World War II had recently concluded which also meant the lifting of price controls and the end of food rationing. Times were changing for food retailers, especially smaller independent grocers who were now facing stiffer competition from an emerging group of larger self-service supermarkets.
With an assist from a sales rep from Del Monte Foods, eight independent grocers from Newark, NJ pooled their resources ($1,000 each) to purchase larger quantities of food that would increase their buying power and allow them to offer their customers lower prices.
From that seemingly unspectacular event in late 1946, a new grocery cooperative was born. It was Louis Weiss, Al and Sam Aidekman, Abe Kesselman, Leo Eisenberg and Dave Fern, a portmanteau of the founders’ names from where the name Wakefern emerged.
Dating back to the early 1900s, wholesale grocery co-ops for years were the most common form of wholesale food distribution. Even when I began my career writing about the food business in 1973, there were more than a dozen such entities in the Mid-Atlantic and Northeast alone.
But over the last 30 years the number of viable co-ops nationally has dwindled to a number that would barely fill up the fingers of two hands. As the business evolved, voluntary wholesale grocers seemingly provided independent retailers with more flexibility and a better opportunity to compete with not only supermarkets, but with a whole class of newer channels that have made the retail landscape more challenging for all food merchants. And let’s face it – the number of independent retailers as a whole has diminished significantly in the past three decades.
Somehow the 50 member-owners of Wakefern, who operate under banners such as ShopRite, Price Rite Marketplace, the Fresh Grocer, Gourmet Garage, Dearborn Market and Fairway Market, missed the news that grocery co-ops were headed toward extinction.
In fact, from that small cluster of Newark merchants who crafted an idea they hoped would help them merely survive, one of the industry’s leading lights has continued its pathway to excellence 75 years later.
To understand Wakefern is a complex exercise. I’ve tracked the company for nearly 50 years and there are still many intangibles that make the whole enterprise work but are difficult to clearly explain. The visceral assets are easy to define: beautiful stores in great locations managed by local owners; a continuum of strong leadership, both from inside Wakefern and also from a long line of talented chief executive officers, who are always represented by a member-owner; a rich history of philanthropy and community giving; and a progressive approach to technology and analytics.
The intangibles are harder to grasp. Words like grit, flexibility, tenacity, entrepreneurialism, tireless work ethic would all apply, but many other retailers also possess those admirable traits.
At Wakefern it seems like the number on their Richter Scale is a bit higher.
In the early 1980s, I got to know the late Joe Saker, founder of what is now Saker ShopRites, Inc., Wakefern’s largest member (which is now capably run by Joe’s son Richard and his children). It was at a meeting at Saint Joseph’s University in Philadelphia for the Academy of Food Marketing (an institution that Joe helped shape) that I asked Joe to explain the “secret sauce” that makes Wakefern successful.
“I really can’t define it,” he asserted. “But I can tell you that we’re a bunch of strong-willed individuals who are passionate about our businesses and our customers. We fight like hell with each other because we care deeply, but when the whistle blows and the game starts, we’re all on the same page.”
Or another time in the early 2000s, when Giant Food (Landover, MD) attempted to expand into South Jersey. It was at an industry event that Giant CEO, the late Pete Manos, ran into George Zallie Sr., who arguably was the catalyst that helped Wakefern expand into South Jersey and Philadelphia. Over a cocktail, my partner Dick Bestany and I introduced George to Pete, who was very candid in his disappointment with Giant’s sales in its new marketing area. Always the diplomat, George Zallie told Pete Manos how beautiful his stores were and how impressed he was by Giant’s dominance in the Baltimore-Washington market. “So, what do you think we’re doing wrong?” Pete asked. “Honestly, your stores are too clean,” George responded. “Our customers certainly don’t want dirty stores, but they like stores that feel as though they’ve been ‘shopped in.’ Your stores look too sterile and sanitary.” George’s polite but direct message was clear: know your customer.
With nearly $18 billion in retail sales, Wakefern’s stores continue to dominate two of the country’s largest marketing areas – metro New York (number one) and Philadelphia (number four). Moreover, there is no other wholesale/retail supermarket organization in the entire industry that can claim as many stores doing more than $1 million a week as a percentage of their base as Wakefern. And the current top leadership team of COO Joe Sheridan, EVP Chris Lane and CEO Joe Colalillo (a great merchant in his own right) understand how to keep the recipe for the “special sauce” working. They are backed by thousands of dedicated associates both at the wholesale level and in the stores.
Even with a brilliant track record for a long sustained period, Wakefern has challenges both externally and from inside the company.
Externally, the landscape continues to evolve rapidly and as the market leader in two huge MSAs, every competitor wants a piece of the top dog. Additionally, Wakefern is fighting an uphill battle against other large entities with deeper pockets – specifically Amazon, Walmart and Ahold Delhaize – in the e-commerce race.
Internally, the Keasbey, NJ enterprise has recently experienced a number of significant retirements. One of Wakefern’s greatest strengths has always been the loyalty and continuity of its associates. As they age and ultimately leave the company, the new hires have to be formally trained with the hope that they, too, can learn the recipe for the “special sauce.” Then there’s the perpetuation of store ownership, an issue that’s always been a challenge for any family-owned business. However, in the grocery business, succession planning has become more difficult over the past decade as the business has become more competitive and diversified. It’s not logical to expect the entire next generation of Wakefern family members to step into their businesses like their fathers or uncles did in previous generations. Expect some ownership consolidation.
Still, this is a fourth generation business that is unbelievably successful; the odds of any family-owned enterprise even surviving for 75 years are less than 5 percent.
And to think that a small group of struggling independent grocers from Northern New Jersey developed into one of the most unique and successful companies in the grocery business is a remarkable story by itself.
The member-owners and associates deserve all the accolades because they’ve earned them.
‘Round the Trade
Gotta give credit where it’s due – the recent Ahold Delhaize Investor Day was one of the best presentations I’ve seen in quite a while. The meeting was held remotely from both Zaandam and multiple U.S. locations. A lot of useful information was disseminated and the production itself was first-rate. While the array of AD executives who spoke all provided the audience with significant insight, I was particularly impressed by Wouter Kouk, the company’s CEO of Europe and Indonesia (a parallel role to Kevin Holt’s in the USA). The 55-year old Dutchman impressed me with his intelligence and stage presence, delivering his presentation with a certain flair that stood out from all the other speakers. If you were to handicap who might replace current AD CEO Frans Muller, who is 61, Kouk would be my early choice.
And the nation’s largest mass merchandisers – Walmart and Target – issued their Q3 earnings and sales reports and both were excellent. For the period ended October 31, comp store sales for the Behemoth in the U.S skyrocketed 9.2 percent (ex-fuel) and grew even more at its sister Sam’s Club unit, where comps (ex-fuel) increased 13.9 percent. And while profits were not quite as healthy as a year ago (when the thrall of the pandemic was still powerful) Walmart’s net income was still a very healthy $3.11 billion. At rival Tar-Jay, overall comp store revenue (physical stores and e-commerce) increased an impressive 12.7 percent. And its earnings, when compared to Walmart, were even better. The Minneapolis-based mass merchant posted Q3 net income of $1.49 billion compared to last year’s third quarter profit of $1.01 billion. We all know the headwinds are coming, but in the meantime the vast majority of retailers are still continuing to post strong numbers even after the peak of the pandemic.
Local Notes
Remember the story last month about how Amazon workers at its four Staten Island distribution centers formed a coalition and sought to hold an election to unionize? At the time, the group known as the Amazon Labor Union (ALU), filed a petition with the NLRB seeking to organize “Godzilla’s” 5,500 associates who work in those facilities. At the time, the ALU said it had more than 2,000 signed authorization cards (more than the 30 percent required) and filed to schedule an election. On November 12, the NLRB confirmed that the ALU withdrew its petition. The group, led by Christian Smalls, a former Staten Island warehouse associate, said that his fledgling organization plans to refile with the NLRB next spring. As one of its recruiting tools, the coalition is trying to attract potential voters with the slogan “Free Weed and Food From ALU.” If you’re watching a Cheech & Chong movie, that might be a real game changer, but maybe the ALU needs to hire a professional marketing company. You wanna bet a vote never happens? As I’ve said previously, whether it’s Staten Island, Bessemer, AL or Timbuktu, organizing a company with the resources and guile that Amazon possesses is nearly an impossible task.
Some notes from Wakefern’s annual shareholder’s meeting which was held last month both virtually and (for a smaller group) at the Marriott in Whippany, NJ. Retail sales for the year dipped slightly from $18.3 billion to $17.8 billion (not surprising because of the cycling of strong pandemic-related sales last year). Additionally, Dewey Cannella, the company’s recently retired VP-labor relations was given Wakefern’s “Chairman’s Award” for his more than 30 years of service to the company. After the meeting, we talked to EVP Chris Lane on a variety of topics related to the co-op. The 18-year Wakefern veteran feels confident that his company is taking the proper steps to ensure future growth. “Over the last several years we’ve become a much more strategic company. Our ability to improve our long-term planning has helped us become more agile and nimble and allowed us to make better long-term investments, particularly in technology,” Lane noted. He added that the improved flexibility was of particular importance to a company like Wakefern which is governed by 50 independent families operating multiple banners that together amass nearly $18 billion in annual sales. One key priority has been Wakefern’s focus on e-commerce. Lane noted that the Keasbey, NJ-based distributor has been involved in some level of e-commerce for about 20 years but added that the game is changing rapidly both from a consumer expectation standpoint and as a competitive challenge. “We’re certainly making progress with our e-commerce initiatives. We surpassed $1 billion in digital sales last year and continue to invest heavily in micro-fulfillment centers, robotics and pick-up pods,” Lane asserted. “But we’re not Walmart and we’re not Amazon; our approach will be more pragmatic. For a company of our size, making the right investment is vital.” And while Wakefern’s e-commerce priorities may differ from the larger global retailers, Lane sees several advantages where Wakefern can use its unique structure to capture more revenue from its e-commerce platform. “Because our stores produce high-volume sales (more than $1 million weekly on average) and we’re located in many densely populated areas, it’s not always possible to build a micro-fulfillment center. But I consider that a good problem – starting off with a significant volume base coupled with strong customer loyalty in stores run by community-minded members. However, we do need to continue to move forward with our e-commerce growth plan – it’s an important part of our future.” A related area that Lane believes will help Wakefern become more efficient, both in e-commerce and at its more than 360 physical stores, is the integration of a new supply chain system. For many years, the wholesaler had deployed its own internally developed program. Last year, the company made a major decision and converted to an SAP data-driven system. The three-year conversion plan will be completed next year and will allow Wakefern to optimize its inventory and improve its forecasting. As with most merchants, the changes that retailers made during the onset of COVID-19 were substantial and continue today to some degree. Lane shared his views of how Wakefern managed this unprecedented event. “Our first concern was protecting our people while not losing sight that our basic job is to serve our communities. Those two pieces are integrally linked,” Lane explained. “As I said earlier, one of the real strengths of Wakefern is the unique bond between our members and our staff. Those connections are an invaluable component of our success.” As for the current challenges with labor, wages and overall supply chain, Lane feels that those difficulties will abate, although it might take until the middle of next year to return to normalcy. “Certainly, there are labor shortages affecting the entire industry. And we’re all going through supply chain problems,” Lane said. “However, as a company that operates with local ownership, I feel our nimbleness is an advantage. The retail business is still largely about people and being a ‘people organization’ I believe is our greatest strength.” And during the past month, two new ShopRite stores have opened, both replacement units. The Inserra family opened its largest store to date, an 80,000 square foot unit in Wayne Hills, NJ which replaced an older Inserra unit nearby. In Matamoras, PA, cute little Delaware River border town, ShopRite Supermarkets (SRS), the corporately-owned store wing of Wakefern, cut the ribbon on a 73,000 square foot supermarket. That store replaced another ShopRite store in Montague, NJ about four miles away.
And as noted earlier, it was an exceptionally busy month for The Giant Company. On November 8, it cut the ribbon on its new state-of-the are e-commerce fulfillment center on Island Avenue in Philly. Four days later it opened a new store on Cottman Avenue in the city and next month the Carlisle, PA-based ADUSA brand will debut new stores on Columbus Boulevard in Center City; a new replacement unit in Doylestown, PA; and its fourth Heirloom Market on 801 Market Street, also in Center City.