Supermarket News 2013 HALL OF FAME

The Lempert Report
January 15, 2013

This year it is all about frozen, customer 1st and concrete floors.

Each year Supermarket News elects food visionaries to it’s Hall of Fame. This year it is all about frozen, customer 1st and concrete floors. The $60 billion frozen food industry owes its success to the creative genius of Clarence Birdseye whose observations of Inuit ice fishing led to his development of a viable flash-freezing technology in 1924. It took years before his invention gained national scale, but by the time he died in 1956 frozen foods had become ubiquitous in United States food retailing. David Dillon took over as chief executive officer of Kroger Co. in 2003 and has led a transformation of the company that sees itself as more than just a supermarket operator. The Customer 1st strategy that he deployed has driven gains in sales and market share that have made it a model for others in the industry. Sol Price the founder of the modern warehouse-club format, created both the FedMart and Price Club chains. His approach was to start with the cost of a product and mark it up as little as possible so the gross margin covered the selling cost and left a small profit. The editors of Supermarket News explain why these 3 men have influenced our industry in such a meaningful way. For the full reports, just go to MARK HAMSTRA writes how one man essentially did create the frozen food category, which now accounts for about $60 billion in annual retail sales in the U.S.: Clarence Birdseye, whose name still adorns a brand of frozen vegetables. Birdseye’s key discovery — that flash-freezing could preserve the taste and integrity of fresh foods — and his invention of processes to make that discovery work on a large scale, laying the groundwork for the modern frozen food industry, earned him a place in the SN Hall of Fame. Birdseye was born in Brooklyn, N.Y., in 1886, and his entrepreneurial drive became evident at a young age, according to a biography of him that was published earlier this year. Among his early exploits was an effort at teaching taxidermy at the age of 9, and another venture selling frogs to the frog-eating reptiles at zoos. Birdseye would eventually patent some 200 inventions, including some related to frozen food retailing and others more distantly related, including a new type of whale harpoon. He died in 1956, having transformed frozen food from what Hamstra calls an unappealing mush into a multibillion-dollar industry. JON SPRINGER writes how it has been a decade of radical change — most of it for the better — since David Dillon took the reins of Kroger Co. in 2003. His tenure as chief executive officer has seen the largest U.S. supermarket chain drive a widening gap between itself and its nearest competitors while turning in consistent sales growth that is the envy of the industry. The changes reflect not Dillon’s desire to be an agent of change, but rather his willingness and ability to lead change when that is what Kroger customers require. His role of steering Kroger’s “Customer 1st” strategy, helping Kroger to establish a blueprint for a successful 21st century food retailer, has earned him recognition in SN’s Hall of Fame. Dave Dillon is a fourth-generation supermarket operator. His great-grandfather, Jonathan S. Dillon, founded the first Dillon Food store in Hutchinson, Kan., in 1913, and his grandfather and father helped to build that company into a publicly traded chain. By the time David Dillon joined the company in the 1970s, Dillon was large, diverse and well regarded for its people. When Kroger acquired Dillon Cos. in 1983, Kroger also acquired its next two CEOs: Joe Pichler, who served from 1990 to 2003, and Dillon. Elliot Zweibach explains how Sol Price made his mark on retailing by lowering the selling price of goods. It was Price who led the way for the founders of Target, Kmart and a guy named Sam down in Bentonville, Ark. Price was the inventor of the warehouse club store. In addition, he was among the first retailers to add an assortment of low-margin foods to a mix of low-margin general merchandise under the same roof; to see the potential for selling food in bulk sizes; and to offer on-site gas stations, in-store pharmacies and in-store optical departments. Describing his approach to business in a 2003 interview with Fortune Magazine, Price said business broke down into three categories — personnel, product and facilities — “and the same six rules applied to them all: having the right kind in the right place at the right time in the right quantity in the right condition at the right price.” Price said he never allowed employees to use the word “discount” to describe his business model, first Fedmart, then Price Club stores. When rival retailers sought to challenge FedMart on some of the low prices it featured, Price decided the company had to be “super careful about what we did. The company never used a superlative in the printed material. It did not use comparative pricing. FedMart’s whole approach to the way we marketed to people was totally different than the conventional approach. He said that “[We] had a duty to be very, very honest and fair with [members] and so we avoided sales and advertising. We said in effect the best advertising is by our members — the unsolicited testimonial of the satisfied customer.” Price expanded FedMart from California to Arizona, New Mexico and Texas. When FedMart opened a store in San Antonio in 1957, it ran up against local segregation laws that required separate snack bar seating for African Americans. Price’s solution was to eliminate seating in the snack bar altogether, enabling customers to be served equally. In 1976 after being fired from the firm that bought control of Fedmart from him the previous year, Price started Price Club and for years refused to accept credit cards — because reportedly Price did not like the idea of seeing his customers go into debt. In 1993 he Merged his 100 locations doing $8 billion in sales with Costco.