F&M maintains course with bold growth plans

Drug Store News, Sept 30, 1991 by James Frederick

F&M maintains course with bold growth plans

WARREN, Mich. - F&M Distributors president and chief executive Frank Newman has called F&M "the most copied company in the deep discount industry," and there is some justification for that. The nation's third-largest off-price chain pioneered the concept of deep discount drug and HBA retailing, along with many of its fundamental principles like on-deal buying, cut-case merchandising and adherence to word-of-mouth advertising.

F&M was the brainchild of Fred and Margaret Cohen, who opened for business in Ferndale, Mich. in 1955. When the Cohens finally sold out in 1977, their store was doing $13 million a year in 9,000 square feet of selling space.

That year, an investment group that included Talon, Inc. bought the store and began expanding it in the greater Detroit market - and later into Chicago. They kept many of the Cohens' ideas, including the steep everyday discounts, the friendly customer service and the reliance on brand names purchased on deal and stacked high and deep.

F&M's last top manager before the Newman era was Bill Edwards, who, by 1985 had steered the company into a successful and profitable operation of roughly two dozen units generating well over $100 million in sales. Edwards later served briefly as president of Revco D.S., and now competes directly with his old company as head of hometown rival off-pricer A.L. Price.

Newman, a native of Britain, signed on as F&M's new ceo in December, 1985 after earning his retail wings as a precociously young, rapidly advancing merchandising and operations executive at discount general merchandise chains like TG&Y, F.W. Woolworth and Zody's.

Newman saw his first task as laying the groundwork needed to allow F&M to grow more rapidly. He saw the chain losing business and growth opportunities to newer deep discount competitors who'd had plenty of time to learn the business from F&M during its years of gradual expansion, and he wanted the chain to reclaim what he saw as its rightful place in the industry. The first order of business, however, was to install the kinds of buying, operating and merchandising support systems at headquarters and in the stores that could support a more rapid, systematic expansion.

Thus, the deep discounter underwent a major overhaul. It lured in new management talent. It launched a major automation effort for its pharmacies, front-end checkstands and back-end offices. It stripped the stores down to their essentials: HBA, cosmetics, household products, snack foods and a few other categories, shedding most "fringe" GM items like electronics, hardware and toys. It doubled warehouse space, boosted support staff and developed a completely new store format to appeal to middle- and and upper-income female shoppers.

That spadework in 1986 and 1987 paved the way for F&M's emergence as a multi-state force. The deep discounter quickly doubled its presence in Chicagoland through new-store development and acquisitions, and continues to add sites. In 1987, F&M leveraged its way into major East Coast markets like Baltimore/Washington, D.C. with the brilliantly conceived purchase of Pathmark's 10-store off-price operation. It expanded via acquisition in Milwaukee.

An astute and aggressive acquisition policy continues to play a big role in the F&M's expansion. The chain nearly doubled its strength in the Baltimore/Washington and Mid-Atlantic regions with its purchase of former Dart and Designer Depot stores. "Those of us that are growing will be looking more toward second-use sites," Newman told Drug Store News earlier this year. "The collapse of Ames, Child World, Hills and other stores. . . helps us to off-set the lack of new construction [in today's economy]."

In 1990, F&M broke into the Minneapolis/St. Paul market. True to form, it has snapped up locations quickly to build market presence, and now has eight stores throughout the metro market. The same approach carries in the key Boston market, which the chain entered earlier this month with a store in Brockton, Mass. Four greater-Boston units are planned by the end of the year.

What's more, the deep discounter still sees big fill-in potential in most of its biggest markets. Chicago, for instance, could support 50 F&M stores, Newman said; the chain will have 33 open there by the end of the year. Minneapolis could see as many as 15 units, he said, and Baltimore/ Washington will host 25 stores by 1992.

PHOTO : Serviced cosmetic/fragrance departments are F&M hallmarks. F&M pioneered such concepts as buying on deal and cut-case displays.