Callison, Lynn

English

Research Papers in Economics

Perspective on the “Supermarket” Revolution
by
Lynn Callison
Executive Director
Rocky Mountain Food Dealers Association
Lakewood, CO
The subject of this panel today is inter-
esting, “Consumers in Search of Value . . .
Reflections on the Value Added by the
Changes in Food Distribution.” ~t is especially
interesting when you look at the whole “super-
market” revolution from my perspective.
As executive director of the Rocky Moun-
tain Food Dealers Association, I have spent
the past ten years reading, going to seminars
and working in the field with retail grocers.
oar membership includes the whole gambit--
the independent operator, the chain, the ware-
house store, the “Mom & Pop” operation, and
the convenience store chain. And let me tell
you, it is an exciting industry and those who
are involved in the food distribution industry
can be proud. The American food distribution
industry is a model for the world --a “showcase
for democracy.*
Today, consumers give supermarkets high
marks, including the highest rating for quality
service in two 1986 polls by the George Gallup
organization. Asked to rate various businesses
on a scale of one to ten, 58 percent gave
supermarkets a high quality rating, de~lned as
eight or more. This is the surest sign of
significant change since the industry’s turbu-
lent days in the 1930s, when its standing with
consumers was low.
But maybe I’m getting ahead of myself,
Let me read to you the preface of a new
book published by Food Marketing Institute in
cooperation with Beatrice Companies, Inc.,
entitled, America the Bountiful, How the
Supermarket Came to Main Street,” which I
believe gives a broad, but most concise over-
view of the value added by changes in the
food distribution industry that I have found,
Written in dialogue form by John Mugar, the
preface reads
Never did I dream in 1925 while
bagging potatoes from 100-pound burlap
sacks in my uncle’s Little Star Market
in Watertown, Massachusetts, that to-
day’s supermarkets would evolve from
such beginnings.
At that time, most communities
had the following types of food retail-
ing.
- A national chain like A & P,
together with a regional chain such as
First National Stores. They were small
stores, selling canned goods, dairy prod-
ucts, bulk cookies, bread and a few
hardy fruits and vegetables in season.
- A meat market that also sold a
few canned goods, a small variety of
produce and bread.
- A typical corner fruit store with
a stem of bananas hanging in the win-
dow,
- A spa with its marble-topped
soda fountain and glass canaly jars.
February 87/page 36 Journal of Food Distribution Research- A horse-and-wagon peddler hawk-
ing his specialty--either bakery products,
fruits and vegetables, fish or ice. And
the milk wagon was a common sight
everywhere.
Many items came in bulk form;
potatoes in barrels and later in 100-
pound sacks, sugar in 100-pound cloth
sacks, molasses and sauerkraut in bar-
rels, bacon in slabs, and butter in tubs.
During the 1930-1940 era, the aver-
age grocery store, though still small,
doubled in size--carrying an expanded
variety of canned goods, meats, fruits
and vegetables, and bakery products.
Some independents, desiring to offer
more services than the chains, expanded
their credit and delivery business.
In the business world, the grocer
was considered insignificant. In 1935, I
wrote a college paper on the grocery
business. Wanting to get all the infor-
mation possible, I went to the Harvard
Business School library. To my amaze-
ment, the only available published
material was Chain Store Age magazine.
The professor of marketing dealt only
with department stores. The grocery
business had not yet attracted the
attention of academia.
In the late 30’s, self-service groc-
ery departments were springing up
around the country. Self-service became
the magic idea that caught the imagina-
tion of many grocers. What helped its
initial impetus was the National Associa-
tion of Food Chains and the newly-
formed Super Market Institute. To-
gether, they became the catalyst that
brought us all together to learn more
about the self-service business.
It was here that we met the
Cookes of Penn Fruit, the Cohens of
Giant Food, the Weingartens of Houston,
Wayne Brown of Big Bear Stores, Joe
Bettendorf from St. Louis, Fred Meyer
from Portland, Claude Edwards from
Alpha Beta, Syl Goldman from Oklahoma,
the Steinbergs from Montreal, George
Jenkins of Publix, A. D. Davis of Winn-
Dixie, John Peachey of Loblaw, and
Frank Lunding from Jewel. We all
learned so much from each other. We
were thirsting for knowledge and know-
how to better serve consumers and de-
velop the best stores possible.
The other association that contri-
buted much was the Grocery Manufac-
turers of America. Our industry was
fortunate in having the enlightened
leadership with men like Jack Logan of
the National Association of Food Chains
and Paul Willis of the Grocery Manu-
facturers of America. They were per-
sistent, capable men with vision. It
was at their seminars and conventions
that retailers, wholesalers, suppliers and
manufacturers met and soon realized
that we all had the same customers --
the consumer. The manufacturers and
suppliers listened to our needs. Out of
this process evolved our present stores.
The results have been remarkable.
The American consumer’s food cost as a
percentage of wages is the lowest in
the world. More than anything else,
our supermarkets say to the world, “This
is America.”
If historians thousands of years
from now wanted to know about our
culture, they would find the answers in
reading about our present supermarkets.
Before Iookjng into the future, I
have one “what-fi What if the politi-
cians of the ’30s had been successful in
their anti-chain legislation, which was
supposed to protect the little grocer?
What would our grocery stores be like
today? Certainly not what we enjoy
today--in conveniences, service and the
most bountiful supply of food in the
world!
In the future, my wish is that the
new leaders in our industry derive as
much excitement and satisfaction in
their daily work as we did.
Journal of Food Distribution Research February 87/page 37I hope that you agree with me, that this
brief overview capsulize the history of the
food distribution industry and helps you envi-
sion the dramatic changes between the grocery
store of not-too-long-ago and today,
The supermarket today is viewed best as
a culmination of many changes in the food
distribution industry that now delivers food to
the tables of America in routine fashion.
Chains provide the efficient distribution net-
work; independents and wholesalers, the mer-
chandising prowess; manufacturers, mass pro-
duction and packaging. But the elements did
not come together easily. They developed
piecemeal and, in many cases, were resisted
fiercely by those who felt at a competitive
disadvantage.
The revolution of the thirties stirred
enmity even within the food industry itself,
pitting chains against independents, manufac-
turers against wholesalers, farmers against
manufacturers. Charges and counter-charges
poured into the news media, the courts, state
legislatures, Congress, the Federal Trade
Commission, the U.S. Department of Justice
and even into the White House.
The roles of the National Association of
Food Chains and Grocery Manufacturers of
America were pivotal in ending the chain store
revolution of the thirties. Since many of the
changes sparked contentious public issues, the
associations became central participants in the
debates over government policies, regulations
and laws to resolve the issues. These organ-
izations orchestrated industry positions before
government agencies, the news media and
many special interests.
They helped resolve issues by bringing
together opposing parties and encouraging
constructive discussion. In doing so, they
inaugurated an era of constructive industry
relations among food executives.
This cooperative approach became the
foundation for such stunning industry achieve-
ments as the Universal Product Code, scanning
and the Uniform Communications Standard,
which enables computer-to-computer communi-
cation between food suppliers and distributors,
The industry also developed a universal com-
puter model for fimncial analysis- -the Unified
Direct Product Profit (DPP) method. Other
cooperative initiatives improved the industry
efficiency with standard pallet sizes, invoices,
order forms and trade practices.
The retail food distribution industry is
as competitive today as ever. We are still
undergoing a revolution to a degree at the
retail level today. Or should I say, we are
continuing to evolve. Smaller independents
are finding that they can meet consumer de-
mands as well as, if not better than, the
chains. New formats ranging from the most
barren of services and product, a box store,
to the newest craze, the niche marketer. The
niche marketer specializes in whatever he
feels the consumer wants in the area he opens
his business.
The warehouse store, the upscale store,
the natural store--ail are examples of a mar-
keter meeting the needs of a particular seg-
ment of the population. These marketers are
determining what value is to today’s consumer.
And the one thing they are finding is that
value means different things to different
people and there is plenty of room for every-
body in providing that value. With the forums
that the associations have provided, there
exists the continuing opportunity for retailers
and other distributors to sit down to learn
and share with industry people. This learning
and sharing is continuing to refine the re-
tailer’s ability to provide real value to the
customer.
we most important thing that the
associations did was to take a broader view
of events and issues, embracing the farmer
and the ultimate consumers--the complete
chain of distribution from the field to the
warehouse -to the supermarket to the dinner
table.
They worked especially hard to improve
relations with the farm community. The
National Association of Food Chains won many
friends in agriculture by initiating a series of
more than 400 programs to alleviate serious
product surpluses. Today, some industry lead-
ers believe that similar programs could allevi-
February 87/page 38 Journal of Food Distribution Researchate current farm surpluses far better than
price-support and paid-diversion schemes--and
at a fraction of the cost to taxpayers.
The value that the consumer is receiving
today is a result of food industry politics--
not politics in the narrow sense, but in the
broader one: relations among consumers, in-
dustry and government.
Today we are facing another big question
that must be answered if this trend is to
continue. You, who are interested in this
industry, who believe that we have provided
consumers with value, must make a big deci-
sion in the near future. The chief of the
Federal Trade Commission has made statements
that the Robinson-Patman Act, that act that
forbids price fixing, should be abolished, and
that all of the nation’s anti-trust laws should
be scrutinized to determine whether we are
stifling the further development of the free
enterprise system.
Journal of Food Distribution Research
Whether we are or are not remains a big
question. Associations will again play an im-
portant role in answering the question. What
they do will determine the future of this
amazing food distribution industry. Involve-
ment in that process is critical because our
ability to provide value to the consumer de-
pends on such political realities.
February 87/page 39February87/page 40 Journal of Food Distribution Research

PERSPECTIVE ON THE "SUPERMARKET" REVOLUTION

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