McLane Company, Inc. History

Company History:

McLane Company, Inc., is one of the largest wholesale distribution companies in the United States. McLane serves customers in all 50 states, and has a total base of over 44,000 customers. Of that total, 26,000 customers are convenience stores, making McLane the world's largest supplier to that market. In addition, the company is a major importer of gourmet and ethnic foods through its specialty food division. Other McLane divisions are engaged in foodservice, trucking, data processing, and food processing. McLane is owned by Wal-Mart Stores, Inc., the largest retail operation in the world. Since its acquisition by Wal-Mart in 1990, grocery distribution has played a growing role in McLane's business, which had previously focused even more heavily on convenience stores.

The history of McLane Company dates back to 1894, when founder Robert McLane opened his first grocery store in Cameron, Texas, a farming community in the central part of the state. McLane's, as the store was called, was successful from the outset, and by 1895 McLane had doubled the size of his store and added a receiving platform. A few years later he put up another building nearby, which he leased to Rotan Grocery Company, one of his wholesale suppliers. When Rotan was bought out by another company in 1903, the wholesale business in that building was shut down. McLane decided to fill the void himself, and within the year he launched his own wholesale operation. He staffed the new firm, dubbed the Robert McLane Company, with three full-time employees.

The company performed well over the next decade, and by 1912 McLane had 12 people working in his office. In 1913 McLane opened a second warehouse, located in the nearby town of Caldwell. The company bought its first two trucks in 1915. The trucks were used only for local deliveries, while shipments to outlying areas were still made by rail. By this time, McLane had a seven-man sales force that roamed the countryside. This enabled Robert McLane to scale back his traveling and spend more time at the company's Cameron headquarters. A year later, the company erected an adjoining building to the original Cameron warehouse. A third building, a garage for servicing the company's growing fleet of trucks, was added to the complex in 1919. Deliveries by truck to locations outside of Cameron were begun the following year. In 1921 Drayton McLane, Robert's son, joined the company on a full-time basis. He had worked in the business on a part-time basis throughout his childhood.

After more than twenty years of quick and steady growth, the company's fortunes finally began to level off around this time. Central Texas was hit with a series of alternating floods and droughts that devastated its agricultural economy during the 1920s. This in turn had a negative impact on retailers and wholesalers who depended on farmers for most of their business. Nevertheless, McLane was able to emerge from this period relatively unscathed, although the company did not undertake any significant expansion projects.

The 1930s began badly as the effects of the stock market crash of 1929 began to make their way into rural Texas. By 1937, though, with the U.S. economy well on its way to recovery, McLane's annual sales had reached $440,000. World War II, and the rationing that came along with it, made it much easier for wholesalers to turn a profit. McLane and countless other businesses were beneficiaries of the economic boom that followed the conclusion of World War II. By 1945 the nation's highway system had improved to the point where McLane could make all of its deliveries by truck. The company broke the $1 million mark in annual sales for the first time in 1946.

The McLane Company grew steadily throughout the 1950s. By 1951 company sales doubled again to more than $2 million. Robert McLane died in 1952, just short of his 85th birthday. He was succeeded as company president by his son Drayton. At that time the company served stores across an area within a 60-mile radius of Cameron. The $3 million sales barrier was surpassed in 1957, and Drayton McLane became president of the Texas Wholesale Grocers Association the following year. In 1959 a third generation of the McLane family--namely Drayton, Jr.,--went to work full-time in the family business. He secured a masters degree in marketing from Michigan State University prior to joining the company.

In the first half of the 1960s, McLane's sales stagnated, increasing from $3.6 million in 1960 to $3.8 million in 1964. Two major developments, both under the guidance of Drayton McLane, Jr., took place at the company during that span, however. The company's first computer, an IBM punch card tabulator, was installed in 1962. Around the same time, McLane launched its Voluntary Group Program. The Program allowed independent food retailers to band together for joint buying power to purchase private label brands offered by the wholesaler. By 1964 McLane had about 40 stores in its program and had acquired the franchise rights to market products under the Shopworth and Valu-Mart trade names. Meanwhile, Drayton McLane, Sr., was elected president of the United States Wholesale Grocers Association in 1963.

As Drayton, Jr., gained influence in company decisions, McLane made moves to regain its momentum in the second half of the decade. First, Drayton, Jr., convinced his father that the company should build a new distribution center. Unable to secure financing in Cameron for a modern facility, the company found in Temple, Texas, both a bank and a city willing to help make the new facility happen. McLane moved into its new 48,000-square-foot warehouse in Temple Industrial Park in March 1966. By that time, McLane Company had 45 employees and its 15 tractor-trailers were delivering merchandise within an 80-mile radius to about 300 stores.

McLane made its initial move into convenience store distribution in 1967. That year, the company contracted with the Southland Corporation to distribute goods to 67 7-Eleven stores in central Texas. In 1968 McLane achieved another important breakthrough, this time in its supermarket business, when it signed a franchise agreement to distribute merchandise under the Red & White label in 23 Texas counties. McLane's Shopworth and Valu-Mart labels were eliminated. In spite of Red & White's success, it was the convenience store market that proved to be McLane's most important growth area for years to come. The late 1960s were marked by McLane's formation of a non-foods division to distribute health and beauty aids and other general merchandise. This enabled the company to become the sole supplier for many of the convenience stores it serviced. In 1969 McLane's sales surpassed the $10 million mark.

McLane grew at a furious pace during the 1970s. By 1971 the company had 163 employees and sales of $19.5 million. The company expanded its warehouse in Temple by 75 percent and purchased its first big diesel truck that year. Within a few years, McLane was delivering products to customers in three states: Texas, Oklahoma, and New Mexico. By 1974 company sales had skyrocketed to $51 million. Its customers included 800 convenience stores, which accounted for about 40 percent of total sales. Later that year, McLane signed a contract with ABC Grocery to distribute to a handful of Stop 'N' Go, 7-Eleven, and Tenneco convenience stores in Denver. Although this arrangement lost money for the company at first, it led to the eventual buyout of ABC in 1976. ABC was renamed McLane/Western and became the company's first division outside of Temple.

Over the next several years, McLane expanded westward briskly. The fast growth of the company's truck fleet required the addition of a transportation center in Temple. The facility was completed in 1977. McLane's relationship with Southland continued to be profitable during this period. Unhappy with the companies that were supplying 7-Eleven stores in the Pacific Northwest, Southland suggested that McLane might receive a substantial amount of convenience store business very quickly if it decided to establish operations in that region. McLane/Northwest was established in Tacoma, Washington, in 1980. As expected, the division quickly picked up all of the supply business for the region's 7-Eleven stores. It also secured an agreement to serve 52 Circle K stores in Oregon. McLane/Southeast, based in Athens, Georgia, was established the same year.

The arrangement with Southland was so successful in the Northwest that it seemed logical to repeat the process in northern California. To that end, McLane/Pacific was created in 1983 in Merced, California. Two years later, McLane/Sunwest was formed in Arizona. In addition to geographic expansion, the company moved into other areas of business. In 1981 McLane Information Systems, the company's data processing operation, became its own division. The following year, McLane purchased Wholesale Food Supply, Inc. of Abilene, Texas, a company specializing in institutional foodservice, and turned it into the McLane/Foodservice division. To accommodate the company's explosive growth during the first half of the 1980s, McLane/Southwest (the new name for the original Temple branch) moved into a new distribution center in 1983. A second branch of McLane/Foodservice also went into operation in Temple that year. In 1984, the year McLane/Northeast was launched in Syracuse, New York, McLane's sales topped $1 billion.

Merit Distribution Services, the company's trucking division, was set up in 1985 to serve all of McLane's other divisions as well as outside customers. By 1986 company sales had reached $1.5 billion, and new divisions had been opened in Mississippi (McLane/Southern) and Florida (McLane/Suneast). In 1987 the company created McLane/America, an importer and distributor of specialty, gourmet, ethnic, and health foods based in Salt Lake City, Utah. Yet another regional division, McLane/Midwest, was launched in 1989 in Carmi, Illinois. The company posted sales of $2.6 billion that year.

In 1990 McLane was acquired by Wal-Mart, the largest retail chain in the world. Prior to the merger, McLane was already doing about $500 million worth of business with Wal-Mart, and Drayton McLane, Jr., had become close friends with Wal-Mart founder Sam Walton. The acquisition by Wal-Mart brought about a quantum leap in business volume for McLane. This expansion was accelerated even more in 1992, when Southland made its exit from the distribution business to focus on its retail operations. Southland sold two distribution centers and three food processing facilities to McLane. These new businesses added well over $1 billion in sales and 2,000 employees to McLane's totals.

In July 1992, Drayton McLane, Jr., bought major league baseball's Houston Astros. A few months later he stepped down as president and CEO of McLane Company to concentrate on running the team, although he retained his chairmanship of McLane. Joe Hardin, Jr., took over as president and CEO. McLane continued to grow dramatically under Hardin. In 1993 the company recorded sales of $6.3 billion, including $2.5 million in business with parent company Wal-Mart. As the 1990s rolled on, McLane continued to seek new areas in which to expand. With a presence in all 50 states, the company began looking southward. McLane de Mexico, a large distribution center in Mexico City, was opened with an eye toward penetrating the Mexican market.

As McLane celebrated its centennial in 1994, the company showed no signs of slowing down. A distribution center to serve convenience stores and mass merchandisers in Kentucky and Ohio was opened, and the company leased space for a large distribution center for its McLane/Foodservice division. In 1995 Hardin returned to Wal-Mart to become chief operating officer. He was replaced as president and CEO of McLane by W. Grady Rosier, an 11-year veteran of the company.

Further Reading:

• Kahler, Martha, and Jeff Hampton, McLane Company, Inc.: The First One Hundred Years, Temple, TX: McLane Company, Inc., 1994.
• Markowitz, Arthur, "McLane Helps Wal-Mart Bite into Food Biz," Discount Store News, November 16, 1992, p. 1.
• Simmons, Tim, "Drayton & Sam," Supermarket News, October 8, 1990, p. 2.
• "Wal-Mart to Acquire McLane, Distributor to Retail Industry," Wall Street Journal, October 2, 1990, p. C22.
• Zwiebach, Elliot, "Wal-Mart to Acquire McLane Co.," Supermarket News, October 8, 1990, p. 1.

Source: International Directory of Company Histories, Vol. 13. St. James Press, 1996.