Wegmans Food Markets, Inc. History

Address:
1500 Brooks Avenue
Rochester, New York 14603-0844
U.S.A.

Telephone: (716) 328-2550
Fax: (716) 464-4664

Website:
Private Company
Incorporated: 1931
Employees: 28,500
Sales: $2.75 billion (1999)
NAIC: 44511 Supermarkets and Other Grocery (Except Convenience) Stores

Company Perspectives:

At Wegmans, we believe that good people, working toward a common goal, can accomplish anything they set out to do. In this spirit, we set our goal to be the very best at serving the needs of our customers. Every action we take should be made with this in mind. We also believe that we can achieve our goal only if we fulfill the needs of our own people. To our customers and our people we pledge continuous improvement, and we make the commitment: "Every day you get our best." Key Dates:

Key Dates:

1916:
Wegman family establishes the Rochester Fruit and Vegetable Company.
1931:
Wegmans is incorporated.
1949:
Stores are converted to self-service format.
1974:
Company acquires Bilt-Rite Chase-Pitkin building and garden supply stores.
1999:
First New Jersey store is opened.

Company History:

Wegmans Food Markets, Inc. is a privately held, family-run corporation that operates a regional supermarket chain of approximately 60 Wegmans stores, in addition to 17 Chase-Pitkin Home and Garden stores. Known for its innovative approach to grocery retailing, Wegmans is consistently cited as one of the nation's top retailers and best places to work. With headquarters in Rochester, New York, Wegmans operates primarily in the central and western parts of New York. In the 1990s the chain expanded into Pennsylvania and New Jersey.

Starting Small in 1916

Wegmans was founded as the Rochester Fruit and Vegetable Company in 1916, a small food store run out of the front of the Wegman family's house in Rochester. After six years of selling groceries from home, brothers Walter and John Wegman moved their enterprise to a small, full-scale grocery store featuring canned goods, produce, a bakery, and even a cafeteria.

The two brothers became known as innovators in the grocery business, and in the early 1930s, they opened a self-service grocery, a new concept that would revolutionize food shopping. The new store was incorporated in 1931 as Wegmans Food Markets, Inc. The Wegmans store became a successful operation as well as a tourist attraction, featuring self-service and several other innovations, including vaporized water spray for vegetables and fruits, refrigerated food display windows, homemade candy, and a cafeteria that seated 300 people.

In 1950, Robert Wegman, son and nephew of the founders, became president of Wegmans stores, and the company began to invest in businesses that would enhance its central focus. Wegman acquired an egg farm and developed an on-site meat processing center and a central bakery. He also formed Wegmans Enterprises, Inc. to handle real estate development, leasing, and property management for the company. In 1969 he was named chairman and CEO of Wegmans, and the company expanded outside of Monroe County, building stores in Syracuse, New York.

1970s: Broadening Wegmans' Scope

The 1970s brought new 40,000-square-foot stores that were intended to incorporate the "mall in a store" concept. These new stores included gift cards, floral products, and pharmaceutical departments and were open 24 hours. Wegmans also became only the third chain in the country to use electronic cash registers, installing an optical scanner system in a Rochester store in 1972.

In 1973, Robert Wegman capitalized on the growing demand for do-it-yourself home improvement products, opening his Home Improvement Center next to one of the company's Rochester groceries. The following year, Wegmans purchased Bilt-Rite Chase-Pitkin, Inc., a retail operation that sold lumber, hardware, millwork, garden and landscape materials, and building supplies. Wegmans soon began expanding this chain, building Chase-Pitkin stores next to existing Wegmans stores. Robert Wegman's son Danny assumed the presidency of Wegmans in 1976.

The company began carrying its own store brand items in 1979, and the line became so popular that by the early 1990s, Wegmans was carrying 1,000 items under its own brand name, including a line of soda. In 1983 Wegmans became one of the first chains to install automated teller machines connected to local banks. The ATMs were profitable for the store because Wegmans owned the machines and charged fees to the bank for providing all the front-line services, including replenishing cash and receipt forms. Other developments included the 1986 establishment of the Wegmans Federal Credit Union for company employees. Four years later, the company opened one of the first child care services offered by a private company with its Wegmans Child Development Center in the town of Greece, New York.

Civic Contributions

Wegmans prided itself on its contributions to the communities in which it operated, noting its donations of damaged packaged goods and perishables to local food banks as well as its sponsorship of local events, donations of foods to charitable activities, and contributions to community projects. Wegmans has been nationally recognized several times throughout its history.

In 1987, Fortune magazine named Wegmans the best U.S. supermarket in terms of customer service. In 1991, Wegmans' Work-Scholarship program was awarded a "Points of Light Award" by President George Bush. The company, one of only two supermarket businesses, was also listed in the 1993 publication of The 100 Best Companies to Work for in America. Wegmans' entry in this list was based on the company's child and development center, medical and vacation benefits for part-time workers, scholarship program and Work-Scholarship Connection, job security, and opportunities for promotion.

Wegmans received the American Business Press competition, "Points of Light," for its community service through its Work-Scholarship Connection program. Started in 1987, the program helped mostly 14- and 15-year-old children at risk of dropping out of school. The store gave these participating students part-time jobs and assigned a mentor to each of them. The mentor, an adult co-worker, helped the student on the job and with schoolwork. Students who stayed on the job and stayed in school to graduate from high school also earned a $5,000 college scholarship to the school of his or her choice.

Nevertheless, Wegmans has had its share of controversy and critics. The company came under attack from consumer groups as well as the New York State Attorney General's office for its alleged refusal to adhere to the state's item pricing laws. Wegmans' violations of state item pricing laws dated back to 1986, but the company argued that item pricing increased consumer costs because of the expense of pricing each item. Wegmans continued to stand by its electronic scanner pricing, claiming it was more accurate than price stickers and refused to pay fines levied against it for violations of the unit pricing regulations. Wegmans won the Attorney General's lawsuit, and the item pricing law in question subsequently expired in 1991.

Wegmans also faced protests from environmental groups when it launched a campaign to decrease paper bag use in favor of plastic. Environmentalists claimed that Wegmans was misleading the public with its claim that plastic bags were better for the environment than paper bags. The critics argued that for Wegmans the main issue was cost: paper bags cost $41 per thousand while plastic cost $18.50 per thousand. According to Wegmans, however, paper bags did not disintegrate in modern dumps any more quickly than plastic, and production of plastic was more energy and resource efficient. Wegmans finally responded to protests by letting each customer decide how he or she wanted purchases bagged. Furthermore, the company established bins for customers to deposit plastic bags for recycling, as part of a trial program with Mobil Chemical Company for recycling plastic. Wegmans also began using paper bags made from recycled paper.

Wegmans also felt criticism commonly directed at companies that experience periods of growth and operation expansion. The needs of the company, it was felt, in some cases conflicted with the needs and interests of local residents when Wegmans sought to enlarge existing stores, requiring the purchase of surrounding properties and development of new traffic control patterns.

By 1993, the largest Wegmans stores were 120,000 square feet, three times the size of the "mall-in-a-store" facilities established 20 years earlier. New Wegmans superstores included cafes with Chinese food, pizza and pasta bars, as well as cappucino and coffee bars. Wegmans promoted itself as a strong advocate of health and nutrition, launching a series of bulletins called "Strive for Five," prepared by a registered dietician and featuring information and recipes for fruits and vegetables. Furthermore, in the early 1990s, Wegmans launched a line of diet foods, called "Just Help Yourself," featuring frozen, prepackaged meals comparable to those offered by diet centers.

Expansion beyond New York

In 1993 Wegmans opened its first store outside of New York State, choosing nearby Erie, Pennsylvania. Over the next five years the chain would move eastward, adding five more stores, the last of which was located in Allentown, Pennsylvania. Wegmans appeared as if it was poised to enter the affluent suburbs of Philadelphia. Instead, the chain moved into the New Jersey market, opening a store in West Windsor Township just south of Princeton in 1999. The following year, the chain opened a store in Bridgewater, New Jersey. It also announced plans for a third unit, this one to be located in the upscale Monmouth County bedroom community of Manalapan, an hour-and-a-half south of Manhattan. Monmouth and Ocean counties, with their populations in excess of one million and annual household income of more than $48,000, appeared to be the perfect market in which to spread the Wegmans' concept.

During the 1990s Wegmans replaced older stores with new facilities and constantly adjusted their offerings in accordance to customer feedback. Wkids Fun Center opened in stores to provide supervised child care while parents shopped. The chain added to their list of private label products, offering phone cards, packaged bread, cereal, frozen family meals, as well as vitamins, minerals, and herbs. Wegmans was especially responsive to the baby boomer market that was becoming more health conscious, bolstering not only its offering of product lines but health-related books, magazines, and yoga videos as well. Wegmans also introduced sushi bars to many of the Market Cafes in its stores. In 1999 it opened a highly popular French patisserie in its flagship store, created in large measure by president Danny Wegman's daughter, Nicole.

Wegmans and its efforts were recognized by major publications. In 1998 it was ranked number 16 by Fortune magazine (using the authors of the 1993 book) as one of the "100 Best Companies to Work for in America." While the industry average employee turnover rate was 16.7 percent a year, Wegmans' turnover was only 9 percent. The company would continue to make the top employer list through 2001. According to customers, in a 2000 Consumer Reports survey of supermarket chains, Wegmans ranked second.

However, Wegmans suffered some setbacks in the 1990s. Because of competition from home improvement chains such as Home Depot, the Buffalo-area Chase-Pitkin stores were closed. Wegmans endured a public relations embarrassment in 1997 when it, along with several manufacturers, were sued by the New York State Attorney General's office for colluding to eliminate manufacturers' coupons in Upstate New York, where coupons are more heavily used than in other regions of the country, at great expense to both retailers and manufacturers. Without admitting guilt, Wegmans agreed to settle by paying $500,000.

Wegmans, with its loyal base of customers and unique blend of ambiance, products, and services, has been somewhat immune to competition. Loathe to become so large a chain that management can't keep close tabs on individual stores, Wegmans faced a number of challenges. Mergers in the supermarket industry were creating superchains that commanded tremendous benefits from their economies of scale. Furthermore, grocery products were becoming increasingly more available at drugstore chains and big box discounters like Kmart and Target, which were opening supercenters that included full lines of groceries. In late 2000, the trade journal Supermarket News suggested that Wegmans might be an acquisition target for Kroger or Safeway, or even part of a three-way merger between Virginia-based Ukrop's Supermarkets and North Carolina-based Harris Teeter. Wegmans dismissed all such speculation, intent on remaining independent. Whether the sheer economics of contemporary grocery retailing forecloses that option, however, remained to be seen.

Principal Competitors: Great Atlantic & Pacific Tea Company (A & P); Penn Traffic Company; Safeway Inc.; Wal-Mart Stores Inc.

Further Reading:

  • Khermouch, Gerry, "Wegmans Builds Its Local Base with Private Label," Brandweek, March 8, 1993, p. 23.
  • Linstedt, Sharon, "Supermarkets Brace for a Good, Old-Fashioned Food Fight," Buffalo News, January 28, 2001, p. P50.
  • ------, "Wegmans May Get Buyout Offer Journal Says," Buffalo News, September 21, 2000, p. E1.
  • ------, "Wegmans, Tops Rated Among Nation's Best Supermarkets," Buffalo News, August 18, 2000, p. C7.
  • Narisetti, Raju, "P & G Settles with New York over Coupons--Firm, Nine Others Agree to Provide $4.2 Million in Cents-Off Squabble," September 10, 1997, p. A4.
  • Uttal, Bro, Bill Saporito, and Monci Jo Williams, "Companies That Serve You Best," Fortune, December 7, 1987, p. 98.
  • "A Winning Day at the White House," Supermarket Business, November 1991, p. 9.

Source: International Directory of Company Histories, Vol. 41. St. James Press, 2001.