Ukrop’s Super Market’s, Inc.

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Ukrop’s Super Market’s, Inc.

600 Southlake Boulevard
Richmond, Virginia 23236
U.S.A.
Telephone: (804) 794-2401
Fax: (804) 794-7557
Web site: http://www.ukrops.com

Private Company
Incorporated: 1937
Employees: 5,600
Sales: $575 million (2000 est.)
NAIC: 44511 Supermarkets and Other Grocery (Except Convenience) Stores

Ukrop’s Super Market’s, Inc. operates a chain of 27 grocery stores in Virginia, primarily in the Richmond area, where it is the market leader. Ukrop’s stores, known for their broad selection of goods, feature prepared foods made at the company’s central kitchen, which produces more than 150 prepared food items, including complete prepackaged meals. Owned and managed by the Ukrop family, the chain sells no alcohol and closes on Sundays, yet it manages to dominate a market populated by large national chains. In 2000, Ukrop’s controlled 38.9 percent of the market for grocery sales in the greater Richmond area.

1930s Origins

As a supermarket chain, Ukrop’s began modestly, a characteristic that would describe the company’s existence during its first half-century of business. The first store, started by husband and wife Joe and Jacquelin Ukrop, opened in 1937 in Richmond, Virginia. Located on Hull Street, the first store belied the grandeur of the Ukrop’s that would follow in its wake, measuring 16 feet wide and 32 feet long. In their garage-sized store, the Ukrops made $23 in their first day’s sales, a total that thrilled Joe Ukrop.

The store survived the last years of the century’s most devastating economic crisis, eventually becoming a fixture in the Richmond area. Despite the success of the store, Joe and Jacquelin were in no hurry to open a second store. Instead, the Ukrops were content with running a single store and leading a simple life. Devout Baptists, the Ukrops raised their children according to their faith, closed the store on Sundays, and sold no alcohol. Jacquelin cooked lunch for the employees, and Joe frequently lent a hand to neighboring farmers, closing the store when the demands of harvest season required his help. The Ukrops demonstrated no interest in parlaying the success of one store to finance the establishment of another store. In fact, 26 years separated the opening of the first store from the debut of the second Ukrop’s, time enough for the Ukrop’s children to mature and take an active role in the leadership of the family business.

1960s: A Second Store and a Second Generation

James Ukrop joined the business at his father’s side in 1960 and began laying the seeds for the company’s first expansion. A second store opened three years later, beginning an initial expansion spree that brought the store count to five by the time James’s younger brother Robert joined the family business. When Robert Ukrop joined the company in 1972—serving as manager of two Richmond stores—Ukrop’s controlled seven percent of the grocery market in Richmond. By comparison, the market leader, Safeway, commanded 35 percent of the market, far outdistancing the independent and privately owned Ukrop organization. When Robert Ukrop joined the company, however, his brother, who served as chief executive officer, and his father, who served as chairman, were ready to begin another major expansion drive. In addition to new stores, the company purchased a bakery as part of its 1970s expansion program. The success of the bakery taught the Ukrops the efficiencies that they could achieve through a central production site, which served as a key lesson in later years when the company reached the defining moment in its history. By 1981, after a steady stream of new store openings, Ukrop’s had closed the distance on its much larger rivals, laying claim to 26 percent of the market.

Ukrop’s command of the Richmond market was impressive, especially in light of the company’s insistence on remaining closed on Sundays and refusing to sell beer or wine. Observers credited the company’s unwavering focus on details, which was a by-product of the Ukrop’s signature trait: its attention to customers. Providing superior service enabled the company to differentiate itself from the deep-pocketed national chains with units in the Richmond area. “The people that know them, know them as a company that runs superb foods stores,” explained Bill Bishop, a food-retailing analyst, to Marketing News in a June 5, 1989 interview. “I think that far and away the most important thing that Ukrop’s does is to put their customer number one,” Bishop continued, noting “A lot of people say that, but it’s not done all that frequently, and they do that.” Robert Ukrop reiterated the importance of customer service, explaining to the Richmond Times-Dispatch in a June 12, 1996 interview: “Our goal isn’t to keep our eye on the market share, but to take care of our customers. People keep score, but that is not what is driving our business. The numbers will take care of themselves if we keep our eyes on our customers.”

Perhaps as important as the company’s focus on customer service was its extensive investment in employee training and its interest in developing an environment conducive to retaining its employees. As with customer service, Ukrop’s success in providing an enjoyable atmosphere for its “associates” came not from articulating such a goal, but through execution—from actually achieving such a goal. The chain refused to sell wine or beer because the Ukrops were devout Baptists, but the chain remained closed on Sundays in deference to its employees. “If you want to be the best place to shop, you have to be the best place to work,” Robert Ukrop remarked to Marketing News in a June 5, 1989 interview, referring to the long-standing policy of closing the stores on Sundays. Ukrop’s ability to compete against an onslaught of national chains was attributable, so industry pundits theorized, to the chain’s focus on the fundamental aspects of business. Many retailers proclaimed a commitment to customer service and employee morale, but far fewer actually succeeded in realizing their commitment. By all accounts, Ukrop’s delivered on its commitment, presenting Richmond shoppers with an attractive alternative to the swarm of grocery stores in their area.

The distinction in consumers’ minds was strong enough to make Ukrop’s the largest grocery store operator in Richmond. By the late 1980s, the company controlled 30 percent of the metropolitan region’s grocery sales, enabling it to collect nearly $275 million in annual sales. Expansion since the 1960s, pursued at a measured pace, had lifted the store count to 19 by the end of the 1980s, with two more stores in offing. Although the company was frequently presented with requests to open stores beyond the greater Richmond area, the Ukrop family resisted more far-flung geographic expansion. “We have an advantage being local,” Robert Ukrop was quoted as saying in the June 5, 1989 issue of Marketing News, adding “We live here, we have friends here. We’re able to put our arms around our business.”

Prepared Foods Debut in 1989

Despite the family’s reluctance to penetrate other markets, it was preparing a bold move in another direction. Remarkably, Ukrop’s had achieved its market dominance without the hallmark quality that underpinned its success at the century’s end. The company’s greatest contribution to grocery store innovation came from research conducted during the mid-1980s, which revealed that changing consumer demographics and lifestyles indicated a growing demand for convenient, restaurant-quality food. The Ukrops decided to tap into the demand and further differentiate themselves from competitors. The result was one of the grocery industry’s most lauded success stories of the late 20th century.

Based on their experience with a central bakery, the Ukrops decided to construct a central kitchen to prepare chilled prepared food, which consumers could then re-heat. For those few grocers who offered prepared foods at the time, the common method was to prepare the food items separately at each store. Ukrop’s approach ran counter to the norm and received much criticism, but a combination of past experience and financial constraints predicated the reasoning behind establishing a central kitchen. “We realized, from a kitchen point of view, that we couldn’t produce out of [each store],” Robert Ukrop explained in the October 1997 issue of Progressive Grocer. “We needed it out of one place. Bakery gave us some experience with manufacturing and logistics. We learned that some things are better done centrally.” By relying on a single, large kitchen, the chain saved money on equipment and staff, possessed greater control over food quality, and could more precisely supply each store with an accurate supply of food items.

Out of a 10,000-square-foot kitchen, Ukrop’s began experimenting with proprietary recipes, concentrating on what it referred to as “homestyle” foods. On Halloween 1989, the company’s prepared foods line debuted, featuring ten items that included twice-baked potatoes, lasagna, and macaroni and cheese. It took approximately three years for the kitchen operation to begin generating a profit, but the company’s persistence paid off. By 1994, the roster of prepared foods had swelled to a rotating list of 125 items that included chilled soups, grilled chicken breasts, spoon bread, cobblers, meat loaf, and various potato salads. Ukrop’s foray into prepared foods became the talk of the industry, accounting for nearly 15 percent of the chain’s total sales and adding further incentive to shop at Ukrop’s. “They are not the flashiest… but what they do, they do very well,” a retail consultant remarked in the April 11, 1994 issue of Supermarket News. “It wasn’t duck a 1’orange,” the consultant added, “It was very middle America. They obviously know who their customers are.”

Company Perspectives:

We’re a chain of grocery stores. But chances are, we’re unlike any other supermarket you’ve seen. The difference is all in our attitude. See, we all really like our jobs, and you can tell Go ahead. Walk into one of our stores. Ask one of our associates a question about a product. You’ll get a cheerful response. Make a special request. We 7/do everything possible to fulfill it. Shop away. We 7/take all those groceries out to the car for you, and carefully pack them in your trunk (and a small “thank you” is tip enough).

Expansion in the 1990s

By 1994, with the prepared foods business a confirmed success, Ukrop’s began to show signs of a more aggressive approach to expanding the chain. There were 22 stores in operation, generating an estimated $420 million in sales. After doubling the size of the central kitchen, the company purchased two buildings in Richmond in 1994 with a combined 393,000 square feet of space to serve as the future site for the expanded and consolidated bakery and fresh food preparation operations that supplied the chain. Company executives also began charting the chain’s expansion beyond Richmond for the first time, looking at sites to the northwest and southeast in Charlottes ville and Williamsburg, Virginia. In charge of overseeing the company’s expansion was 47-year-old Robert Ukrop, who was named president in August 1994, succeeding his 57-year-old brother James Ukrop, who added the title of vice-chairman and continued to serve as chief executive officer. The company also had six new sites targeted in Richmond, as it readied itself for an unprecedented pace of expansion.

Ukrop’s expansion and renovation program began in earnest in 1996, financed for the first time in the company’s history by taking on debt. The $125-million program, perceived as a preemptive strike against mounting competition, included relocating stores, expanding existing stores, and adding new locations. The new store openings included the August 1997 debut of a store in Fredericksburg, Virginia, a 63,000-square-foot store that represented the company’s first major move beyond the Richmond area. A greater geographical leap followed a month later, when the company’s 26th store opened in Charlottesville. Meanwhile, as executives focused on growth, the company’s market performance continued to improve despite the distractions of expansion. In 1997, the chain’s market share increased to 37.6 percent, keeping the company well in the lead amid intensively competitive conditions.

Midway through the company’s expansion and renovation program, management duties among the Ukrop family evolved one more step. Family patriarch Joseph Ukrop was named chairman emeritus in 1998, making room for the appointment of James Ukrop as chairman and the promotion of Robert Ukrop to chief executive officer.

By the end of the decade, the company’s expansion program was winding down. Between 1996 and 2000, four new stores were opened, three stores were relocated, and four existing stores were expanded, but the company’s expansion activity was expected to diminish as it entered the 21st century. Although the company was reluctant to divulge specifics, analysts predicted three new stores would open by 2005.

One area of the company that was expected to expand in the new century was Ukrop’s foray into health-oriented departments within its stores. In November 1999, the company opened its first full-blown health-focused store, which featured a store-within-a-store format. The concept integrated in-store pharmacies with wellness/patient centers that included large natural and organic foods departments staffed by a registered dietitian. The extension of the format chain-wide was expected in the decade ahead, as company executives confirmed that the “whole-health” approach was a major focus for the future.

Principal Competitors

Winn-Dixie Stores, Inc.; The Kroger Co.; The Great Atlantic & Pacific Tea Company, Inc.

Key Dates:

1937:: Joseph and Jacquelin Ukrop open a grocery store on Hull Street in Richmond, Virginia.
1960:: The Ukrops’son, James Ukrop, joins the family business.
1963:: A second store is opened.
1972:: James Ukrop’s brother, Robert Ukrop, joins the company.
1989:: A line of prepared foods debuts.
1994:: The company launches a $125-million expansion program.
1997:: The company opens its first store outside of Richmond.
2000:: The company’s annual sales eclipse $500 million.