6363 Main Street
What started as a small association of franchised stores grew into a regional leader and would eventually become part of one of the world's leading retailers, while remaining an integral part of the fabric of the community in which it all began.
Tops Markets LLC is a subsidiary of the U.S. operations of Dutch supermarket giant Royal Ahold N.V. In addition to the Tops chain, Ahold also owns Stop & Shop, Giant Food, BI-LO, and Bruno's Supermarkets. With its headquarters located in Williamsville, New York, Tops is comprised of some 160 Tops Friendly Markets, more than 200 Wilson Farms and Sugar Creek convenience stores, and B-Kwik Food Markets superettes. Tops' units are located in central New York and neighboring parts of Pennsylvania and Ohio.
Company Origins in the 1920s
The Castellani family has been the driving force in the development of Tops throughout its history. The roots of the company can be traced to the 1920s, when Ferrante Castellani opened a small neighborhood grocery store in Niagara Falls at a time when orders were still being filled by clerks and before the self-service concept was pioneered by Clarence Saunders and his Piggly Wiggly stores. In the years following World War II, the modern supermarket took shape. Ferrante's son, Armand, would take the family business into this new era. He learned the business from an early age, serving as manager of his father's store when he was only 16. After a stint in the military, he struck out on his own, establishing the Great Bear Market in Niagara Falls in 1951. He then forged a partnership with Thomas A. Buscaglia, a grocery equipment salesmen, to create the T.A. Buscaglia Equipment Company in 1953, a business that equipped grocery stores. Later in the decade, the company became involved in the retail food business, offering support services for an alliance of small company-owned and third-party grocery stores in Upstate New York, primarily in the Buffalo area, which would evolve into the Tops chain. In 1960, the business was renamed Niagara Frontier Services, and in the same year the company opened its first modern supermarket, a 25,000-square-foot store located in Niagara Falls. The Tops Friendly Markets chain was launched in 1962 as a franchise system for supermarkets and the B-Kwik banner was coined for smaller stores.
Thomas Buscaglia died in 1967. Armand Castellani succeeded him as Niagara's chief executive officer and continued the company's growth. A year after his partner's death, Castellani took the company public. In 1969, Niagara opened its first convenience store under the Wilson Farms Neighborhood Food name. As the company became a regional leader, it ceased franchising and began to expand beyond the Buffalo area, by the mid-1970s moving into the Rochester market and northern Pennsylvania. Whenever possible, the company bought out its franchised stores. For the most part, however, Niagara flew under the radar screen. Armand's son, Larry Castellani, told the Rochester Business Journal in 1993, "We were virtually ignored through the '60s and '70s, and I think one of the reasons we were able to grow through our infancy was probably because a lot of the national chains many, many times our size ignored us." Larry Castellani, representing the third generation of his family to be involved in the grocery business, started out at the age of five sorting bottles and sweeping up at his father's Great Bear Market. In 1962, as a teenager, he went to work as a Tops stock boy. He studied business administration at Niagara University but never earned his degree, opting instead for a practical education with the family business. He graduated to director of operations in 1975 and became president of Top's retail division in 1980.
Going Private in the Early 1980s
The 1980s saw changes in ownership for the company. In May 1983, Niagara was taken private in an $82.6 million leveraged buyout by SB Investors Inc., a subsidiary of New York City Investment firm AEA Investors Inc. AEA negotiated terms for the acquisition and arranged for the financing. Of that $82.6 million, $58.6 million came from bank loans and through the issuance of $24.5 million in stock and notes. Armand Castellani, who remained chairman of Niagara, earned more than $11 million in stock and stock options, then turned around and paid $2.1 million to SB Investors for a 14.3 percent interest in Niagara.
Over the next three years, Niagara spent more than $75 million on its largest capital program in company history. Tops moved into the profitable superstore concept, which featured more high margin products and specialty departments. Eight Tops Friendly Markets were converted to superstores and another seven superstores were built during this period. In addition, Tops introduced a number of initiatives, including direct debit service, Instabank ATMS, and the first CarryOut Café service. During this period, Niagara acquired four supermarkets from franchisees and greatly expanded the number of Wilson Farms stores, which increased from 39 in 1982 to 60 by 1986. At this stage, the company also owned and operated 53 Tops Friendly Markets and two B-Kwik superettes. In addition, it franchised another 11 Tops markets, 11 BiKwiks, and six Wilson Farms, along with owning a 10 percent stake in Supermarket Operators of America Inc., a Minneapolis-based company involved in the franchising of Cub super warehouse food stores. For the fiscal year ending June 1984, Niagara generated sales of $705.6 million and posted a profit of $6.15 million. A year later, revenues improved to $742.9 million but net income fell off, totaling $5.42 million.
As was the case with many companies, Niagara was taken private, then spruced up to be once again taken public in an offering that would prove highly profitable to investors. In preparation for a new offering, SB Investors changed its name to Tops Markets Inc. in January 1986. An offering was then completed on March 12, 1986, with 2.12 million shares sold at $19.50 a share. The company netted $18.6 million, which was then used to pay off outstanding debt. However, Tops would be publicly owned for little more than a year. After recording revenues of $790 million and net profits of $6.6 million for the year that ended June 28, 1987, Tops was again taken private. Management hired New York investment banker Goldman Sachs, which then found a buyer: the Los Angeles-based merchant banking firm of Riordan, Freeman & Spogli, which paid about $280 million, including debt, for the company. RFS already owned other supermarket concerns, including Bayless Southwest Cocompany in Phoenix, P&C Foods in Syracuse, Boys Markets in Los Angeles, and Piggly Wiggly Southern in Vidalia, Georgia.
Ahold Parentage in 1991
Tops would be owned by RFS for less than four years. During this transitional phase, Larry Castellani was named president of the company. Tops continued its expansion efforts, although the balance did not reflect its overall health. The company lost $13.3 million in 1988, $12.1 million in 1989, and $2.8 million in 1990, but according to management these results were essentially "paper losses" connected to the 1987 buyout. Annual revenues reached $812 million by this point. Moreover, the chain experienced a significant increase in operating income, and cash flow improved by 50 percent. An objective reflection of the company's state was provided in 1991 when the Dutch conglomerate Ahold N.V., through its U.S. subsidiary, Ahold USA, decided to buy the chain. Ahold, which generated more than $10 billion in annual revenues, split equally between the United States and the Netherlands, was interested only in acquiring quality properties. According to a statement issued by Ahold USA president Rob Zwartendijk, "Top Markets represents a remarkably good fit with Ahold's existing U.S. operations in terms of its retailing formats, market approach and geographic location." The acquisition also elevated Ahold to the status of a top ten food retailer in the Unites States. According to a Tops management statement, becoming a part of the Ahold family was also a positive development for the supermarket chains: "Backed by the extensive financial and technical resources of a highly successful international retailing group, Tops Markets is about to enter a bright new growth phase in its development." With the financial backing of its new corporate parent, Tops hoped to accelerate the conversion of existing stores to the superstore format and open new units, as well as to extend its geographic reach.
Over the course of the 1990s, with Larry Castellani now serving as CEO, Tops expanded into central New York state and Northeast Ohio. In 1994, it opened a new headquarters in Williamsville, New York, then in 1996 opened a major state-of-the-art distribution center in western New York. Tops also launched a number of marketing initiatives. Allying itself with M&T Bank, the company co-branded a popular Visa credit card that offered stores credits. Tops also opened Fantastic ticket outlets in some of its stores to sell tickets for the Buffalo Bisons minor league baseball team and Buffalo Sabres National Hockey League team, as well as to events held at the venues where the teams played. Tops added significantly to its portfolio in 1996 when Ahold merged its Ohio-based Finast supermarket chain into the operation, adding 43 stores, mainly located in northeast Ohio. Although they adopted the Tops colors and added the Friendly Markets tag, the supermarkets retained the Finast name until 1999, when all the northeastern Ohio stores were rechristened Tops Friendly Markets. In another development in 1996, Ahold announced that it was going to use the Tops banner on supermarkets it planned to open in Thailand as part of a joint venture with Bangkok-based Central Group. For the parent corporation, this alliance was part of a larger effort to expand its supermarket operations into Malaysia, Indonesia, and Singapore.
In October 1997, Larry Castellani resigned as Tops president and CEO in order to take a corporate position with Ahold. Stop & Shop's CEO, Bob Tobin, filled in on a temporary basis. In January 1998, a replacement was named, 39-year-old Steve Odland, who took over as president and CEO of Tops in February, despite having no retail experience other than working at the store level while attending college. After earning an undergraduate degree in business administration from the University