original ice dock.

Southlands success was not limited to the United States; penetration of the European market occurred with the companys purchase of a 50 percent interest in Cavenham Ltd., a manufacturing corporation controlling 840 retail outlets in Great Britain. By early 1974, Southlands international operations included 50 percent interest in 1,096 United Kingdom outlets, 75 7-Eleven stores in Canada, and four Super-7 Stores in Mexico.

Negotiations for the introduction of 7-Eleven to Japan were completed in December of 1973, when Southland granted Ito-Yokado, one of Japans largest retailers, an area license. Like the franchise concept in the United States, area licensing worked well in Japan because of its emphasis on the individual businessperson operating a store but able to take advantage of 7-Elevens name and established systems of management and accounting. By late 1978, 188 7-Eleven stores were open for business in Japan.

Also in 1978, Southland bought Chief Auto Parts, a California chain of 119 retail automobile-part stores. By 1986 Chief Auto Parts operated 465 stores and stood as the largest convenience retailer of automobile parts in the nation. Another Southland acquisition was Tidel Systems, a manufacturer of cash-dispensing systems and underground gasoline-tank-monitoring systems.

Southlands most significant acquisition, however, was the Citgo Petroleum Corporation, purchased in August of 1983. Southland hoped that the $780 million acquisition would provide a smooth supply of gasoline for its convenience stores. In September of 1986 Southland sold a 50-percent interest in Citgo to a subsidiary of Petroleos de Venezuela, S.A.

In mid-1987 the Thompson brothers, spurred in part by the threat of a hostile takeover bid by Canadian raider Samuel Belzburg, initiated a leveraged buyout. The buyout, which involved the formation of a temporary holding company called JT Acquisitions, was completed on December 16, 1987.

By the end of 1988 Southland had completed a series of divestitures to streamline operations, focus on convenience retailing, and pay back debt. Southland sold Chief Auto Parts, the snack foods division, the dairies group, Reddy Ice, Chemical/Food Labs, Tidel Systems, 1,000 convenience stores, and related real estate properties. Proceeds from the divestitures, as well as the monetization of royalties from the licensee in Japan, went to repay a portion of the $4 billion debt Southland had incurred through the leveraged buyout.

Southland may well have rebounded by the early 1990s were it not for competition from convenience stores operated by the major oil companies. Although these stores emphasized gasoline retailing rather than other merchandise, they did sell the primary products of convenience storessoft drinks, cigarettes, and beer. Their sheer number and financial strength changed the nature of the convenience retailing industry. Their effort was exacerbated by the decline in the U.S. economy that began in the late-1980s. Southland, along with a number of other convenience-store chains, had limited capital to invest in its store base due to heavy debt loads.

Under President and CEO Clark J. Matthews II, the company began to work on a plan to restructure its balance sheet. In October of 1990, Southland filed a bankruptcy plan of reorganization after securing preliminary approval from its bondholders. The company emerged from bankruptcy less than five months later. As part of the reorganization, Southland exchanged its old leveraged buyout bonds for approximately half of the principal amount of new bondswhich had substantially lower interest rates. In addition Southland sold 70 percent of its common stock to IYG Holding Company of Japan for $430 million. Ito-Yokado Co., Ltd, the most profitable retailer in Japan, owns 51 percent of IYG, and Seven-Eleven Japan Co., Ltd., the longtime 7-Eleven licensee in Japan, owns 49 percent.

In 1992 Southland completed additional financing, a $400 million commercial paper facility backed by Ito-Yokado. Also in 1992, Southland decided to leave the distribution and food processing business to focus on its core business, 7-Eleven. The company sold certain distribution centers and food processing facilities to McLane Co., Inc., a subsidiary of Arkansas-based Wal-Mart stores. Southland also signed a service agreement with McLane, the countrys largest convenience store distributor, to provide coast-to-coast distribution service to the companys 5,700 stores in the United States.

Matthews has capitalized on the companys nationally recognized 7-Eleven name and enhanced the quality, appearance, and service of the famous convenience store. In late 1991, Southland remodeled and remerchandised its 50 stores in Austin, Texas, to test its new physical standards, commissary food service program, and new merchandising process.

The new merchandising process, that deletes slow-moving items and introduces new products, had been refined and introduced to 7-Eleven stores across the country by the end of 1992. Due to the initial capital infusion by its majority owners in 1991, and their backing of the commercial paper facility established in 1992, Southland was able to make long-term capital investment plans for the first time in many years. The company plans to remodel 1,300 stores in selected markets in 1993 and hopes to upgrade its entire store by the end of 1996. Southland also continues to upgrade the quality and value of its fast foods because these have been identified as a good source of future profit growth.

Thus far Southlands new concepts have worked well. With the end of the recession in sight, the company is slowly returning to profitability. Market analysts have predicted an upsurge in fast food consumption and the rebound of the neighborhood convenience store, because of the growing popularity of 24-hour businesses. If convenience stores such as 7-Eleven can solve their biggest problemsa high turnover of labor and unfavorable image among women and older customersthey could well be on the road to a rapid recovery.

Principal Subsidiaries

Citgo Petroleum (50%).

Further Reading

Liles, Allen, Oh Thank Heaven! The Story of the Southland Corporation, Dallas, Texas, The Southland Corporation, December 1977; Annual Report: The Southland Corp., 1991; Bondholders Withdraw All Objections to Southland Plan (Bankruptcy Reorganization Plan), Los Angeles Times, January 24, 1991; Muzak Attack (7-Eleven Store in Thousand Oaks, California, Pipes in Classical Music to Discourage Loitering Youths and Criminal Activity), Los Angeles Times, November 17, 1991; Southland Chief Fires Top Aides to Cut Costs, Wall Street Journal, June 25, 1992; Miller, Karen Lowry, A New Roll of the Dice at 7-Eleven, Business Week, October 26, 1992.

updated by Sina Dubovoj

The Southland Corporation

views updated May 23 2018

The Southland Corporation

Post Office Box 719
2828 Haskell Avenue
Dallas, Texas 75221
U.S.A.
(214) 828-7011

Private Company
Incorporated:
1961
Employees: 50,724
Sales: $12.7 billion

In 1927 John Jefferson approached Joseph C. Thompson, one of five founding directors of the Dallas Southland Ice Company, with a new idea. He wanted to sell milk, eggs, and bread through his retail ice dock. You furnish the items, he suggested, and Ill pay the power bills. Thompson agreed, and together they established the first known convenience store.

The newly formed Southland Ice Company was comprised of four separate ice companies and operated eight ice plants and 21 retail ice stations. Today, the Southland Corporation is the nations largest operator and franchisor of convenience stores, with five distribution centers, six food-processing centers, and a 50% interest in the refining and distribution of Citgo Petroleum.

After a visit to Alaska in 1928, one Southland manager traveled home to Texas and planted a souvenir totem pole in front of his store. The pole attracted so much attention that the employee suggested placing one at every Southland-owned retail ice dock and naming the stores Totem Stores, since the consumers toted away their purchases.

Southland decided to go with the new name; it unified the companys diversified stores and provided a distinct identity, a key ingredient in the successful operation of numerous retail outlets. Joseph Thompson, secretary-treasurer of Southland Ice, unified the stores further by training staff with daily sales talks. He also chose a company uniform for ice station service men. Thompson recognized early on that consumers should receive the same quality and service at every store. During this time Southland also began to experiment with constructing and leasing gasoline stations at ten of its Dallas-area stores.

The Depression plunged Southland into bankruptcy in 1931. During a period of receivership and reorganization, Joseph Thompson was named president, a move which ensured continuity during the rocky period. The management team chosen during this time was especially strong, and led Southland for a number of years. W. W. Overton Jr., a Dallas banker, helped disentangle the young companys finances by organizing the purchase of all Southland bonds for seven cents on the dollar, which eventually put ownership of the company under the control of the board of directors.

Despite the financial confusion, profits from the Totem Stores continued to climb, and with the repeal of Prohibition in 1933, ice and beer sales surged.

Once it was on more stable footing, Southland began vertical integration with construction of Oak Farms Dairies in 1936, using public relations to market its new dairy products by offering a free movie for six of its milk-bottle caps. A crowd of 1,600 attended the Dallas theater sponsoring the event. By 1939 Southland operated 60 Totem Stores in the Dallas-Fort Worth area, triple the number operating when the company was founded 12 years earlier.

With the onset of World War II, demands for ice peaked; Southland became the chief supplier of ice for the construction and operation of Camp Hood, the United States Armys largest training camp. The dramatic increase in business prompted reorganization of the company. Southland bought City Ice Delivery, Ltd.; the acquisition included two modern ice plants, 20 retail stations, and property on Haskell Avenue, where the new company headquarters was sited. Southland became the largest ice operator in Dallas.

By 1945 Southland owned stores scattered over north-central Texas, operating from seven in the morning to 11 at night, seven days a week. The firm Tracey-Locke, commissioned to create a new name, chose 7-Eleven to emphasize the firms commitment to long operating hours to serve customers better. At this time Southland remodeled all 7-Eleven stores, doubling the amount of floor space at each retail outlet.

After the war, Americas pent-up consumer appetite surged. Refrigerators, however, were not yet readily available to the public. To meet demands for block ice, Southland bought Texas Public Utilities, which owned 20 ice plants, in 1947, making Southland the largest ice operator in Texas. In 1948, Joseph Thompsons oldest son, John P. Thompson, was named to the board of directors.

At a management meeting in Washington, D.C. in 1956, a blizzard blanketed the city. John Thompson noticed that in densely populated areas, people could walk to the stores even when the weather made driving impossible, and that 7-Elevens long operating hours and unusual stock could provide exactly what customers might need, from canned soup to tissues to aspirin. Southland began to focus on the traffic patterns around potential store sites, choosing high-volume corners whenever possible.

At the end of the 1950s, John Thompson, now vice president, began to introduce 7-Eleven stores outside of Texas, in Virginia, Maryland, and eastern Pennsylvania. In reaction to mass-migration to the suburbs, Southland opened more suburban stores. Southland also refined its marketing by studying customer traffic in its stores and eliminating products that moved slowly.

In 1961 Joseph Thompson named his son John as the second president of Southland. His son Jere W. Thompson also was elected vice president of sales. Upon the elder Thompsons death that year, the Dallas Morning News credited Thompson with transforming the ordinary corner ice house from an ice dispensary to a multi-million-dollar drive-in grocery enterprise. John Thompsons first goal as president was to propel Southland from $100 million in annual sales to $1 billion within ten years.

Southland, incorporated in 1961, moved quickly to national prominence. The unprecedented expansion began with dairy acquisitions, notably Midwest Dairy Products in 1962, with production plants and branches in Illinois, Arkansas, Louisiana, and Alabama. Purchasing continued through the 1960s and 1970s, as Southland bought existing convenience market chains in Arizona, New Jersey, Colorado, Illinois, Georgia, and Tennessee. In addition, Southland experimented with its first 24-hour store, in Las Vegas, and expanded to the East Coast and into Canada in 1969.

With the acquisition of 100 SpeeDee Marts in California in 1963, Southland was introduced to the concept of franchising, a system already in operation at the very successful SpeeDee Mart stores. The company developed two-week training sessions for prospective franchisees, which allowed greater decentralization of stores. By 1965, Southland had climbed to 49th in Fortunes top 50 merchandising firms.

In January, 1965, 1,519 7-Eleven stores were operating; by December, 1969 the number had exploded to 3,537. Through a new computer inventory system, 7-Eleven was able to pinpoint its strengths and discover that single purchase items were its best sellers. But with such growth, problems began to surface: due partly to the operation of 24-hour stores, high employee turnover and insufficient security systems drew management attention. The company committed itself to the 24-hour store nonetheless, and the number of 24-hour 7-Eleven stores rose from 817 in 1972 to 3,703 by the end of 1975.

Southland reached $1 billion in sales by 1971, and became a member of the New York Stock Exchange the following year. The first regional distribution center was opened in Florida in 1971; by 1977 several such centers were fully functioning and serving more than 3,000 7-Eleven stores. Jere Thompson, named president of Southland in 1973, continued Southlands American retail store expansion.

Southland began to use microwaves for fast-food sales and introduced self-service gasoline through its newly acquired Pak-a-Sak stores. In 1974, the five-thousandth 7-Eleven store opened in Dallas at the site of John Jeffersons original ice dock.

Penetration of the European market occurred with Southlands purchase of a 50% interest in Cavenham Ltd., a manufacturing corporation controlling 840 retail outlets in Great Britain. By early 1974, Southlands international operations included 50% interest in 1,096 United Kingdom outlets, 75 7-Eleven stores in Canada, and four Super-7 Stores in Mexico.

Negotiations for the introduction of 7-Eleven to Japan were completed in December, 1973, when Southland granted Ito-Yokado, one of Japans largest retailers, an area license. Like the franchise concept in the U.S., area licensing worked well in Japan because of its emphasis on the individual businessperson operating a store but able to take advantage of 7-Elevens name and established systems of management and accounting. By late 1978, 188 7-Eleven stores were open for business in Japan.

Also in 1978, Southland bought Chief Auto Parts, a California chain of 119 retail automobile-part stores. By 1986 Chief Auto Parts was the largest convenience retailer of automobile parts in the nation, operating 465 stores. Another Southland acquisition was Tidel Systems, a manufacturer of cash-dispensing systems and underground gasoline-tank-monitoring systems.

But Southlands most significant acquisition by far was the Citgo Petroleum Corporation, purchased in August, 1983. Southland hoped that the $780 million acquisition would provide a smooth supply of gasoline for its convenience stores. But because of a decrease in demand and a glut in capacity throughout the oil-refining industry, the Citgo purchase resulted in a pretax loss of $50 million for Southland. Profits in 1985 exceeded the previous years loss by $20 million, but nevertheless, Southland cut Citgos petroleum production in half, expecting Citgos Lake Charles, Louisiana refinery to be unprofitable. In September, 1986 Southland decided to sell a 50% interest in Citgo to a subsidiary of Petróleos de Venezuela, S.A.

In mid-1987 the Thompson brothers, spurred in part by the threat of a hostile takeover bid by Canadian raider Samuel Belzburg, initiated a leveraged buyout. The buyout, which involved the formation of a temporary holding company called JT Acquisitions, was completed on July 6, 1987.

By the end of 1988 Southland had completed a series of divestitures in order to streamline operations. Southland sold Chief Auto Parts, the snack foods division, the dairies group, Reddy Ice, Chemical/Food Labs, Tidel Systems, 1,000 convenience stores, and related real estate properties. Proceeds from the divestitures, as well as the transfer of royalties from licensees in Japan, went to repay a portion of the $4 billion debt Southland had incurred through the leveraged buyout.

The Southland Corporation, led by the sons of Joseph C. Thompson, entered the 1990s going back to the basics: minding the neighborhood store. As one of the leading retailers in the United States, Southlandstill the nations largest operator and franchisor of convenience storescommands a reputation its first president would be proud of.

Principal Subsidiary:

Citgo Petroleum (50%).

Further Reading:

Liles, Allen. Oh Thank Heaven! The Story of the Southland Corporation, Dallas, Texas, The Southland Corporation, December 1977.

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The Southland Corp

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