Harry’s Farmers Market Inc.

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Harry’s Farmers Market Inc.

1180 Upper Hembree Road
Roswell, Georgia 30076
U.S.A.
(770) 667-8878
Fax: (770) 664-4920
Web site: http://www.hfm.com

Public Company
Incorporated: 1987
Employees: 1,160
Sales: $140 million (1997)
Stock Exchanges: NASDAQ
SICs: 5411 Grocery Stores

Harry’s Farmers Market Inc. is an Atlanta-based grocery chain, but its megastores are far removed from the traditional groceries of yesteryear. Specializing in perishable food products and ready-to-eat meals, Harry’s appeals chiefly to a clientele with sophisticated tastes, plenty of disposable income, and little time to cook meals from scratch. In 1998 it had three 100,000-square-foot stores in the Atlanta area, as well as three “Harry’s In A Hurry” locations, 10,000-square-foot stores oriented toward convenience. The exotic fare offered by Harry’s has elicited almost universal praise; but founder Harry Blazer’s management style has not earned the same admiration. Since going public in 1993, the company has lost money each year and its stocks have taken a pounding. Many analysts grant Blazer, considered by many a visionary, the credit for his stores’ great appeal to customers; but they also give him the blame for his company’s poor performance as an investment.

A Difference of Visions: Company Origins

The story of Harry’s Farmers Market is inexorably tied to that of its founder. Like a large portion of Atlantans, Harry Blazer is not a native of the city. Born in 1951, he grew up in the town of Cranston, Rhode Island. As a teenager he was heavily interested in music, particularly jazz, and commuted to Boston once a week for drum lessons at the Berklee College of Music. His first experience in retail came when he worked as a stock boy at a discount clothing store in Cranston called the Lorraine Mill Outlet.

At the age of 17, Blazer enrolled in Brandis University, where he majored in philosophy. Though he was an honor student, he dropped out and went on the road as a professional drummer. At one time or another, he played drums for Diana Ross, Dean Martin, Paul Anka, Johnny Mathis, Vic Damone, and Grammy-winning bassist Abe Lorelei. Later he would tell the Atlanta Journal and Constitution, “In a lot of ways, music and business are related. There always has to be a balance between passion and intelligence for success.”

Blazer’s older brother Robert had moved to Atlanta, where in 1977 he established a popular store called the DeKalb Farmers Market. Located in the Decatur suburb, east of downtown, the store featured a variety of foods from around the world. Its clientele consisted mainly of internationals, as well as Americans with a taste for exotic foods and a variety of fresh produce. Rapidly the store grew from a 7,500-square-foot open market to a facility twice that size, and from that to a 22,000-square-foot store. Then an ice storm in 1979 destroyed the building—which was not insured. But with the help of his most loyal customers, who loaned him money, Robert rebuilt the market in eight weeks. He also hired his younger brother to work as his general manager; Harry would continue in that position for the next eight years.

During the 1980s the DeKalb Farmers Market prospered and became a favorite shopping place for people from all over the sprawling metropolitan area of Atlanta. Harry, however, left his brother’s store in 1987 over “religious differences”—this according to several Journal and Constitution reports, none of which reported the exact nature of those differences. The cause may have been Robert’s interest in est (Erhard Seminar Training), a quasi-religious self-help movement with cultish overtones. According to a 1987 report in Creative Loafing, a local arts and entertainment paper, Robert encouraged his employees to take courses in the est program. Whatever the exact cause, Blazer left his brother’s store on May 22, 1987, taking with him a $400,000 severance package. He was 36 years old.

In October of that year he announced that he would open a farmers market of his own. Construction of the 60,000-square-foot facility would begin in December, and his attorney told Joe Earle of the Journal and Constitution that the building would cost $6 million. From the beginning Blazer seemed able to attract the respect and backing of successful people; his builder, for instance, would be David Pattillo, a prominent Atlanta contractor.

Outwardly the Blazer brothers showed no animosity toward one another, at least not at this early stage. Regarding his decision to leave Robert’s store, Blazer told Earle, “We had totally different management philosophies, and he’s the owner.” He also said “… I wish him the best and I think he wishes me the best.” Through his attorney, Robert returned the sentiment: “We wish Harry well.” As though to prove his desire not to compete with his brother, Harry located his store in the northern suburb of Alpharetta, 25 miles away from the DeKalb market. For a time, peaceful coexistence seemed possible.

A Dream Store in the Late 1980s

From the beginning Harry’s had a reputation as a shopper’s dream. On the two-year anniversary of the opening of its first store, Sam Brown of the Atlanta Journal and Constitution wrote, tongue-in-cheek: “Before [1988], it was difficult to find fresh Afghan bread, calimari steaks, Ranier cherries or miniature bok choy in the Alpharetta area. That dilemma ended with the opening of Harry’s.” Now, Brown reported, shoppers could buy “the bread of the [Afghan] freedom fighters,” as well as 35 other fresh-baked varieties. Other unusual offerings noted in his report were Walla jumbo onions from Washington state, California Black Mission figs, conger eel, and New Zealand tamarillos.

By 1998 the company’s stores sold 15,000 different items. According to material at the Harry’s Web page, these included more than 1,200 varieties of fruits and vegetables from around the world; 400 types of cheese from far-flung countries, as well as a wide range of dairy products; and 200 kinds of breads, muffins, bagels, pastries, cakes, and pies baked daily. In addition to Coleman’s beef and Perdue chicken, customers could choose from pork, lamb, veal, duck, rabbit, goose, beefalo, quail, and other exotic items; 250 types of fish and seafood representing 100 different species; and 85 deli selections, featuring the Boar’s Head brand of cold cuts. With the boom in the coffee business during the 1990s, Harry’s could boast 75 different coffee blends, including cappuccinos, espressos, roasts, and flavored varieties, from more than a dozen countries. It also sold a full line of wines, featuring some 3,000 foreign and domestic varieties, and more than 250 specialty domestic and imported beers. In addition, the stores sold nonperishable food products, including hard-to-find and gourmet items, natural products, and foods useful in the preparation of ethnic cuisines; a limited line of kitchen-oriented housewares; 500 health and beauty aid products; floral items; and gardening plants and flowers.

But the crowning touch at Harry’s, particularly as the market for these items grew during the 1990s, was its prepared foods. The store featured some 200 of these ready-to-eat meals, made from scratch daily. Wendy Webster of the National Restaurant Association told the Journal and Constitution in 1991, “People want to spend more time at home, eating off their own china, but they don’t have the time to prepare the meal.” She also said that industry experts had predicted rapid growth in this sector of food service—an area in which Harry’s excelled.

The Alpharetta store earned a profit within just one year and, in 1990, its celebrated its second anniversary with a two-week fair that included pony rides, a skydiving exposition, a dunking tank, a pie-eating contest, and a petting zoo. The next year Harry’s doubled the size of its Alpharetta store. With so much going for it, success seemed inevitable.

Brother Against Brother in the Early 1990s

Harry’s opened its second store in the northeastern suburb of Duluth, in Gwinnett County, in October 1991. This placed it in direct competition with a store called Fresh Festival, which opened at about the same time. A Georgia State University analyst told the Journal and Constitution that, given the size of the marketing area and the similarity of their offerings, it was unlikely both businesses would survive. But Blazer was confident: referring to his competitors, he said, “We’ve kind of defined the term ’farmers market,’ and to a large extent, these guys are trying to copy us.” As it turned out, both Blazer and the marketing analyst were correct: within a year Fresh Festival was out of business and Harry’s was thriving.

The upscale farmers market concept was clearly a hot idea, and Atlanta became a battleground for retailers. And the competition between Harry and his brother Robert was certainly “blazing.” By 1993, the DeKalb Farmers Market was a 140,000 square-foot store, Harry was planning to open his third store in Cobb County to the northwest of downtown, and the Blazer brothers had dropped all pretense of peaceful coexistence. “There is no way to gauge from patronage numbers the impact of the competition on the markets,” Dena Smith of the Journal and Constitution reported in September, 1993, “but shopper interviews confirm that Harry’s has siphoned some business from DeKalb.” Her article quoted a number of shoppers who expressed dissatisfaction with the DeKalb market, or who praised Harry’s, or both.

Company Perspectives:

Harry’s Mission Statement: We at Harry’s want to delight you by consistently exceeding your expectations for quality products and service. Please let us know how we ’re doing. And remember, no sale is ever final until you ’re completely satisfied.

Robert Blazer told Smith, “My younger brother is very competitive with me.” He also hinted that Harry had copied his idea. For his part, Harry said, “My brother was the one who introduced me to jazz, and I went on to pursue a career in music. And then he introduced me to the farmers market concept, and I went on to start my own. Robert deserves a lot of credit for the concept that he developed and for the guidance that he’s given me, but when it comes to execution of the concept, I’m better.”

In 1993, after just five years in business, Harry’s made its initial public offering of stock on NASDAQ. In line with his ability to attract successful people to his cause, Blazer’s five-member board of directors was composed of some prominent names in Atlanta business. They included Home Depot President Arthur M. Blank, Post Properties CEO and President John Williams, and David Pattillo, whose company had built the first Harry’s. Stock sold initially for $17 a share, and investors were so bullish that Harry’s quickly raised $23 million. With this money, Blazer opened the Cobb facility, as well as two Harry’s In A Hurry stores. The latter would be much smaller than the superstores and would focus on prepared foods, which they would offer in a ready-access, convenient—and decidedly upscale—atmosphere.

Up to 1995, the geographic center of Harry’s had been on the north side of Atlanta. But in the middle of that year, the company established a market in Clayton County, far to the southeast of town. It was to be a short-lived venture: by November, after just five months in business, the store was closed. The company attributed its failure to the fact that surrounding areas did not offer enough customers from the socioeconomic bracket that would sustain a store like Harry’s. But by then many stockholders were placing the blame, not only for the Clayton store’s failure but for the company’s lackluster financial performance, on Blazer himself.

1995: The “September Massacre”

The company was suffering from its losses at the Clayton County store and from its Alpharetta food processing plant, which was operating at less than half its capacity. In February 1996 the underwriters of the initial public offering, Robinson-Humphrey, discontinued coverage of the stock, and the next month the Journal and Constitution reported that Harry’s stock had lost 90 percent of its value. Paul Lapides, a business professor at Kennesaw State College, told the paper, “Investors … wanted to own the next Wal-Mart or Home Depot. It’s just not likely to happen with Blazer.”

Blazer’s dictatorial style had made him a controversial figure. “While Blazer’s upscale farmers market concept is studied by others in the industry,” Chris Roush of the Journal and Constitution noted in March 1996, “his management style is not. Dozens of former executives and employees … speak of him in tones and phrases preachers reserve for the devil himself.” A former employee called Blazer “an incredible manipulator” and said, “Most places are dysfunctional, but Harry’s tops the charts.” According to Roush, “Blazer, his dark eyes on fire … knocked over chairs and desks in meetings with employees, screaming profanities with such force that he spit repeatedly on one former worker during a meeting last summer.”

A catalogue of negative facts soon emerged and, since Harry’s was now a public company, these were subjected to increasing scrutiny. Among the problems noted, and reported by Roush, were a lack of controls and accounting over the price of producing food at the company’s plant; failure to install a human resources management software program that had cost the company $200,000; favoritism by Blazer toward certain employees, which included his buying houses for his secretary and a few others; and, according to a 1994 survey by a consulting firm, unusually high stress levels among employees.

In August 1995, on the recommendation of a team that included CFO Robert Aldworth, the board removed Blazer from his positions as CEO and president, but allowed him to remain chairman. According to Roush, “Blazer won’t say where he went” after this decision, though Blazer did comment, “I wanted to do some thinking from a distance.” On a Thursday in late September, he submitted a proposal for reinstatement as president, a position which the board had given to Aldworth. The board rejected his idea, and that weekend he struck back.

On Saturday he had the offices of Aldworth and several others padlocked. The next day, using his control of voting stock, he called a special meeting and removed four of the five board members—all except for himself. Then he named replacements, who promptly reinstated him to his positions. The stock market responded to Blazer’s coup, which employees dubbed the “September Massacre” on Monday, prices dropped 40 percent. Harry’s closed out the day as NASDAQ’s biggest loser.

An Uncertain Future Beyond the 1990s

Blazer’s management problems were further exacerbated in October 1995, when his vice-president for research and development left him as well. This was no ordinary company executive: Janet Thomiszer-Blazer was his wife, and she wanted out of the marriage as well. Thomiszer-Blazer, who had worked with him from the old DeKalb market days, had operated the vital prepared foods division. In August 1995, at the time of his ouster by the board, the couple separated; then, after the “September Massacre,” she filed for divorce and sold 50,000 shares—about one percent of the company’s total outstanding—for $225,000.

An analyst at J.C. Bradford told the Journal and Constitution in late 1995 that Harry’s “doesn’t have a lot of time. The turnaround has to be very quick, very dramatic.” In an August 1997 New York Times profile, Dana Canedy began with a positive appraisal of the Harry’s markets themselves and a quote from a customer: “There’s no place like it.” But Canedy went on to say, “Trouble is, Harry’s is a financial mess by any measure.” In 1995 it had lost $1.75 million on sales of $146 million, which Canedy called “bad news by any standard. And that was its best financial performance in four years, a period in which it has lost $23 million.”

In October 1995 Blazer announced that he would restructure the company. He fired 50 employees, a move that he said would save $2 million. He also dropped an ethics policy adopted by the board during his period of exile and in its place instituted a statement in which employees were encouraged to value their loyalty—in order—to him, to the company, to their customers, and to coworkers. Noting that he had never heard of a statement of loyalty to a company founder in any of the hundreds of mission statements he had reviewed, Lapides told Roush, “This statement confirms everything that is wrong with the company.” In response, Blazer quipped that he was not trying to start “a Hitler youth movement.”

In spite of these negatives, a number of positive signs appeared for Harry’s as the mid-1990s became the late 1990s. The company won a contract to cater the Paralympics, a series of events for disabled athletes, approximately one-third the size of the Olympics, which followed the 1996 Summer Games in Atlanta. More significantly, in 1997 it entered into a joint venture with Boston Chicken which, as the Atlanta paper reported, “would finally lead to a national expansion of the upscale grocer.” A company formed by Boston Chicken President Saad Nadhir, Progressive Foods, would develop Harry’s locations outside Georgia and Alabama. The deal would give Harry’s $23 million, with which it could pay down some of its staggering debt load.

In mid-1997 Boston Chicken tested the Harry’s concept in Charlotte, and later in the year it underwent a reshuffling of its management team. As a result, Harry’s was able to work out an even better partnership deal, gaining still more cash and the right to operate in the Carolinas and Tennessee. Harry’s sold off its costly bakery and announced plans to remodel all three of its large stores. It would also be opening a third Harry’s In A Hurry store in late 1997 and a fourth in early 1998.

The company’s future remained uncertain. In December 1997, following the announcement of a $5 million quarterly loss, the Journal and Constitution reported, “Next year will be critical for Harry’s Farmers Market.” Blazer himself had stated in an official company release that Fiscal 1999, which began on February 1,1998, would be a “make-it-or-break-it” year for his company.