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Operator of a leading supermarket chain in the northeastern United States, Big V Supermarkets, Inc. owns 32 grocery stores in New Jersey, New York, and Pennsylvania that operate primarily under the ShopRite name. Big V began as a family-owned business with one store, then grew robustly under the guidance of the founders' son, J. Arthur Rosenberg, who took the company public in 1972. Two leveraged buyouts in the late 1980s and early 1990s returned the company to the private sector. Big V's greatest physical presence during the 1990s was in the mid-Hudson Valley, north of New York City, where its stores earned a reputation for astute merchandising. A member of the Wakefern Food Corp., the largest cooperative food wholesaler in the United States, the company enjoyed an entrenched position in many of its markets, successfully withstanding the relentless pressure of competing supermarkets encroaching upon its home turf.
A family-owned business for many years, Big V began operating in 1942, when husband and wife William and Viola Rosenberg opened their first grocery store in upstate New York. The first store operated under the name Victory Supermarket, and stood for many years as the sole business supporting the Rosenbergs. Neither of the pair intended to nurture that single store into a chain of supermarkets, but their son, J. Arthur Rosenberg, had other ideas. The younger Rosenberg was responsible for transforming a single supermarket into a tightly knit chain of supermarkets anchored in the mid-Hudson Valley. Under his direction, professional managers were brought in who shaped the family business into a genuine corporation, one that made its debut as a publicly-traded company on the American Stock Exchange in 1972, thirty years after the first store had opened.
With the proceeds netted from the issuance of stock, J. Arthur Rosenberg (who by this point completely presided over Big V's operations) gained the financial resources to accelerate expansion. He opened a number of new stores, though never straying far from the company's headquarters in Orange County, New York, and operated the chain under the ShopRite banner. Supporting the company, aside from its own senior management and employees, was an important partner--the Wakefern Food Corp.--a retailer-owned cooperative based in Elizabeth, New Jersey that served as the wholesale distribution and merchandising arm for Rosenberg's ShopRite supermarkets. With the help of Wakefern, which ranked as the largest cooperative food wholesaler in the United States, Big V carved a lasting territory for itself in the state of New York. The resiliency of its grip on its operating territory, however, was seriously tested in the years following Rosenberg's departure.
Ownership Changes Begin in Late 1980s
The first major change in Big V's ownership after its 1972 conversion to a publicly-held company occurred in 1987. First, Boston Corp., a New York-based investment banking organization that paid approximately $170 million for Big V, led a leveraged buyout (LBO) in 1987. With the purchase, First Boston gained control of the company's 33 stores, which collected $600 million in sales a year, and began making moves to ensure that its investment paid a respectable return.
After a comparatively inactive 1988, there was a flurry of activity in 1989. Ten stores underwent thorough renovation, while less substantial changes were made to three other stores. Three new stores were established in upstate New York during the year--a store in Fishkill, another in Chester, and a third in Vails Gate--all of which were an average of 12,000 square feet larger than Big V's other stores. At the same time the chain was expanding, it was also contracting, losing seven stores in the Albany, New York, market. Company executives, still led by Rosenberg, had decided to retreat from the Albany area and concentrate on their core territory, ceding ground in order to secure a stronger hold over its major markets. The sale of the seven Albany stores in the spring of 1989, coupled with the addition of three new stores during the year, was reflective of the operating strategy embraced by Big V officials.
The progress of the company was not measured by annual leaps of its store count, but instead by the performance of its existing fleet of stores. In the years ahead, new stores would be opened, to be sure, but the aim was not on developing a chain of supermarkets that ultimately would sweep across the country in great numbers. Instead, the focus was on fine-tuning the stores, both in terms of square footage and merchandising, to perfectly match the particular demands of a particular market. Accordingly, the emphasis was on the renovation or relocation of existing stores rather than the geographic expansion of the company's corporate banner. For the next decade, Big V concerned itself with identifying its markets and tailoring its stores to the desires of the people residing in its core operating territory.
Management Changes in the 1990s
As the company headed into the 1990s, it did so--for the first time in its history--without a Rosenberg in charge. In 1990, a second LBO was completed, passing ownership of the company to an investment group that included members of Big V's senior management and was led by a Boston investment firm called Thomas H. Lee Company. Thomas H. Lee paid $212 million for Big V, which after the expansion and contraction of the chain in 1989, comprised 27 ShopRite stores which were collecting $630 million in annual sales. The change in ownership resulted in one important management change: the resignation of Rosenberg. He was succeeded by David G. Bronstein, who added the chairman title in addition to the president and chief executive officer position he held before the LBO. Aside from Rosenberg, there were no management changes in the wake of the "friendly" buyout. The change of ownership occurred without disruption, and its arrival was viewed as a positive event, particularly by Bronstein. "In our case," he effused, shortly after taking command, "LBO stands for Love Being Owners. Being owners has really helped to energize the company, and to do things worthwhile, whether one is a public company, private company, or LBOed or not."
Under the stewardship of Bronstein, there was promise of progress amid what the new leader described as "the largest expansion period in the company's history." Typically, progress at Big V did not mean a proliferation of new stores, but instead the renovation or relocation of the company's existing stores. According to Bronstein's plans, by 1993 or 1994 more than 80 percent of the chain's stores would either be new or remodeled since 1985, part of a sweeping facelift to rejuvenate the appeal of the company's supermarkets. With this remodeling effort as its goal, the company tackled the 1990s, concentrating its efforts in the Hudson Valley, and particularly in affluent Westchester County, immediately north of New York City.
New Challenges at the End of the Century and Beyond
Forces within the company's major trading areas and forces stemming from industry-wide trends dictated, to a certain degree, the new "look" that Big V would assume during the 1990s. Within the eight-county region in the Hudson Valley that represented the heart of Big V's territory, competitive forces intensified as the 1990s progressed. Although the pressure of competition was not a new phenomenon in the company's experience, the ardor with which competitors entered Big V's markets did assume a more aggressive nature during the 1990s. The type of competition the company faced was relatively new as well--a retail concept born in the 1980s that was thriving in the 1990s: the "superstore." Sprawling, 80,000-square-foot stores were inundating markets throughout the country, forcing much smaller competitors out of business and making second-tier retailers devise a response to the encroachment.
For its part, Big V concentrated on nonfood merchandise within its stores, placing a particular emphasis on videotape rentals. As the company busied itself with remodeling the majority of its existing stores, "video areas" were replaced with "video centers," the main difference between the two being the number of videos offered to customers. Instead of stocking 800 videos, remodeled Big V stores featuring video centers carried more than 2,000 tapes, enabling the company to offer a greater selection of movie titles. By the beginning of 1992, 11 of Big V's supermarkets were being outfitted with video centers, with a continued emphasis in this direction promised in the years ahead.
Another early response to the heated competition that characterized the 1990s was the opening of a warehouse membership store. In October 1992, Big V opened a "test pilot" Price Rite store in Fishkill, New York, as an experimental effort to fight competition in the Hudson Valley. The store, which measured 30,000 square feet, was far smaller than competing warehouse stores that reached upwards of 100,000 square feet, but Big V's version of the warehouse store operated in much the same way that competing warehouse stores operated. For $19 a year, a membership card was issued to a customer, enabling him to shop at discount prices for a broad assortment of merchandise, including grocery products, frozen foods, fresh meat, produce, dairy, health and beauty care items, and electronics. Despite being billed as a test pilot store, the Price Rite store did not signal the beginning of a concerted push into warehouse store expansion. From the earliest days of Price Rite's operation, Big V officials explained that they had no expansion plans for the concept. In the years ahead, the store in Fishkill would stand as the sole warehouse store within Big V's operations.
As the company tinkered with finding the best strategy to carry it forward through the contentious 1990s, management changes at corporate headquarters provided a backdrop for Big V's efforts out in the field. In August 1993, Stuart A. Rosenthal was named president and chief operating officer, succeeding Bronstein, who had narrowed his executive duties to the responsibilities assigned to the company's chief executive officer and chairman posts. Working together with Bronstein, Rosenthal ranked as the number two executive, but less than 16 months later Rosenthal resigned, allegedly quitting because he was convinced he would never be promoted to the chief executive office. A future promotion to chief executive was contingent upon Bronstein's retirement, which was something Bronstein himself declared he had no plans for in "the foreseeable future." With Rosenthal gone, Joseph V. Fisher, the company's senior vice president of operations and marketing, took his place as chief operating officer, but the title of president remained vacant. Less than ten months after Rosenthal's departure, Bronstein announced his retirement, paving the way for Fisher to be named president and chief executive officer. Fisher, subsequently, assumed day-to-day control over the company, while Bronstein served as a consultant, retaining his chairman title.
As the management shuffle took place between December 1994 and September 1995, competition in Big V's operating territory stiffened discernibly. Along one 10-mile stretch of road, for instance, six new stores opened in a matter of months, spurring Big V officials to take action. As a response to the encroachment of superstores, Big V accelerated the pace of its long-term strategy of matching a store with the area in which it operates. As before, the company sought to fine-tune its stores, striving to identify the right-sized store for the right location and the right product offering. Executives opted for stores ranging in size between 48,000 square feet and 58,000 square feet, purposely avoiding building the 80,000-square-foot superstores that were fast circling its stores. In certain markets, the company believed the mammoth stores were not in touch with the clientele they were supposed to serve, a perspective articulated by Bronstein before his retirement when he remarked, "You're not going to into an 80,000-square-foot store for a loaf of bread."
With Big V's smaller version of the conventional superstore selected as the store type for the years ahead, the company moved quickly to install "replacement" stores--stores that were remodeled to reflect management's prevailing strategy. "We're at the beginning of the greatest expansion program in the history of the company," Bronstein had declared in 1994, reiterating his words of three years earlier. "Between now and 1996, we see a major transformation. If less than half of our units are superstores now, we predict three-quarters of them, or more, will be superstores by then." To finance its accelerated replacement program, the company took on additional debt. The company entered the mid-1990s with no plans to move outside its boundaries in the Hudson Valley.
By the late 1990s, a new twist to the format of Big V's supermarkets was beginning to emerge. The concept was taken from the company's store in Vails Gate, New York, which in 1996 began experimenting with a prototype christened Market Fresh Cafe. The cafe was a self-service buffet featuring prepared meals such as brick-oven pizza, submarine sandwiches, and fried seafood. The original operation at Vails Gate served as the training ground for managers to become acquainted with the concept so that they could then carry the concept to other stores. At the opening of the company's new store in Montague, New Jersey, in late 1997 (a 59,000-square-foot replacement of a 31,000-square-foot store), the prototype Market Fresh Cafe was unveiled, a debut that most likely promised the establishment of additional self-service buffets in the future. "We've been working on a Market Fresh Cafe concept for about a year and a half," Fisher explained shortly after the Montague store opening, "and this is the first store to get it full-blown. This is our prototype." With the blueprint set for the company's remodeling efforts in the future, Big V moved forward with its strategy, striving to keep competitors at bay as the company prepared for the 21st century. Early reports of the performance of the prototype, disclosed in mid-1998, exceeded the company's expectations, instilling confidence for the future.