Supervalu Inc. History
Eden Prairie, Minnesota 55344-3691
Telephone: (952) 828-4000
Fax: (952) 828-8998
Incorporated: 1926 as Winston & Newell Company
Employees: 57,800 (2002)
Sales: $20.98 billion (2002)
Stock Exchanges: New York
Ticker Symbol: SVU
NAIC: 445110 Supermarkets and Other Grocery (except Convenience) Stores; 446110 Pharmacies and Drug Stores
The philosophy of Supervalu companies will always be a "total commitment to serving customers more effectively than anyone else could serve them." We believe the pursuit of this meaningful goal is the continuing and overriding responsibility from which every corporate activity must evolve. We value today's success as merely the beginning of a constantly expanding level of achievement. We believe that customers are most knowledgeable, skilled, and capable buyers who will always seek out and do business with that supplier which most effectively serves their wants and needs. Therefore, by serving our customers more effectively than anyone else could serve them, and by efficiently managing our business with highly skilled and dedicated people, we are confident that we shall continue to increase Supervalu's sales and share of market. We believe that this philosophy and practice will result in continuing profitable growth for Supervalu and provide security and opportunity for our many thousands of loyal employees.
- Minneapolis wholesale grocery firms--B.S. Bull and Company, and Newell and Harrison Company--merge to form the early forerunner to Supervalu.
- Earnings reach $6 million. The company incorporates as Winston & Newell Company.
- The company changes its name to Super Valu Stores, Inc.
1955-88:The company acquires 12 regional food wholesalers, primarily in the Midwest, Southeast, and Northwest.
- Sales surpass $300 million.
- With the acquisition of Shopko, the company begins major investments in the nonfood, general merchandise business.
- Supervalu opens its first hypermarket (a Cub Foods-ShopKo combination) in Cleveland, Ohio, and company sales reached $1.28 billion.
- The company changes its name to Supervalu Inc.
- Supervalu acquires Richfood Holdings, Inc., a leading Mid-Atlantic food distributor and retailer.
- Sales surpass $20 billion.
- Supervalu opens its 1,000th Save-A-Lot store, and is faced with an accounting scandal centering on its pharmaceutical business.
Minnesota-based Supervalu Inc. is the leading grocery wholesaler in the United States, supplying products to more than 4,200 stores--regional and national chain supermarkets, corporate owned and licensed retail locations, mass merchandisers, and e-tailers--in 48 states and abroad. The company also offers retailers a variety of business support services, including consumer and market research; private labeling; personnel training; accounting; insurance brokerage and services; store site selection, construction and design; category management; and business planning. Major clients include Bruno's, Dahl's, Jewel, Kroger, and SuperTarget. Supervalu is also the 11th largest food retailer in the United States, running more than 1,000 retail stores across 36 states, including Save-A-Lot, bigg's, Cub Foods, Shop'n Save, Scott's, Shoppers Food Warehouse, Metro, Farm Fresh, and Hornbacker's. In addition, Supervalu has franchise and licensing agreements for stores operated by others companies, including 55 Cub Foods and 764 Save-A-Lot stores.
Late 1800s to Early 1900s: Minneapolis Wholesaler Roots
Supervalu's origins lie in the 1871 merger of the Minneapolis wholesale grocery firms B.S. Bull and Company and Newell and Harrison Company. The new Newell and Harrison existed for only three years; in 1874 George R. Newell bought out his partners and renamed the company George R. Newell Company.
Meanwhile, one of Newell's former partners, Hugh G. Harrison, formed a wholesaling venture called H.G. Harrison Company in 1879. After a series of reorganizations (including Harrison's sale of his interest), this company became Winston, Harper, Fisher Company in 1903, headed by F.G. Winston, a Minneapolis railroad contractor; J.L. Harper, a merchandiser; and E.J. Fisher, a financier. In 1916, Harrison's grandson, Perry Harrison, joined Winston, Harper, Fisher as vice-president and co-owner.
In 1926, George R. Newell Company and Winston, Harper, Fisher Company merged to form Winston & Newell Company, with Perry Harrison and L.B. Newell, Winston's son-in-law, as principal shareholders. Winston & Newell was incorporated in 1926 in response to the threat that independent retailers faced from the emerging grocery store chains that began developing in the 1920s. Winston & Newell hoped to improve services to these independent retailers so they could withstand the competitive impact of the chain stores. At the time of its creation, Winston & Newell was serving some 5,000 small grocery stores and had sales of $6 million--making it the largest grocery wholesaler in the Midwest.
With Minnesotan Thomas G. Harrison at its helm, Winston & Newell became one of the first wholesale distributors in the nation to join the new Independent Grocers Alliance (IGA). Harrison, the son of Perry Harrison, had joined Winston, Harper, Fisher Company in 1919 as an assistant sales manager. He successively became assistant treasurer and executive vice-president, directing the operations of Winston & Newell and later Super Valu in a variety of executive positions from 1926 until his retirement as CEO in 1958.
Harrison, in guiding the company through the Great Depression, was primarily responsible for introducing many practices that changed the way in which grocery stores conducted business. Cash-and-carry and self-service shopping, almost unheard of at the time, were two of his innovations at Winston & Newell. He broke with tradition again when he stopped using a pricing structure with an arbitrary markup and began charging instead the manufacturer's price plus a percentage fee that declined with volume. This practice gave the company impressive cumulative profits. During the 20-year period from 1942 to 1962, Fortune reported that the company's sales volume increased from about $10 million to more than $300 million.
Early 1940s to 1960s: Formation of Voluntary Associations
It was during World War II that Winston & Newell began the march to becoming Supervalu and attaining its position as the world's largest food wholesaler and distributor. Although no acquisitions were made during the 1940s, in 1942 the company ended its affiliation with IGA and formed its own association, known in the industry as a "voluntary." Winston & Newell offered independent retailers services such as food processing and packaging, preparation of advertising for individual store use in local newspaper advertising, and store-planning assistance, in addition to supplying most of the merchandise sold. This voluntary association introduced the Super Valu name and operated independently from the wholesale business. Super Valu and another voluntary association called U-Save (which was also formed under the auspices of Winston & Newell) were familiar to grocers in Iowa, Minnesota, and North Dakota. By 1942 the company had wholesale sales of $10 million and some 400 stores belonged to its wholesale-retail team.
In 1954 Winston & Newell Company changed its name to Super Valu Stores Inc. in order to clarify the connection between itself and the voluntary association. During the 1950s Super Valu began to grow by acquiring other voluntary associations. In 1955 it purchased Joannes Brothers of Green Bay, Wisconsin, a firm that had begun serving stores in northern Michigan and northeastern Wisconsin in the 1870s. Joannes Brothers became Super Valu's Green Bay Division. In 1958 Russell W. Byerly became president of Super Valu. Byerly, a North Dakota native who joined Winston & Newell in 1932 as a bookkeeper, served as president until 1964 and later was chairman of the board and chief executive officer.
Series of Acquisitions in the 1960s
Acquisition followed acquisition during the 1960s as Super Valu expanded throughout the Midwest. In 1961 Super Valu moved into the Ohio Valley with the purchase of the Eavey Company, one of the nation's oldest food wholesale distributors. In 1963 the company acquired the J.M. Jones Company of Champaign-Urbana, Illinois, and the Food Marketing Corporation of Fort Wayne, Indiana. Each of these companies could trace its beginnings to the early days of the grocery business. Jones began as a general store and developed into a large wholesale business; Food Marketing dated back to the early 1800s, as Bursley & Company and the Bluffton Grocery Company. The Food Marketing acquisition also brought Super Valu into the institutional market. After the acquisition, these two companies were operated as autonomous divisions in a company that historically gave its divisions and stores as much free rein as possible.
In 1964 Super Valu expanded its area of operation outside the Midwest by acquiring Chastain-Roberts Company, which had begun in 1933 as a wholesale flour and feed company, and the McDonald Glass Grocery Company, Inc. of Anniston, Alabama. These acquisitions formed the basis for Super Valu's Anniston Division.
In 1965 Super Valu acquired the Lewis Grocer Company of Indianola, Mississippi. The Lewis Grocer Company was founded by Morris Lewis, Sr., in 1895 and eventually became a multimillion-dollar wholesale grocer, branching out later into the retail grocery business.
The 1960s were a growth period for Super Valu in ways other than acquisition. The company expanded its retail support services to include accounting, efficiency studies, budget counseling, and store format and design advice. In 1962 Super Valu established Planmark, a department that offered engineering, architectural, and design services to independent retailers, subsidiaries, and corporate stores. Planmark became a division in 1975. With Studio 70, its commercial design arm, Planmark used computer-assisted design to analyze and develop plans for construction, expansion, or remodeling. This innovation, implemented in the recessionary years of the late 1970s, allowed Super Valu retailers to take a project from planning to opening faster than their competition. Super Valu also began providing financial assistance for retailers building new stores, bankrolling some 500 stores in a three-year period in the 1960s. Super Valu also signed leases on its retailers' behalf, allowing them to locate in prime space in shopping centers and other locations.
In 1968 Preferred Products, Inc. (PPI) was incorporated as a subsidiary of Super Valu to develop its private label program. A food packaging and processing division, it was started in the 1920s as a department of Winston & Newell.
Super Valu also formed an insurance agency--Risk Planners, Inc.--in 1969. This wholly owned subsidiary began by providing insurance on retail property for the company and its retail affiliates. Tailored specifically to the needs of retailers, its products have expanded to include all types of insurance for Super Valu and its stores and franchisees, as well as independent retailers' employees and families.
Diversified Operations in the 1970s
Diversification was the moving force at Super Valu in the 1970s, in part because the U.S. government in the late 1960s made it clear that it was not going to allow further consolidation of the food industry. Beginning with the 1971 acquisition of ShopKo, a general merchandise discount chain, Super Valu began what proved to be a highly profitable program of nonfood marketing operations. ShopKo, founded by James Ruben in Chicago in 1961, opened its first store in Green Bay, Wisconsin, in 1962. In 1971 Super Valu acquired Daytex, Inc., a textile goods company, but the venture proved unsuccessful and its assets were liquidated in 1976. Meanwhile, Super Valu sales surpassed $1 billion for the first time in 1972.
When Jack J. Crocker became chairman and CEO of Super Valu in 1973, he initiated another diversification venture, County Seat. A success story in its own right, County Seat opened its first store in 1973 selling casual apparel, including the complete Levi's jeans line. By 1977 there were 183 County Seat stores, and the chain's earnings were $8 million in that fiscal year. When it was sold for $71 million to Carson Pririe Scott and Company of Chicago in 1983, there were 269 stores in 33 states.
Crocker, a CPA who came to Super Valu from the presidency of the Oregon-based grocery and pharmacy chain Fred Meyer, Inc., also directed the company's continuing acquisition and expansion program. Very much a part of the trend toward consolidation in the food wholesale industry, Super Valu continued to purchase smaller food wholesalers, acquiring Pennsylvania-based Charley Brothers Company in 1977. Charley Brothers, which began as a retail grocery store in 1902 and moved into wholesaling in 1918, served Shop 'n Save stores and other independent retailers in Pennsylvania.
The advent of universal price codes and scanning equipment in the grocery business led to the introduction, in the mid-1970s, of Testmark, an independent research center providing store measurement data. This data had been available from Super Valu stores since 1965 and, during the period before Testmark was established, had been handled by Super Valu merchandising research, an internal department for clients who preferred not to use commercial research companies. In direct competition with these commercial research companies, Testmark, with Super Valu's backing, offered its customers the advantage of cooperation within the Super Valu network and with major chains and independents nationwide. Testmark's autonomy was enhanced by its Hopkins, Minnesota, location, separate from Super Valu's corporate headquarters.
Crocker's tenure at Super Valu was characterized by his success in running what was one of the better-capitalized and stronger wholesalers in the country and by the casual no-frills operation he ran. Company headquarters were in a warehouse, not a plush office. Crocker personally founded a professional soccer team, the Minnesota Kicks, in 1976. They, too, were a Crocker success story, becoming popular in their home territory.
Crocker's successes were apparent on the bottom line, as well. By fiscal 1978 earnings per share had increased approximately 50 percent since Crocker's first year with Super Valu, but, Crocker explained to Financial World in 1977, "I don't think about profits very much. If you're doing things right, profits always follow." By the end of the 1970s Super Valu's sales were $2.9 billion.
Move into Retail Grocering with Acquisition of Cub Foods in 1980
Super Valu ushered in the 1980s with the acquisition of Cub Foods, a discount grocery store operation. Warehouse stores, with bare bones facilities and prices, were a phenomenon of the 1970s. Cub Foods was founded by the Hooley family, grocers since 1876 in Stillwater, Minnesota. The Hooleys opened their first warehouse store with the Cub name in a Minneapolis suburb in 1968. When Super Valu purchased the chain in 1980, there were five Cub stores and a Hooley supermarket in Stillwater. Culver M. Davis was appointed president and chief executive officer of Cub Foods in 1985. Davis had joined the Hooley organization in 1960 and was a founder, with the Hooley family, of the discount stores.
Super Valu originally acquired the Cub chain to boost its wholesale sales, but, Business Week reported in 1984, the company soon realized it had a "tiger by the tail," and that Cub had "taken on a (retailing) life of its own." Super Valu improved the atmosphere of Cub Foods stores by using attractive decor, keeping the stores clean, and increasing product offerings, including perishables, which the early warehouse stores did not offer. As a result, Cub Foods evolved into a combination of the conventional grocery store and the warehouse store, known in the industry by the late 1980s as a "super warehouse."
Although Cub Foods competed directly with a number of Super Valu's customers' stores and its own corporate stores, the company saw a benefit in the opportunity Cub offered its retailers to learn about warehouse-store operations from the inside. Several of its retailers did not totally agree, citing a 10 to 15 percent reduction in business when a Cub Foods store opened in their market area. To address this complaint, Super Valu started franchising its Cub stores and also developed County Market, a downsized version of Cub with the same low prices, but aimed at smaller communities and at independent retailers who could not meet the financial commitment that buying a Cub franchise required. By 1989, 74 Cub Foods stores (of which Super Valu owned 34) were in nine states and had sales of approximately $3 billion.
By 1986 Super Valu had introduced another variation on the Cub theme. Developed for retailers who needed to improve their stores' look and style to meet competition, the Newmarket format combined warehouse pricing with an upscale product line and services such as video rental, check cashing counters, and baggers. The first Newmarket store opened in the St. Paul-Minneapolis area, and was so successful that the company opened more stores in other locations.
In June 1981 Jack Crocker, at age 57, stepped down from his position as CEO. Crocker, who headed Super Valu for nine years, brought the company to just over $4 billion in sales. He is reported to have handpicked Michael W. Wright, who had joined Super Valu as an executive vice-president in 1977 and become president in 1978, to be the next CEO. Wright had first come to Crocker's attention when he handled some legal matters for the company in Minneapolis. Wright, a former captain of the University of Minnesota football team, had put himself through law school by playing professional football with the Canadian Football League.
The 1980s: Expansions in the West and the South
Super Valu took its expansion west in 1982 when it acquired Western Grocers, Inc. Western had distribution centers in Denver, Colorado, and Albuquerque, New Mexico; in 1984 these two centers became separate divisions. Super Valu also moved into Nebraska in 1982 by acquiring the Hinky Dinky distribution center near Omaha from American Community Grocers, a subsidiary of Texas-based Cullum Companies. In 1984 Super Valu sold the center back to Cullum.
With intentions of gaining a strong market presence in Florida, in 1983 and 1984, respectively, Super Valu purchased Pantry Pride's Miami and Jacksonville distribution centers. In what Super Valu considered a breach of their agreement, Pantry Pride began selling off its stores. With this and the fact that the Florida market had historically been dominated by the chains, Super Valu, claiming that the Florida market would take a large amount of capital to develop, sold the Miami center to Malone & Hyde in 1985, and the Jacksonville center to Winn-Dixie in 1986.
In 1985, Super Valu created its Atlanta Division when it acquired the warehouse and distribution facilities of Food Giant. Through this division the company supplied Food Giant, Big Apple, Cub Foods, and independent stores. Food Giant, according to a 1988 Financial World report, "refused to implement Super Valu's turnaround plan for store upgrading," and the retail stores that Super Valu owned through the original transaction and a later acquisition of stock lost money for the company. By 1988 the company had divested itself of these stores, but operated or franchised seven Cub stores in the Atlanta area.
Also in 1985, Super Valu acquired West Coast Grocery Company (Wesco) of Tacoma, Washington. Wesco, founded by the Charles H. Hyde family in 1891, was Super Valu's largest acquisition to that time. Wesco had distribution centers in two Washington cities and Salem, Oregon, and a freezer facility in another Washington city. Super Valu's West Coast operations were hurt when the Albertson's chain opened a distribution center to supply its own stores in Washington.
In 1986 and 1987 Super Valu acquired two more distribution centers in Albuquerque and Denver, respectively. These centers were owned by Associated Grocers of Colorado, which, at the time of the Denver purchase, was in Chapter 11 bankruptcy proceedings. In December 1988, Super Valu acquired the Minneapolis; Fargo, North Dakota; and Green Bay, Wisconsin, distribution centers of Red Owl Stores, Inc.. The former Denver and Albuquerque divisions of Western Grocers were moved into these new facilities.
By the mid-1980s Super Valu had developed a substantial presence in the military commissary marketplace. The company had been supplying both product and retail support to military commissaries in the United States and abroad and, in 1986, demonstrated its commitment to international operations by appointing a military and export product director. Super Valu International had its beginnings with the Caribbean and Far East markets and eventually supplied fresh goods and private label canned goods, general merchandise, and health and beauty aids to most countries of the world.
During the 1980s ShopKo continued to expand and to turn in substantial profits for the company. At the end of fiscal 1989 ShopKo operated 87 stores in 11 states from the Midwest to the Pacific Northwest and had sales of $1.28 billion. Super Valu's only nonfood retail operation at the time, ShopKo had its headquarters and distribution center in Green Bay, Wisconsin, and distribution centers in Omaha, Nebraska, and Boise, Idaho.
It was perhaps the successes of ShopKo and of Cub Foods that led Super Valu to its biggest venture in retailing in the 1980s--the "hypermarket," a retailing concept that originated in Europe after World War II. The first hypermarkets introduced in the U.S. in the early 1970s were not successful, but in the mid-1980s Hyper Shoppes, Inc., a predominantly French consortium, reintroduced the hypermarket in the United States. Super Valu was a 10 percent investor in the venture, which opened bigg's, a 200,000-square-foot food and general merchandise store in the Cincinnati, Ohio area.
With the experience of this venture under its belt, Super Valu created its own version of the hypermarket, Twin Valu. A combination of a Cub Foods and a ShopKo, this 180,000-square-foot store opened in early 1989 in Cleveland. A second Twin Valu opened in Cleveland in 1990. The hypermarket concept as executed by Super Valu emphasized low prices, good selection, and brand name merchandise.
In 1988 Super Valu lost its position as the world's largest wholesaler when Oklahoma City-based Fleming Companies bought Malone & Hyde, a purchase Super Valu declined to make. At the end of the 1980s, Super Valu served some 3,000 independent retailers in 33 states. The company still owned and operated 70 conventional grocery stores and some Cub Foods stores and served its corporate stores and customers from 18 retail support and distribution centers.
Acquisition of Wetterau Inc. and Other Purchases Highlight Early 1990s
Super Valu entered the 1990s having to contend with the loss of $220 million in business from the sale or closing of three major customers in 1989: Red Owl stores in Minneapolis, Skaggs Alpha Beta stores in Albuquerque, and two Cub Foods stores in Nashville. The loss of business through acquisition of its independent retail customers by major chains--nearly all of whom were self-distributing--would continue to pose a threat to Super Valu and other wholesalers throughout the 1990s. Part of Super Valu's response to this threat was to further bolster its own retail operations.
Meanwhile, Super Valu's ShopKo subsidiary had grown so rapidly it was beginning to be too large for Super Valu to manage. The company decided to divest itself of part of ShopKo through an initial public offering (IPO). In October 1991 the IPO resulted in the sale of 54 percent of ShopKo to the public, netting Super Valu $420 million. Wright told Grocery Marketing that if Super Valu had not taken this step, "it was a case where we would have ended up with the tail wagging the dog."
The very next month Wright began to reinvest the cash, and to boost the company's retail sector through the purchase of Scott's Food Stores, a 13-store chain based in Fort Wayne, Indiana. With the addition of Scott's, Super Valu became the 25th largest retailer in the United States.
In early 1992, Super Valu Stores Inc. changed its name to Supervalu Inc. Later that year, the company made its largest acquisition to date when it acquired Wetterau Inc., the fourth largest wholesaler in the country, in a $1.1-billion deal. The addition of Wetterau's $5.7 billion in sales volume to Supervalu's $10.6 billion leapfrogged Supervalu over rival Fleming and back into the top spot in U.S. grocery wholesaling. Wetterau, founded in 1869 and based in Hazelwood, Missouri, was led at the time of the merger by Ted C. Wetterau, a member of the fourth generation of Wetteraus to run the company. With Wright, Wetterau became vice-chairman of Supervalu and a company director. Wetterau retired late in 1993, leaving Wright in sole control of Supervalu once again.
In addition to bolstering Supervalu's wholesaling operation, Wetterau brought Supervalu a significant retail operation--180 stores in 12 states (added to Supervalu's stable of 105 stores in 11 states). Most significantly, Wetterau's stores included the Save-A-Lot chain of limited-assortment stores, a format new to the Supervalu fold and one that would expand under Supervalu's supervision. The newly combined retail operations moved Supervalu into 14th place among U.S. food retailers. The company set a long-term goal of being one of the top ten retailers by the end of the 1990s.
The Wetterau acquisition was soon followed by additional acquisitions, several in retail. Late in 1993 Supervalu acquired Sweet Life Foods Inc., a wholesaler based in Suffield, Connecticut, with $650 million in revenues and a few retail operations in New England, one of Supervalu's weaker regions. In March 1994, the 30-store Texas T Discount Grocery Stores chain was acquired. Then in July, Supervalu bought Cincinnati-based Hyper Shoppes, Inc., which ran seven bigg's stores in Cincinnati, Denver, and Louisville, Kentucky, and had more than $500 million in annual revenues. Meanwhile, in June 1994, Fleming leapfrogged back over Supervalu into the number one wholesaling position when it acquired Scrivner Inc., then number three. At that time, Fleming claimed $19 billion in revenue to Supervalu's $16 billion.
Mid-1990s to 2002: Supervalu Restructures While Still Growing
Supervalu announced in late 1994 that it would begin to implement a restructuring program called Advantage in early 1995. Over a two-year period, the company eliminated about 4,300 jobs (10 percent of the total workforce) and divested itself of about 30 underperforming retail stores. The Advantage program also centered around three chief aims: revamping the distribution system into a two-tiered system in order to lower the costs to retailers; creating a new approach to pricing called Activity Based Sell; and developing "market-driving capabilities" that would increase sales for Supervalu's retail customers, chiefly through category management. The last of these goals also involved the realignment of the company's wholesale food divisions into seven marketing regions: Central Region, based in Xenia, Ohio; Midwest Region, Pleasant Prairie, Wisconsin; New England Region, Andover, Massachusetts; Northeast Region, Belle Vernon, Pennsylvania; Northern Region, Hopkins, Minnesota; Northwest Region, Tacoma, Washington; and Southeast Region, Atlanta, Georgia. Supervalu took a $244 million charge in 1995 to implement the Advantage program, which was the company's response to increasing market pressures--low inflation, industry consolidation, a slowdown in growth, and changes in the promotional practices of manufacturers--which had yet to hurt the company's earnings but were certain to begin to do so if the company took no action.
In late 1996 Supervalu bought the 21-store Sav-U Foods chain of limited assortment stores from its rival, Fleming Companies. The purchase provided Supervalu its first southern California retail presence. The stores were to be converted to Save-A-Lot stores, and the company made plans to eventually open 200 to 300 Save-A-Lot stores in the area.
Also in late 1996, ShopKo and Phar-Mor Inc., a chain of more than 100 deep-discount drug stores, merged under the umbrella of a new holding company called Cabot Noble Inc.. Although initially Supervalu was to have no stake in the new company, the final agreement gave Supervalu 6 percent of Cabot Noble in order to reduce the amount of financing needed for the merger. Supervalu also gained about $200 million as a result of the purchase of most of its shares in ShopKo. In 1997, the company exited its 46 percent investment in ShopKo, making about $305 million in the net proceeds. Supervalu had also started to take some tentative steps toward expanding its presence overseas, through a 20 percent stake it held in an Australian wholesaler and its agreement to supply products to a new supermarket in Moscow.
By mid-1998, the company had a strong first quarter to boast about, a two-for-one stock split, and opened or completed acquisitions of 73 stores. The company focused its expansion efforts that year to growing the Save-A-Lot unit. That same year, Supervalu began its investment in the pharmacy business: Scott's Foods stores acquired Keltsch Pharmacy of Northeast Indiana, which included 11 freestanding pharmacies and three in-store ones. Supervalu also lost one of its bigger customers, Bellevue, Washington-based QFC, which was acquired by Portland's Fred Meyer.
In 1999, Supervalu reported record sales of $17.4 billion for 1998, and shortly thereafter, still riding the crest of the previous year's revenue wave, acquired Richfood Holdings, Inc., the leading Mid-Atlantic food distributor and retailer. As a result, Supervalu took over the Shoppers Food Warehouse, Metro, and Farm Fresh retail food chains and gained about 800 new customers. Supervalu then divested of Hazelwood Farms Bakeries to focus its investments on core food distribution and retail businesses, but maintained its link with the bakeries (and new owner Pillsbury Bakeries & Foodservice) as a supplier.
Along with various cost-reduction initiatives, Supervalu's continued focus on core businesses and the boost from the Richfood acquisition helped Supervalu see yet another record year for sales: By mid-2000, Supervalu's sales surpassed the $20-billion mark. An ever-growing, increasingly more efficient company, Supervalu was operating more than 194 price superstores (including Cub Foods, Shop'n Save, Shoppers Food Warehouse, Metro, and bigg's), 839 limited assortment stores (including 662 licensed locations under the Save-A-Lot banner), and 85 other supermarkets. It was also the primary supplier to about 3,500 supermarkets and franchises of its own retail chains, and a secondary supplier to approximately 2,600 stores, including 1,350 Kmart stores. The company also joined the Worldwide Retail Exchange, a premier retail-focused, business-to-business exchange, and signed a multiyear national supply agreement with Webvan Group, Inc. of Foster City in California.
As was the trend among wholesalers at this time, Supervalu planned to continue its expansion of retail stores in order to gain more control of its core businesses. By 2001, Supervalu's retail food business represented about 60 percent of total company operating earnings, and was growing even more. One of the company's goals was to increase retail square footage by about five percent for the 2001 fiscal year. The pharmacy side of Supervalu's retail business, however, was apparently not considered a core one, as the company closed 30 stores in three states, 18 of which contained pharmacies.
The distribution side of Supervalu's business took a blow when Kmart ended its contract with the company, resulting in $2.3 billion in reduced revenue for the year. Supervalu also lost a $400 million annual supply contract with the Genuardi's chain, once the East Coast chain was bought by Safeway in mid-2001. Supervalu continued to consolidate its distribution centers and announced that it would cut 4,500 jobs, or 7.3 percent of its workforce.
During fiscal year 2002, Supervalu opened 115 new stores, including 103 Save-A-Lot stores, 11 price superstores, and one conventional supermarket, and closed 49 stores. In mid-2002, the company announced its aggressive plans for 2003: It would open 10 to 15 superstores and at least 150 extreme value food stores. And in yet another move to gain control over its core business, Supervalu announced that it would purchase St. Louisbased Deal$-Nothing Over a Dollar LLC, adding 53 stores to its general merchandise business. Supervalu's Save-A-Lot chain also opened its 1,000th store in 2002.
In June 2002, Supervalu faced an embarrassing major setback, however. The company's shares dropped 22 percent in value after the company announced that profits for its pharmacy business were deliberately inaccurate for three years. While preparing for a scheduled, internal audit, the company discovered that a former Supervalu comptroller deliberately misstated earnings for the company's pharmaceutical stores, artificially inflating profits. Although Supervalu entered into the new millennium with great momentum for expanding its retail business and consolidating its distribution business, any possible long-term effects from the accounting scandal remained to be seen.
Principal Competitors:Ahold USA; Albertson's; Alex Lee; Allou; AWG; Associated Wholesalers; Bozzuto's; C&S Wholesale; D&W Food Centers; Delhaize America; Di Giorgio; Dierbergs Markets; Fleming Companies; Fresh Brands; Giant Eagle; A&P; Jetro Cash & Carry; Krasdale Foods; The Kroger Co.; Marsh Supermarkets; McLane; Meijer; Nash Finch; Roundy's; Safeway; Schnuck Markets; Sherwood Food; Shurfine International; Spartan Stores; Topco Associates; Wakefern Food; Wal-Mart; Winn-Dixie.
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- "Supervalu: 50 Years on the Road to Excellence," special section of Grocery Marketing, 1992.
- "Supervalu Announces Major Restructuring," The Food Institute Report, April 9, 2001, p. 1.
- "Supervalu Announces Store Closings, Restructures," MMR, June 25, 2001, p. 138.
- "Supervalu Boosts Spending, Plans Expansion, Acquires Discount Retailer," The Food Institute Report, April 8, 2002, p. 1.
- "Supervalu Closes Stores," Drug Store News, July 23, 2001, p. 4.
- "Supervalu Falls 22% after Revealing False Accounting," The New York Times, June 27, 2002, p. C10.
- "Supervalu Inc. (The Bottom Line)," Business Record (Des Moines), February 4, 2002, p. 24.
- "Supervalu Inks Richfood Deal," Food Logistics, July-August 1999, p. 12.
- "Supervalu Is Stung by Accounting Fraud," Drug Store News, July 22, 2002, p. 6.
- "Supervalu Posts Record Results," The Food Institute Report, April 3, 2000.
- "Supervalu Posts Record Sales, Earnings," Supermarket News, December 20, 1999, p. 8.
- "Supervalu Takes $17.6 Million Charge in Earnings Restatement," Supermarket News, July 8, 2002, p. 4.
- "Supervalu to Buy 29-Unit Retailer," Supermarket News, October 26, 1998, p. 4.
- Tosh, Mark, "Wholesale Changes," Progressive Grocer, January 1999, p. 29.
- Weinstein, Steve, "The Reinvention of Supervalu," Progressive Grocer, January 1996, p. 26.
- ------, "Tomorrow the World," Progressive Grocer, October 1992, p. 58.
- Zwiebach, Elliot, "SuperValu Set to Reposition Six Chains as One Operation," Supermarket News, June 7, 1999, p. 1.
- ------, "Supervalu's Strength; Though Acquisitions and Consolidation, the Super Distributor Continues to Strengthen Its Position as a Leader in the Nation's Food Industry," Supermarket News, September 27, 1999, p. 1.
- ------, "SuperValu to Buy Fleming California Chain," Supermarket News, September 30, 1996, p. 1.
- ------, "SuperValu to Buy Wetterau," Supermarket News, June 15, 1992, p. 1.
Source: International Directory of Company Histories, Vol. 50. St. James Press, 2003.