GSC Enterprises, Inc.

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GSC Enterprises, Inc.

130 Hillcrest Drive
P.O. Box 638
Sulphur Springs, Texas 75483-0638
U.S.A.
Telephone: (903) 885-0829
Fax: (903) 885-6928
Web site: http://www.grocerysupply.com

Private Company
Incorporated: 1947 as Grocery Supply Company
Employees: 1,150
Sales: $1.17 billion (2005 est.)
NAIC: 424410 General Line Grocery Merchant Wholesalers

GSC Enterprises, Inc., is one of the top wholesale distributors of food and other goods to convenience stores in the United States. The company delivers candy, beverages, groceries, prepared foods, tobacco, and health and beauty products from a wide range of vendors to more than 15,000 locations in 15 southern and midwestern states. The firm also serves gas stations, supermarkets, military commissaries, and institutions, and provides money orders and other financial services to 5,000 clients in 22 states through subsidiary Fidelity Express Money Order Company.

BEGINNINGS

The origin of GSC Enterprises dates to February 18, 1947, when Grocery Supply Company opened for business in Mt. Vernon, Texas. It was founded by Ken McKenzie, Curtis McKenzie, and Woodrow Brittain to supply food and other products to area grocers. With the interstate highway system still in its infancy and trucking equipment relatively unsophisticated, more than 50 similar firms were located within a 100-mile radius.

In 1953 Grocery Supply expanded by acquiring Jackson Brothers Wholesale Co. in nearby Sulphur Springs, about 80 miles east of Dallas. It subsequently based its operations there, and after several expansions of the Jackson Brothers space the firm moved in 1965 to a larger 42,000-square-foot building. As the company expanded its client base by buying out small regional distributors, this facility would be enlarged over the years to more than ten times its original size. To help manage its growing business, in 1977 Grocery Supply added an electronic commerce system for vendors.

In 1980 the company boosted the pace of its acquisitions. Many of the firms it bought were older candy or tobacco distributors, and Grocery Supply grew rapidly during the decade while honing its focus on serving convenience stores.

FIDELITY EXPRESS FOUNDED IN 1988

In 1988 the company formed a new unit called Fidelity Express Money Order Co. to facilitate retail money order sales. The firm also began sponsoring an annual charity golf tournament during the year that raised money for local children’s organizations.

In the late 1980s an export division called Grocery Supply International was formed to supply grocery stores, pharmacies, and convenience stores in Mexico with products. Some items, such as tobacco, were not offered because of the high duty and taxes charged. Several years later this unit’s territory was expanded to include Panama.

By 1991 GSC Enterprises, as the company was now known, had annual sales of $688 million, which won it a place on Forbes ’ list of the top 500 privately owned companies in America. Control of the firm had passed to Ken McKenzie’s son Michael K. “Mickey” McKenzie, who held the positions of chairman and CEO. GSC now distributed a wide variety of goods that ranged from food and beverages to tobacco, health and beauty products like toothpaste and shampoo, and trading cards.

While many of its clients were independent retailers, GSC also served chains such as Kmart, Exxon, and Chevron, and distributed products to military commissaries in Texas through a subsidiary, Sweeney & Co. Sales in this sector were growing as many vendors began to switch from direct delivery to middlemen like GSC. Other work was performed for 400 Texas school districts, for which the firm stored and delivered commodity items.

To help educate customers about its vendors’ offerings, in the spring of 1992 GSC sponsored a trade show called The Marketplace. Some 900 retailers and 149 suppliers attended the two-day event, which featured seminars on customer service and scanning technology. The show was seen as a way to let vendors display new products or demonstrate items that were difficult to explain to retailers. The Marketplace subsequently became an annual event.

Acquisitions continued in 1993 with the purchase of Jefferson City, Missouri-based Simpson Distributing Company, which operated out of a 21,000-square-foot warehouse. A few months later the firm also bought a company called Chalmers Distributors, Inc.

By 1994 GSC’s convenience store sales had grown to $750 million, with another $100 million accounted for by supermarkets. The firm was the fifth largest tobacco and candy distributor in the United States and one of the top 50 wholesale grocers, supplying 4,000 convenience stores and supermarkets in the South. Its warehouse space had grown from 1.1 million square feet two years earlier to 1.37 million feet, while the number of stockkeeping units (discrete items that differed in content, quantity, or size), had more than doubled to 43,700.

MOVING EAST OF THE MISSISSIPPI IN LATE 1994

In December 1994 the company bought Wagner Candy Co. of Paducah, Kentucky, a 76-year-old firm that had $70 million in annual sales and 138 employees. Like GSC it specialized in convenience stores, serving an area that included Kentucky, Tennessee, Illinois, Indiana, Missouri, and Arkansas. The acquisition represented GSC’s first foray east of the Mississippi River. Early the following year Fidelity Express also purchased the Entronics Division of Inotek Technologies Corporation, which designed and manufactured automated money-order dispensers for retail stores.

In May 1995 GSC made its largest acquisition ever, purchasing the grocery distribution business of Lewis Bear Company of Pensacola, Florida. Lewis Bear had sales of $363 million and served 250 customers in Alabama, Mississippi, Georgia, Florida, and Louisiana, most of them military commissaries. The company, which subsequently became known as Grocery Supply Company-Southeast, had facilities in Pensacola and Sanford, Florida, and Columbus, Georgia.

GSC’s acquisitions boosted sales above $1 billion and increased its warehouse space to 2.15 million square feet. To track items in its large facilities, the company was using a computerized radio-frequency system that helped it quickly locate specific pallets and find empty slots for new ones. Pallets and slots were each bar-coded and forklifts were equipped with transmitters that sent their status to a central computer.

COMPANY PERSPECTIVES

Our customers span the gamut of grocery retail outlets, from convenience stores, grocery chains and drug stores to military bases and supercenters. And we serve every one of them with the same combination of customer service, professionalism, advanced technology, and fair prices that has become synonymous with Grocery Supply Company. We started as a family business and have always believed that no matter how big you become, you must continue to treat your employees and your customers like members of a family. It’s that philosophy that has brought us to this point in time and will keep us rolling in the years to come.

Having completed the purchases of Wagner Candy and Lewis Bear, GSC began closing some smaller distribution centers and serving their customers out of its larger facilities, with warehouse space falling to 1.86 million square feet by 1996. During that year the company introduced a service called Deli Fast Foods, which offered prepared foods in kiosks for cooking onsite. The company had sales of nearly $1.2 billion for the year.

Along with distribution of goods, GSC also offered support services that included merchandising advice and category management for beverages, candy, and cigarettes. A variety of special programs were available including “end-cap” racks filled with about 80 top-selling products from different vendors, which helped retailers move impulse items. GSC also published a quarterly catalog called the Advantage Program, which featured merchandise at discounted prices, while the weekly MarketPulse bulletin gave information on new or discontinued items, price changes, and promotions. For larger accounts the firm held quarterly meetings to update them on new products and sales trends, and it maintained an online ordering service that all customers could use to place orders or get other business information, later adding a bulletin board for their comments. Additionally, GSC sponsored incentive programs that gave store owners the chance to win vacations, which were given out in a series of random drawings. Vendors sent staff on the trips, which allowed them to develop relationships directly with retailers.

FIDELITY EXPRESS OFFERINGS EXPANDED IN 1999

In 1999 Fidelity Express began offering bill payment services for major utilities and phone companies, in addition to the money order and debit and credit card processing it already performed. A year later GSC closed the former Wagner Candy Company distribution facility in Paducah, Kentucky, as part of a consolidation of operations, servicing its customers out of Sulphur Springs. The firm’s Georgia warehouse was also closed and its functions shifted to Pensacola, where 75 jobs were added and sales volume increased by 43 percent. By 2001 this consolidation had shrunk the firm’s warehouse space to 1.68 million square feet.

In 2004 GSC’s Pensacola warehouse was damaged by Hurricane Ivan. Operations quickly resumed there, however, and the facility was repaired.

GSC’s corporate slogan was “Big enough for the job, small enough to care,” and the privately owned firm took pride in fostering family-like relationships among employees and with customers. The company also worked with a Dallas-based spiritual counseling firm called Marketplace Ministries that provided an on-call chaplain to its employees and hosted a spiritual luncheon for them each month. The latter was voluntarily attended by nearly a quarter of GSC’s staff, more than double the amount typically seen.

In January 2006 company president Larry D. Kerns took the additional title of CEO, with Mickey McKenzie remaining in place as board chair. In the spring the firm completed construction of a new warehouse in Junction City, Kansas, and in the fall it announced plans to build new offices for the growing Fidelity Express in Sulphur Springs, which were expected to open within two years.

Fidelity Express was one of the top five American money order providers, selling more than 20 million money orders worth $2.5 billion per year. It served more than 5,000 locations in 22 states, and had launched a new service, money remittance. Some 40 million U.S. citizens did not have bank accounts and 20 percent paid their bills at retail locations, making such services an important draw. One of Fidelity’s major clients, Kroger Company, reported that two-thirds of bill-paying customers also bought items while they were in the store.

KEY DATES

1947:: Grocery Supply Company is founded in Mt. Vernon, Texas.
1953:: Acquisitions begin with Jackson Brothers Wholesale Company.
1965:: Firm moves into new 42,000-square-foot quarters in Sulphur Springs.
1980:: Pace of acquisitions increases.
1988:: Fidelity Express Money Order Company is established.
1992:: Marketplace trade show is introduced to bring vendors and customers together.
1994:: Purchase of Wagner Candy Company of Kentucky takes firm east of the Mississippi.
1995:: Expansion to Florida with the Lewis Bear acquisition; sales top $1 billion.
1999:: Fidelity Express begins offering electronic bill payment services.
2000:: Consolidation of operations begins; Kentucky warehouse closes.
2006:: New Kentucky facility is built.

Sixty years after its founding, GSC Enterprises, Inc., had grown into one of the top distributors to convenience stores in the South and Midwest, establishing strong connections to retailers and vendors through its merchandising programs and annual Marketplace trade show. The firm’s expansion was continuing as it added new facilities and boosted the offerings of subsidiary Fidelity Express Money Order Company.

Frank Uhle

PRINCIPAL DIVISIONS

Grocery Supply Company-Sulphur Springs; Grocery Supply Company-San Antonio; Grocery Supply Company-Southeast; Fidelity Express.

PRINCIPAL COMPETITORS

McLane Company Inc.; H.T. Hackney Company; Core-Mark Holding Company, Inc.; Eby-Brown Company; The Western Union Company; MoneyGram International, Inc.