Kash n' Karry Food Stores, Inc. - Company Profile, Information, Business Description, History, Background Information on Kash n' Karry Food Stores, Inc.

6422 Harney Road
Tampa, Florida 33610

History of Kash n' Karry Food Stores, Inc.

Kash n' Karry Food Stores, Inc. was, in 1996, one of the three largest food retailers in west-central Florida, operating 98 supermarkets, 35 liquor stores, and 2 super warehouse stores. More than half were in the Tampa-St. Petersburg area, Florida's largest retail-food sales market. Kash n' Karry was acquired by Food Lion Inc. in 1996.

Kash n' Karry to 1989

The history of the company dates back to 1947, when the Greco family founded its first Big Barn grocery store in Plant City, Florida. By 1962 the family-run business had expanded to nine stores and the Grecos opted for a new name, Kash n' Karry. Tampa Wholesale Co., whose principal shareholders were the Greco and Dominguez families, was operating Kash n' Karry in the 1970s. This firm had an estimated $32 million in annual sales and some 1,000 employees by 1968. The Kash n' Karry chain expanded in the 1970s partly through the acquisition at various times of about a dozen A&P stores. There were 46 Kash n' Karry supermarkets in a seven-county area on Florida's Gulf Coast in 1978. Kash n' Karry was believed to be in third place among supermarkets in the Tampa-St. Petersburg-Clearwater area, with about 9 percent of the market. In Hillsborough County, where it operated most of its stores and which includes Tampa, it held more than 50 percent of the market. The chain's annual sales were estimated at more than $150 million.

Most Kash n' Karry food stores were 20,000 to 23,000 square feet in size at this time. In 1974 the chain opened its first supermarket-drugstore combination in Tampa, in collaboration with Kare Drugs. Other such combination stores soon followed. They were about 43,000 square feet in size, with an area between 7,000 and 10,000 square feet operated by Kare.

Kash n' Karry was sold to Lucky Stores Inc. of Dublin, California, in 1979 for $26.8 million in cash and stock. The chain grew rapidly in the 1980s, both in size and market penetration. It competed aggressively for business, lowering prices on 3,000 items in 1985, when there were 84 stores, stretching from Fort Myers in the south to Gainesville in the north. "Kash n' Karry has managed to sell a total concept in the Tampa market," an observer told Supermarket News, "one that appeals to low-price-oriented shoppers and to more upscale shoppers alike."

The following year Kash n' Karry improved its service to handle the heavier flow of supermarket traffic between 5 and 7:30 P.M. by not allowing employee breaks and dinner hours during these times. The program called for stores to be cleaned and stocked again with a wide selection of frozen dinners and precooked meat before 5:30. A new checkout aisle was opened every time there were three people waiting in line. In 1988 there were 94 Kash n' Karry units, averaging 28,000 square feet in size. By now the chain had passed Winn-Dixie Stores to take second place in its field in the Tampa-St. Petersburg area, with market share of 29 percent. Annual sales came to about $900 million.

Having established a reputation for low prices, Kash n' Karry launched a television advertising campaign in 1988 emphasizing the quality of its services. The first phase of the campaign consisted of conversations with employees about the services Kash n' Karry workers provided, including fast checkout and help in product selection. The second phase used employees only as extras, hiring actors to portray the delicatessen, bakery, and produce people who described and discussed their work. In-store and newspaper advertising supported the TV campaign, featuring photos of as many as 100 of the chain's employees. Its vice president for advertising told Supermarket Business, "The customer really gets a kick out of coming to the store, and going to the register, and actually seeing the girl ring up her groceries whom she saw on TV the night before."

In July 1988 Kash n' Karry opened a 40,000-square-foot prototype store in Largo with aisles wider than in older stores and many amenities. This store carried vast supplies of bulk produce, a huge frozen-food section, a wine-and-cheese island, and a "nutritional information center" offering brochures on healthful dining. The Largo store was among more than two dozen Kash n' Karry outlets with floral departments.

Independent Firm, 1989--96

Kash n' Karry was acquired by its management from American Stores--the parent of Lucky Stores--for $305 million in 1989, by means of a leveraged buyout in partnership with the New York City-based investment-banking firm of Gibbons, Green, van Armerongen Ltd. Fulcrum III Limited Partnerships, managed by Gibbons, Green, van Armerongen, emerged with a majority of the stock until November 1991, when Los Angeles-based Leonard Green & Partners invested $27.7 million to become the controlling shareholder. Green & Partners was acting as general partner for Green Equity Investors L.P. In 1994 Green Equity Investors L.P. held 60.9 percent of Kash n' Karry's common stock and Fulcrum III Ltd. 33.8 percent.

Even before the leveraged buyout was completed, Kash n' Karry purchased 24 Florida Choice Food & Drug units and 24 adjacent liquor stores from Kroger Co. for $55 million. The acquisition enabled Kash n' Karry to pass Publix Super Markets and take the No. 1 position in the Tampa-St. Petersburg area, where half of the acquired Florida Choice units were located. These units ranged in size between 25,000 and 54,000 square feet, while about two-thirds of Kash n' Karry's stores were about 40,000 square feet. Kroger's president said the Florida Choice stores had been unprofitable for some time.

Kash n' Karry opened full-service First Florida Banks branches in some of its 116 stores during 1989. In 1990 it launched a "Nature Friendly" shelf-tagging program that told customers whether an item was recyclable, recycled, reusable, or carried less packaging than it once did. Some 700 items were identified in this manner. The chain's own environmentally friendly agenda included a cardboard recycling program that it estimated saved 500,000 trees a year. Its point-of-purchase card-toppers won an award in 1991 for graphics to draw attention to delicatessen and bakery sale items.

In 1990 Kash n' Karry established, at a cost of more than $3 million, a prototype store in Tampa. One of its most distinctive features was the exterior, with redesigned signage and more glass for an airy look. All future stores were to have this basic design. National-brand sale items were promoted inside with highly visible front-end and in-aisle signage. The company was converting its Lady Lee store brand to the Kash n' Karry private label. Most locations began staying open 24 hours a day in 1991. Kash n' Karry began offering shopping and delivery services in Hillsborough County in 1993.

Kash n' Karry acquired from Wetterau Inc. three super warehouse stores--one of which was subsequently closed--in 1992, operating under the "Save n' Pack" name. Ranging in size between 76,000 and 88,000 square feet, these around-the-clock units featured among the lowest prices on basic items carried by supermarkets and were designed to meet the needs of low-income households. In its Kash n' Karry outlets, too, the company continued to emphasize its everyday low prices. "Our prices are not based on cost, but on our competitors' prices," a marketing executive of the chain told Progressive Grocer in 1991.

By 1994 Kash n' Karry had annual sales of $1.2 billion. Same-store sales fell to a five-year low, however, during fiscal 1994 (the year ended July 31, 1994), and the company lost nearly $38 million in the face of intense competition from four major supermarket operators with greater financial resources. Kash n' Karry closed 17 stores but could not overcome the heavy debt load it had incurred, mainly in its leveraged buyout--$331 million in 1991, compared to only $12 million in 1988. The company filed for Chapter 11 bankruptcy in November 1994, listing assets of $389.9 million and liabilities of $446.3 million, of which $326.2 million was unsecured debt.

Shortly before the end of the year Kash n' Karry emerged from bankruptcy under a plan that was intended to reduce its debt burden by one-third and interest expenses by more than one-third, or $12 million a year. As part of the restructuring, Green Equity Investors traded its controlling interest in the company for a lesser stake of 15 percent. Shortly thereafter, however, Green Equity Investors bought $12.9 million worth of Kash n' Karry's common stock, raising its stake to more than 22 percent. In 1995 the company's stock began trading on the NASDAQ exchange.

Ronald E. Johnson was appointed in 1995 as Kash n' Karry's new chairman, president, and chief executive officer. He began a 16-store remodeling program that featured more perishables and more seasonal nonfood merchandise. "We want to move toward a food court," Johnson told Supermarket News in an interview, "with a power alley featuring a salad bar, soup bar, and a variety of prepared foods, plus enhanced and upgraded varieties in bakery-deli, service meat, and service seafood." The new system called for 3,500 square feet of space for a bakery, 3,000 square feet for the traditional deli, and 3,500 square feet for the food court and prepared-foods area. The latter included pizza and coffee shops and carving, salad, and sandwich stations, plus a sushi bar. A Slim Creations 18-item line of low-fat and no-fat prepared foods also was being added.

One economy measure the company adopted was to abandon a three-year-old, $1.5-million project in which it built its own object-oriented language, database, and development tools to make quicker, nimbler pricing and inventory changes and decisions. Instead the company decided to outsource its information-systems operations, including development of a new mainframe-based procurement system and store-based point-of-sales systems. It continued to use an object-based warehousing application and promotional pricing system already in production.

Food Lion Subsidiary in 1996

Kash n' Karry was purchased by Food Lion in late 1996 for $341 million, including assumption of $221 million in long-term debt. Food Lion thus added Kash n' Karry's 22.3 percent market share in the Tampa-St. Petersburg-Clearwater area to its own 4 percent. Food Lion closed Kash n' Karry's 625,000-square-foot distribution center in Tampa but announced it would remodel and expand almost all of Kash n' Karry's stores as a precursor to possible further expansion of the chain outside west-central Florida. It was not immediately decided whether the 10 or so Food Lion stores operating in the same area as Kash n' Karry would convert to the Kash n' Karry name.

Food Lion also said it would refinance Kash n' Karry's debt at lower rates, resulting in annual savings of about $9 million.

Kash n' Karry's stores, in 1996, continued to center on the Tampa-St. Petersburg area, ranging from Gainesville, about 130 miles to the north, to Bonita Springs, about 150 miles to the south. Fifty-one food stores had 40,000 to 57,000 square feet of space; 42 ranged in size between 25,000 and 40,000 square feet; and 5 were less than 25,000 square feet in size. Most of them were in shopping centers. All of them sold groceries, including fresh fruits and vegetables, bakery and dairy products, delicatessen items, frozen foods, and fresh meats. Some of the larger ones had a pharmacy and/or full-service floral department. Kash n' Karry food stores also offered such nonfood goods as health-and-beauty-care items, paper and tobacco products, soaps and detergents, drugs, sundries, and housewares. Each of the 35 liquor stores was adjacent to a company supermarket.

Kash n' Karry had net income of nearly $2 million on sales of $1.02 billion in fiscal 1996. Liquor-store sales accounted for only about 2 percent of the total. The company owned nine of its supermarkets and leased the remainder. It also owned its Tampa warehouse, distribution, and office facility on 53.6 acres of land, which the company also owned.

Principal Subsidiaries: KNK 702 Delaware Business Trust; KNK 886 Delaware Business Trust; KNK 891 Delaware Business Trust.

Additional Details

Further Reference

Beres, Glen A., "New Kash n' Karry Chief Lists Plans," Supermarket News, February 20, 1995, p. 4.Buss, Dale, "Survival in the Fast Lane," Florida Business--Tampa Bay, August 1989, p. 30.Clancy, Carole, "Buyout Firm Ups Its Stake in Kash n' Karry," Tampa Bay Business Journal, February 24, 1995, p. 1.Duff, Mike, "People Power Key to Kash n' Karry Campaign," Supermarket Business, November 1988, pp. 68--69.Fisher, John, "Eberhard in Talks to Acquire Kash n' Karry, Florida Chain," Supermarket News, April 10, 1978, pp. 1, 10."A Full-Scale Approach," Progressive Grocer, July 1996, pp. 102--04."Kash n' Karry Restructure Complete," Supermarket News, January 2, 1995, p. 4."Kash n' Karry Will Try In-Store Bank Branches," Supermarket News, July 24, 1989, p. 24.King, Julia, "Back to Basics," Computerworld, March 20, 1995, pp. 1, 117.Linsen, Mary Ann, "Price Isn't Everything at Kash n' Karry," Progressive Grocer, September 1991, pp. 95, 98, 100--01.Malko, Constance, "Florida Chain Catering to After-Work Shoppers," Supermarket News, September 15, 1986, p. 10.Merrefield, David, "Tampa: A Market in Transition," Supermarket News, December 9, 1985, Sec. 2, p. 28.Ossorio, Sonio, "Chain Plans Debt Swap; Income Up," Tampa Bay Business Journal, May 1, 1992, p. 1.Sansolo, Michael, "Going Green: 3 Ways to Build Trust," Progressive Grocer, February 1991, pp. 45--46, 50.Zwiebach, Elliot, "American Stores Close to Kash n' Karry Sale," Supermarket News, August 8, 1988, p. 2.------, "Kash n' Karry to Buy Block of Florida Choice Stores," Supermarket News, August 29, 1988, pp. 1, 38.------, "Kash Investments," Supermarket News, April 24, 1995, pp. 1, 132--33.------, "Remodels Set as Food Lion's First Step for Kash n' Karry," Supermarket News, November 11, 1996, p. 1.

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