Affiliated Foods Inc. History

Address:
1401 Framers Lane
Amarillo, Texas 79118
U.S.A.

Telephone: (806) 372-3851
Toll Free: 800-234-3661
Fax: (806) 372-3647

Website:
Cooperative
Incorporated: 1968
Employees: 1,000
Sales: $854 million (2002)
NAIC: 42221 Drugs and Druggists' Sundries Wholesalers; 42241 General Line Grocery Wholesalers; 42243 Dairy Product (Except Dried or Canned) Wholesalers; 42247 Meat and Meat Product Wholesalers; 42248 Fresh Fruit and Vegetable Wholesalers

Company Perspectives:

Affiliated Foods meets the needs of grocery stores and restaurants in Texas, Oklahoma, Kansas, New Mexico, Colorado, Arizona, and Wyoming. We've been supplying only the freshest produce, meats, bread, and dairy products for over 50 years. With 700 member stores as part of our family, we're committed to bringing quality service and goods to the Southwest.

Key Dates:

1946:
Panhandle Associated Grocers is organized in Amarillo, Texas.
1960:
The company moves to its South Washington location in Amarillo.
1968:
Panhandle is merged with South Plains Associated Grocers, Inc. of Lubbock, Texas to form Affiliated Foods Inc.
1977:
Affiliated begins provisioning food service operators.
1996:
Plains Dairy is acquired.
1998:
Affiliated purchases Tri-State Baking.

Company History:

Affiliated Foods Inc., headquartered in Amarillo, Texas, is a grocers' cooperative provisioning over 700 independent, member-owned stores in seven states: Arizona, Colorado, Kansas, New Mexico, Oklahoma, Texas, and Wyoming. The cooperative receives and distributes over two million pounds of groceries daily. It owns and operates the Plains Dairy and has a "sister company," the Tri-State Baking Co., located next door that shares board members with Affiliated. Respectively, the bakery and dairy produce over five million loaves of bread per year and about 60,000 gallons of milk per day. The dairy also bottles water, juice, and fruit beverages. In addition, the co-op owns an interest in Western Family Foods, which produces private label goods under the Western Family and Shurfine brand names. Besides providing its member-owned retail stores with both foods and non-food items, the co-op has helped them in other ways, notably in implementing computer-based accounting and stock-control systems. In addition to provisioning its member stores, Affiliated Foods also operates a food service division that conducts business with over 1200 vendors, including restaurants, kitchens, and cafeterias at hospitals and other institutions.

Becoming a Major Regional Cooperative: 1946-84

Although it was not until 1968 that Affiliated Foods came into existence through the key merger of South Plains Associated Grocers, Inc. and the Panhandle Associated Grocers, Inc., its origins extend back to the boom period following World War II with the founding of the latter organization. Panhandle started out in Amarillo, Texas, in 1946, housed in a 4,000-square-foot building close to the downtown area of that small but rapidly growing city. It was created by a group of charter members of independent grocers in the area who wanted to establish a centralized cooperative that could purchase and distribute food products from a single distribution point or warehouse using its own fleet of trucks. Growth was slow at first, but by 1960 Panhandle had moved its operation to the site that it and then Affiliated would occupy for the rest of the century. By that time, the impact of national retail chains was beginning to hit independent grocers fairly hard, and increasing numbers signed on with Panhandle to survive.

Affiliated Foods officially came into existence on November 1, 1968, when the boards of South Plains Associated Grocers and the Panhandle Associated Grocers, Inc. merged to form the new company. The merger proved to be a fortuitous step, one allowing for steady growth and a widening market range.

Gradually, the cooperative took on members beyond its epicenter in Amarillo, moving into Colorado, Kansas, and New Mexico. In addition, in 1977, it added food-service supply to its business, that is, the direct sale of foodstuffs to restaurants and cafeterias. Thereafter, Affiliated enjoyed substantial growth in that segment every year.

The Cooper Era Begins and Affiliated Updates Its Operations: 1985-93

In 1985, Benny Cooper became Affiliated's president. Cooper, from McLean, in the Texas Panhandle, had grown up in the grocery business. Members of his family owned and operated stores both in Texas and New Mexico, and his father and one of his uncles were charter members of the cooperative back in 1946. For years he lived in Canyon, Texas, where he first worked at his uncle's grocery store and eventually bought his uncle out. In 1979, while on Affiliated's board of directors, he was invited to join the company, and in 1983, two years before being elected president, he was named the company's general manager.

During the 1990s, a good bit of Affiliated's focus was on adapting to rapidly changing technologies. Although Affiliated had installed its first computer in 1963, by 1990 its system was badly overloaded, and its response time in managing the company's distribution needs had become badly outmoded and inefficient. To remedy the situation, Affiliated began automating its warehouse operations. In 1991, it installed a high power IBM computer using a full-function software package developed by BACG/Marwood Distribution Systems. At that stage, Affiliated, with an annual revenue of about $450 million, was servicing over 600 member stores and 2,500 institutional accounts from its single 700,000-square-foot, full-line distribution warehouse and center. The new program enhanced the company's limited automation technology, which, until that time, had been largely limited to placing orders and picking documents. The new software computerized the receiving, storage, and letdown functions, and it gave notice that Affiliated was not going to fall victim to the enhanced efficiency of its competitors by a failure to adapt to changing technologies.

Affiliated Expands Merchandising and Ventures into Food Production: 1994-97

Change accelerated more quickly through the decade, prompting Cooper, in 1997, to note that over the previous five years the company had experienced more changes and a greater need to incorporate technological advances than it faced in the previous 40 plus years of its development.

In roughly that same five-year period, from 1993 through 1997, Affiliated found it necessary to step up its non-food sales in order to compete more successfully with the growing number of alternative format stores in its market area. In 1994, the company had set a goal of boosting its non-food sales by one percent at some of the 300 full-fledged supermarkets it was then servicing. To accommodate new non-food items, Affiliated's retailers expanded some of their departments, increasing both their size and their variety. They also undertook some in-store promotional measures to increase the sale of non-food items. By April 1994, about 60 retailers had adopted Affiliated's non-food merchandising program. The stores involved reported that their sales had gone up from .05 percent to 1 percent.

While expanding its non-food merchandising program, through demographic analyses, Affiliated gave careful consideration to the regional demands of its member stores in order to provision them with items that their particular customers needed or wanted. This resulted in a different product mix for stores in, say, Colorado as opposed to those in south Texas or New Mexico. For example, in Colorado it proved more appropriate to stock plastic snow shovels than in Texas, where metal shovels were more serviceable because winter was more likely to produce ice than the type of deep snow covering the Colorado landscape.

By the end of 1997, Affiliated was receiving and delivering about two million pounds of groceries each day. It had 210 stockholding members, owners, and operators of about 650 stores. These, located for the most part in West Texas, New Mexico, and parts of Colorado, Kansas, and Oklahoma, were all within about a 500-mile radius of Affiliated's distribution center. From its single warehouse and distribution facility, just south of Amarillo, Affiliated ran about 180 trucks and 200 trailers round the clock and covered the company's entire trade area.

Affiliated had also expanded its facility from 700,000 to 750,000 square feet, and it was undertaking another 22,000-square-foot increase to its dry-grocery warehouse at its center. In addition, the company maintained its own motor pool facility to service its fleet of trucks. Altogether, Affiliated had over 1,000 employees. With its improving stocking, inventory, and ordering systems, the company was able to establish a 24-hour turnaround schedule for any member store in its network, and it was working on a new buying and networking system designed to make it operate in a more efficient manner while providing its member stores with greater product information than had been previously available to them.

It was also during the 1990s that Affiliated Foods undertook expansion into the production end of the grocery business. It took one important step when it acquired the Plains Dairy, a business that enjoyed both a local habitation and an established name. Lindsay Nunn, a prominent Amarillo citizen, started up the dairy in 1934 and brought in A.F. Mason, later Amarillo's mayor, to manage it. The pair sold it in 1955 to National Dairy, which marketed milk under the Sealtest name and was a division of Kraft Foods. Ten years later, National sold the dairy to L.B. Parker, who owned it for 30 years before selling it to Affiliated Foods in 1996.

Affiliated's Growth Continues: 1998-2000

By 1998, Plains was the last commercial dairy left in town. Servicing parts of West Texas, most of New Mexico, as well as parts of Oklahoma, Kansas, and Colorado, the dairy was producing 60,000 gallon of milk a day. The dairy obtained most of its milk from large dairy farms in New Mexico, but some of it came from Texas farms. In any case, all of it was brought into the Plains operation by the tanker load, and about 70 percent of the goods it processed were sold to Affiliated, its parent, which marketed milk and milk products under its own brand, "Frosty Acres." The dairy also sold milk and milk products to other businesses in the Amarillo marketing area. Dub Garlington, Plains Dairy's president, believed that the company's purchase by Affiliated would lead to an expansion of the dairy, both in its size and product line. It had already begun producing bottled water under the Culligan name as well as fruit drink items; it had also become a distributor of Blue Bunny Ice Cream. Fur- thermore, Garlington had anticipated that the dairy would quickly package its milk in a wider range of container sizes and types, including single-serving plastic bottles suited to the needs of some of Affiliated's vendors. Over the next few years, Affiliated Foods would promote the dairy's "Snack Attack Line" of beverages and add new items, including tea bag-brewed Red Diamond Tea bottled in gallon and pint containers.

In that same year, 1998, Affiliated took another important step into the food production business when it acquired the Tri-State Baking Company, a "sister company" which, like the Plains Dairy, had a well-established place in Amarillo and had become the only operating commercial bakery in that city. Founded in the 1950s, the bakery sold bread and other baked goods under the locally familiar "TenderCrust" and "Always Fresh" labels. Using both its own fleet of tractor-trailers as well as trucks from Affiliated Foods' fleet, the company distributed its Frontier line of baked goods, which, in addition to breads, included buns, rolls, coneys, cakes, tortillas, and cookies. In 2000, the bakery moved six million loaves of bread into the marketplace.

By the end of the century, Affiliated Foods was venturing into the e-commerce world with its characteristic deliberation. In 2000, for example, it entered an agreement with Networld Exchange, Inc., a business-to-business e-commerce service for food-service and hospitality providers. Affiliated wanted an advanced but economical Web-based system capable of providing immediate product and pricing information to its 1,200 plus food-service clients, one that could provide easy-to-access and accurate information for its customers. Convinced that Networld offered what it needed, Affiliated began steps to place 30,000 products online. Then, in order to improve its order-filling efficiency, in early in 2001 Affiliated Foods contracted SPS Commerce to provide e-commerce supply chain automation and optimization services. Affiliated selected SPS because that company's hosted model allowed Affiliated to do business with each of its vendors no matter what their size.

New Century Brings Changes in Affiliated's Management: 2000-01

In 2001, there was a change in the company's upper management when George Lankford, who had been serving as president and COO since October, 2000, also became Affiliated's CEO. He had started out with the company in 1990, when he took the post of vice-president of merchandising and marketing. Before being named COO, he had served as the company's executive vice-president.

Over its history, reflecting its business growth, the physical plant of Affiliated foods has grown by over one million square feet. Its business had been steady and determined, despite increased pressure from giant supermarket chains that have been largely successful in driving independent grocers out of business. Affiliated took well-conceived steps to avoid that fate. In addition to the acquisition of a dairy and a bakery, the cooperative bought a share of Western Family Foods, Inc., a company founded in 1934 that provides private label products to over 3,500 independent grocers. Affiliated and a handful of other wholesale grocers own it and distribute its Western Family and Shurfine branded foods. Also, Affiliated's members have been very loyal, and all indications are that they will continue to be so for the foreseeable future, in part because the cooperative has successfully met the competitive challenges in range and depth service provided by the industry's giants.

Principal Subsidiaries: Plains Dairy; Tri-State Baking; Western Family Foods (25%).

Principal Competitors: Associated Wholesale Grocers. Inc.; Fleming Companies, Inc.; Nash Finch Company; SUPERVALU INC.

Further Reading:

  • Browser, David, "Grocery Supplier Takes Care of Affiliates," Amarillo Business Journal, November 3, 1997.
  • ------, "Plains Dairy Is the Last One Standing," Amarillo Business Journal, July 21, 1998.
  • Elson, Joel, "Affiliated Meeting Goal to Boost Nonfood Sales," Supermarket News, April 18, 1994, p. 16.
  • "Info Systems Tackle Warehouse Problems," U.S. Distribution Journal, October 15, 1991, p. 15.
  • "SPS Commerce to Provide E-Commerce Services to Affiliated Foods, Inc.," Supply Chain Press Releases, January 22, 2001.

Source: International Directory of Company Histories, Vol. 53. St. James Press, 2003.