Shoppers Food Warehouse Corporation

International Directory of Company Histories, Volume 66 (1995) by Ed Dinger

Shoppers Food Warehouse Corporation

4600 Forbes Boulevard Lanham, Maryland 20706 U.S.A. Telephone: (301) 306-8600 Fax: (301) 306-8855 Web site: http://www.shoppersfood.com

Wholly Owned Subsidiary of Supervalu Inc. Incorporated: 1956 as Jumbo Food Stores Employees: 5,000 Sales: $971.7 million (2002) NAIC: 445110 Supermarkets and Other Grocery (Except Convenience Stores)

A subsidiary of Supervalu Inc., Shoppers Food Warehouse Corporation operates a chain of 57 warehouse-style supermarkets, serving Delaware, Maryland, Virginia, and the Washington, D.C., markets. The company's headquarters is located in Lanham, Maryland. Although its takes a no-frills approach—items are presented for sale in their own packing cartons and customers bag their own food—Shoppers offers a wider range of products and services than other warehouse chains, including baked goods, cookware, produce, salad bars, and prepared food.

Founder Opens First Grocery Store in 1929

The founders of Shoppers were two brothers, Irving and Kenneth Herman. Their parents were Russian immigrants who opened a small delicatessen in northwest Washington, D.C., in 1919. The boys worked in the store, sweeping floors and stocking shelves, while the family lived in the back. Irving did not intend to devote his life to the grocery business and was instead interested in becoming a lawyer. While attending George Washington University Law School, however, he opened a grocery store in Washington, financed by a $300 wedding present and a loan of some $500, and ran it with his wife Toby. After finishing law school the next year, he was prepared to get out of the business and start practicing law, but with the country lapsing into the Great Depression of the 1930s, his prospects for a legal career were dim. His bank loan officer, who had been keeping tabs on Herman's grocery store, weighed in with his opinion, "I've seen many unemployed lawyers. Stay in business." Herman took his advice. Several years later, he was joined by his brother, and in the late 1930s they launched the first Jumbo Food Stores—Shoppers' predecessor.

With the population boom during the post-World War II years and the rise of the supermarket concept, the Herman brothers successfully added several Jumbo stores in the area surrounding Washington, D.C. Irving's son, Michael, also became involved in running the business. By the mid-1970s, however, the company grew stagnant and was in trouble financially. In order to stay afloat, it had to seek concessions from an employee union. Desperate for a way to turnaround the company, the Hermans decided to try the warehouse approach and opened their first Shoppers Food Warehouse in 1978. A key factor in the move was the computer technology that by this time had become instrumental in the supermarket industry. By scanning items at the cash register, the Hermans realized, a store could maintain much better control of both inventory and prices. The concept was to eliminate private-label goods and sell only name brand products, but at prices 20 to 30 percent lower than conventional supermarkets. Shoppers would be able to maintain a pricing edge by keeping employment and services to a minimum. Hence, items were simply stacked in their packing boxes and customers bagged their own groceries.

The Shoppers formula worked, and the company began to convert all of its Jumbo stores to the new warehouse format. In 1986, the company dropped the Jumbo name in favor of Shoppers. The Hermans were not the only grocers to try the warehouse format, but they were more successful at its implementation than others, a key factor in the highly competitive Washington market. The area was dominated by Giant and Safeway, and a number of major chains—Acme, Grand Union, Memco, and Pantry Pride—had all attempted to break into the market and failed. Shoppers was able to take advantage of the situation, buying some of the shuttered stores and opening warehouse units in their place. As a result, Shoppers, with 11 stores, rose to third place in the market, albeit a distant third, controlling just 5.7 percent, or $211 million of a $3.6 billion market.

Ownership Changes in the Late 1980s–Early 1990s

Shoppers reached a turning point in 1988. Irving Herman was ready to retire, and his son Michael wanted to exit the business to pursue other interests. As a result, the family was open to selling part of the company and found an ideal suitor in Dart Group Corp., which operated the Trak Auto discount auto parts chain and the Crown Books chain. Dart's chairman was Herbert Haft, who was also the son of Russian immigrants and had attended high school and George Washington University with Kenneth Herman. Haft had made his fortune in the drugstore business. His father had owned a Baltimore drugstore, where Haft worked as a child, and after becoming a pharmacist he opened his first Dart drugstore in downtown Washington in 1954. He eventually built his business into a 73-store discount chain and became a major player in real estate. Haft's son Robert, who held a Harvard MBA, joined Dart in 1977 and launched Crown. Two years later, Dart established the Trak Auto. In 1984, Dart sold off the original drug store chain and the Hafts became involved in takeover bids as a way to enter the supermarket business. They failed in their attempts to land Safeway Stores Inc., Supermarkets General Corp., and Stop & Shop Co. However, they made money selling their shares at a premium, which led to the perception that they were not truly interested in food retailing, just stock speculation. The hope was that by becoming involved with Shoppers, the Hafts would gain some credibility as food retailers, and when making future bids in the industry they would not simply be dismissed as hostile raiders.