Wakefern Food Corporation

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Wakefern Food Corporation

600 York Street
Elizabeth, New Jersey 07207
U.S.A.
Telephone: (908) 527–3300
Fax: (908) 527–3397
Web site: Web site: http://www.shoprite.com

Member-Owned Cooperative
Founded: 1946
Employees: 3,000
Sales: $3.5 billion (1999)
NAIC: 42241 General Line Grocery Wholesalers; 311999 All Other Miscellaneous Food Manufacturing; 44511 Supermarkets and Other Grocery (Except Convenience) Stores

Wakefern Food Corporation is the wholesale purchasing and distributing cooperative for about 190 ShopRite supermarkets that operate in New Jersey (where it is the dominant grocery chain), New York, Connecticut, Pennsylvania, and Delaware. Owned by 43 independent grocers, it is the largest such co-op in the United States. To provide goods at competitive wholesale prices for its member stores, the co-op purchases foods and other items both at home and abroad and distributes them from its warehouses in New Jersey, where it maintains its corporate headquarters. Using 2.5 million square feet of warehousing, most of it located within one mile of the Port of New York docks, Wakefern distributes goods, some packaged under its own label, to its member stores. To accomplish this, it uses one of the largest private transportation fleets on the East Coast, consisting of over 400 tractors and 2,000 trailers, which provide day-to-day deliveries of its various goods throughout its fairly concentrated network of ShopRite stores. Wakefern also offers centralized services to its member stores, including advertising, group insurance, and marketing. It also has facilities for processing its own brand milk, fruit juices, and fish. All ShopRite grocery companies are Wakefern members and, regardless of the number of stores each owns, they all have an equal voice in the governance of the cooperative. Two of the member companies—Big V Supermarkets Inc. and Inserra Supermarkets, Inc.—own and operate over one quarter of the stores, but most member grocers operate fewer than five.

Starting Out with a Risky Enterprise: 1946-50

The end of World War II brought an end to food rationing and price controls in the United States, but it also created problems for independent grocers who faced quickly stiffening competition from such rapidly growing supermarket chains as A&P. The problem was that such chains were able to undercut the retail prices of the independent grocers by volume buying at the wholesale level and by utilizing more efficient marketing strategies.

In New Jersey in the summer of 1946, Ed Casson, a representative of Del Monte Foods, repeatedly heard the same complaint from independent grocers in the Newark area, that as individuals the independents had to purchase wholesale canned foods for retailing at the same prices customers at the chain stores were paying for them. Casson suggested that the independent grocers meet together to try to find a solution to the problem. Two of them, Abe Kesselman and Sam Aidekman, began doing so on a regular basis and were soon joined by five others: Al Aidekman, Dave Fern, Sam Garb, Albert Goldberg, Bill Kesselman, and Louis Weiss. The group then started experimenting, making some bulk wholesale purchases and splitting them for retail sale in their grocery stores, storing some items in their homes until they were depleted. It was a system that seemed to work well, so they formalized their cooperative venture on December 5, 1946, when each of them put up $1,000 and incorporated their association as the Wakefern Food Corporation. The Wakefern name, an acronym, was developed from the w from Weiss, the a from Aidekman, the k from Kesselman, and fern from Dave Fern. The extra e was added to make the name both agreeable and pronounceable.

The founding members were fully aware that other grocers had attempted to form co-ops and had failed, and they expected problems. They knew that they would have to put a lot of extra time and effort into the enterprise, rotating the responsibility of accepting deliveries at their first storage facility, a 1,000-squarefoot storefront on Miller Street in Newark. They used their own cars and pickup trucks to transport food to that “warehouse” and took turns paying for deliveries and keeping the company’s books. They operated without any long-range plan, just trying to stay afloat and not be beaten out by the chain giants.

Their first problem was to get credit from major food manufacturers. They were considered too risky an enterprise by most large food producers because they lacked sufficient capital, but they got a break when a loyal customer’s husband, who worked for Campbell’s Soup Company, convinced that manufacturer to extend credit to Wakefern. Del Monte and other companies soon followed suit.

The next need was for an immediate expansion of Wakefern’s membership to help improve the cooperative’s wholesale buying strength. The founders all undertook the task of enlisting new members, a difficult and frustrating effort. At the time, $1,000 or more was a lot of money to put at risk for most independent grocers, but the members’ persistence and the donation of their free time to help prospective members paid off. Over the first five years, growth was gradual but steady.

In 1949, the company moved into a 15,000-square-foot warehouse in Port Newark, hired a warehouse manager, and contracted the services of a trucking company for the delivery of purchased goods. It was still a marginal operation, however, not yet very efficient and rather costly. At the time it forced member grocers to sell some items at a loss in order to remain competitive with the chain supermarkets.

In the next year, 1950, membership grew to 28. Annual sales reached $2.2 million, and a full-time office staff was doing the managing and accounting work the founders had originally undertaken themselves in order get the enterprise established. The change allowed for some longer range planning, including modifications designed to improve the cooperative’s efficiency and to enhance its market image.

Period of Rapid Growth and Change: 1951-60

Wakefern took the first important step the next year. On March 15, 1951, it began advertising in the Newark Evening News under a new name—ShopRite—a name that the co-op’s members finally decided upon after careful deliberation. The $1,500 ad was a calculated risk, and only nine members were willing or able to participate in financing it. All of them, adding “ShopRite” to their stores’ names, logged a significant increase in sales. They continued to advertise under the new name, and other Wakefern members, seeing the important benefits, soon joined in and changed their stores’ names as well. The change also attracted other independent grocers, and within a year Wakefern’s membership grew to over 50, almost doubling.

Wakefern’s new advertising and merchandising program became “the cornerstone of its success.” New memberships that resulted from it spurred an important increase in volume, and that resulted in some significant developments, including a move to a larger warehouse, a growth in trucking operations, and enlarged stores with a complete line of products. Also, Wakefern began marketing foods packaged under ShopRite’s own, private label, a strategy that started as a promotional ploy in October 1951, when, for the Halloween season, its stores sold doughnuts packaged under the ShopRite name. It soon evolved into a whole line of ShopRite labeled foods, some processed by the cooperative itself.

The advertisements also helped the member grocers keep in touch with their customers by including biographical information about new members and announcing such events as the opening of new warehouses or the renovation or remodeling of any of its members’ stores. Thus, even as their stores grew in size and number, the ShopRite owners continued a tradition of personal community involvement that characterized the “mom and pop” corner groceries from which their stores evolved.

In addition to using ads to provide information about the local store owners and their ShopRite stores, for four years, from 1952 to 1956, the co-op published and distributed a newsletter, “The ShopRite Ladies Home News.” In it, a fictional character named “Sally Rite” shared tips on saving money and preparing foods.

By its tenth anniversary in 1956, Wakefern’s membership had climbed to over 70, and its sales volume had reached $100 million, made possible by its bold warehouse and distribution strategies. These started in 1953, when Wakefern built the first of its large warehouses in Cranford, New Jersey, and took on additional staff members. Survival seemed certain, even though the members still had to face difficult decisions, an important one being whether or not to succumb to a major marketing trend, the issuing of trading stamps, which, by the mid-1950s, had become a national craze. In 1958, after a heated meeting, the members opted not to do so. Instead, they voted to cut their retail prices by ten percent. The decision at first caused a decline in sales, but after a few months ShopRite’s “low price leader” concept took hold, and their sales started a new upward swing.

Company Perspectives:

At Wakefern, generations of families have served generations of their customers’ families. Although they have grown from the small “Mom and Pop” stores of the 1940s, most of the Member companies of Wakefern are still family owned and operated businesses —many with second, third and even fourth generations involved. Many of these families are descendants of immigrants who came to America hoping to improve the lives of their families and future generations. Since the early days, the family businesses of Wakefern have helped and complemented one another by sharing ideas and information, and by perfecting the art of compromise. Compromise, interdependence and mutual respect are the threads that weave a family together —a nuclear family, a family business, or a co-op.

At the same time, many of the ShopRite stores were expanding in size, either remodeled or relocated to accommodate the self-service system that was replacing the older, less efficient full-service system. By 1960, some of the old stores, a few originally only 2,000 to 3,000 square feet in size, had been transformed into much larger operations up to ten times their original size.

Increased Use of a Professional Staff and Temporary Setbacks: 1960-80

Through the 1960s and 1970s, Wakefern completed the task of turning over its management to a professional staff, freeing its members of direct involvement in any of the day-to-day operations of the co-op. The staff directed its volume buying, merchandising, warehousing, and distribution, always with an eye to improving efficiency and thereby cutting costs.

There were obstacles, including two problematic setbacks in the 1960s. The first occurred in 1962 when several smaller members sued Wakefern and what were then its two largest members: General Supermarkets and Supermarkets Operating Co. Their complaint was that the larger member companies wielded too much power and grabbed up the best store locations. Then, in 1966, the sued companies merged to form Supermarkets General Corp., which subsequently took its 65-store chain out of the cooperative and formed Pathmark, cutting Wakefern’s volume in half and effectively closing its Long Island market. However, the loss prompted the remaining members to redouble their expansion efforts, opening new stores and improving their marketing and purchasing strategies. It took only three years for the changes to allow the cooperative to again reach the sales volume it had enjoyed before the withdrawal of Supermarkets General.

It was during the 1970s that Wakefern adopted the principle that each of its members would have just one vote in major decision making, regardless of the number of ShopRite stores each owned. The rule— “One Member, One Vote” —helped ensure member input in shaping policies. That attracted new members and enough financial backing to continue Wakefern’s ongoing expansion, especially the addition of new warehousing facilities in the 1980s. By that time, Wakefern could confidently claim that ShopRite “had become the recognized market leader.” It had also become the largest surviving retailer-owned cooperative in the nation.

Wakefern’s Community Service Record and Continued Success: 1980-2000

Throughout the last two decades of the 20th century, Wake-fern compiled a significant record of achievements, not just as a successful cooperative in a business sense but as an enterprise profoundly committed to helping the host communities of the ShopRite stores.

By 1996, the year in which Wakefern reached it 50th anniversary, those stores were serving over three million customers per week in a five-state network, and in sales the co-op was ranked 14th in the nation among supermarket chains. It had 36 member companies, each of which was an independent corporation. All together, they employed over 35,000 associates in retail outlets and another 3,000 in staff positions in Wakefern’s purchasing, merchandising, warehousing, and distributions operations and administrative roles. To service the stores in its network, in 1997 alone, Wakefern’s distribution fleet logged 23 million miles.

The ShopRite stores also reflected Wakefern’s commitment to staying abreast of industry changes, to employing technological advances, and to promoting change through its own innovations, as in its Supermarket Careers program. Initiated in 1989, Supermarket Careers was created to help special needs students train for work in ShopRites or other stores. By 1999, the award-winning program was offered in the curriculum of 42 schools in five states.

In the 1990s, Wakefern adopted CGO (computer-generated ordering), fully automating the stock-replenishing process in the majority of its stores; EDI (electronic data interchange); and computer-based training for its employees. The larger ShopRite stores also began offering the full line of services and departments that typifies the chain giants’ “megamarkets,” including pharmacies, delis, catering, salad bars, coffee shops, and banking services. In 1992, one of its largest members, Big V Supermarkets, opened the first PriceRite mini-warehouse club, hoping to get a share of a market dominated by Sam’s Wholesale Clubs.

Despite such up-sizing tendencies, Wakefern takes pride in the fact that its members have maintained an ongoing commitment to their respective communities and the continued participation of family members in their businesses. In projects like the Community Food Bank of New Jersey and the Special Olympics, ShopRites have played a very significant and highly publicized role, constant reminders that the stores are locally owned and operated by people who care about their community. Wakefern’s record of assisting charities has been noteworthy throughout its history.

Key Dates:

1946:: Consortium of New York and New Jersey grocers form the Wakefern cooperative.
1949:: Co-op moves into 15,000-square-foot warehouse in Port Newark and hires professional staff.
1951:: Seeking a more competitive industry image, Wake-fern begins using “ShopRite” name in its marketing and advertising and institutes the ShopRite brand of foods.
1953:: Company builds first large warehouse in Cranford, New Jersey, and adds more staff members.
1956:: Wakefern members elect to cut retail food prices ten percent rather than issue trading stamps.
1966:: Supermarkets General Corp. forms and subsequently leaves Wakefern to form Pathmark.
1989:: ShopRite institutes its Supermarket Careers training program.
1992:: Wakefern member Big V Supermarkets opens PriceRite mini-warehouse club.

Principal Competitors

The Great Atlantic & Pacific Tea Company, Inc.; C&S Wholesale Grocers Inc.; Di Giorgio Corporation; Fleming Companies, Inc.; The Grand Union Company; IGA, Inc.; King Kullen Grocery Company Inc.; Pathmark Stores, Inc.; Royal Ahold N.V.; Shurfine International, Inc.; The Stop & Shop Companies, Inc. Stop & Shop; SUPERVALU INC.; Wal-Mart Stores, Inc.