COVER STORY: PG Profile on Publix--Florida's other magic kindgom

Giving customers a memorable, pleasant experience. Building customer loyalty with outstanding service and community commitment. Adding value to the consumer dollar. Fostering a sense of heritage and tradition. Instilling a can-do corporate culture.

We're not talking about Orlando's Walt Disney World here, but about another renowned Florida institution, Publix Super Markets, Inc., the 741-store chain based in nearby Lakeland that has been creating its own kind of retail magic for the past 70 years.

Having cultivated a deeply loyal following among Floridians, Publix is widely regarded not only as one of the industry's best-run supermarket organizations, but also as one of the most well-respected family businesses in the United States. The dominant market leader in its home state, the fast-growing retailer also operates combination food/drug stores in Georgia, South Carolina, Alabama, and, most recently, Tennessee.

Retail visionary

There is no understating the enduring heritage of Publix founder George Jenkins, a retail visionary who developed a plan in 1930 that has worked like a charm ever since. The impact of Jenkins' legacy is felt by each of the company's 123,000-plus associates every day. After all, they are the co-owners of the empire "Mr. George" built, and today it has become the standard for quality service, contemporary facilities, superior merchandising, and an extraordinarily loyal work force.

"It's difficult to find employees who would speak ill of Publix," notes a longtime observer of the local trade. "A lot of Lakeland bleeds Publix green, and the company's strong heritage permeates right down to its front-line clerks."

Although officials from privately held Publix declined to be interviewed for this article, industry observers are quick to comment on the company's nearly flawless performance throughout its proud and prosperous history.

"Publix has consistently had the best same-store sales in the industry, which says an awful lot about the chain's overall health and position in the market," says Andrew Wolf, an analyst at BB&T Capital Markets in Richmond, Va.

Keeping the faith

The nation's largest employee-owned grocery chain, Publix is ranked No. 7 on the Progressive Grocer Super 50 list of top supermarket firms, and is Florida's largest private employer. Despite its unprecedented growth rate, Wolf says Publix has maintained its leadership role in the industry by preserving the founder's guiding philosophy of taking good care of both customers and employees.

"One of the things that sets Publix apart is outstanding customer service," says Wolf, adding that its record is unrivaled for a company of its size and is the trait that best characterizes what makes Publix tick.

"One of the reasons they've been able to achieve high service levels is that every employee, from store manager to part-time janitor, owns stock in the company. Everybody. No exception. And I think that their good, incentivized employee base has been the main driver of providing shoppers with an exceedingly pleasant experience," he says.

The stock is not publicly traded and is made available for sale only to current Publix associates and board members. All told, there are some 90,000 shareholders—including current and former employees, members of the Jenkins family, and those given the stock as gifts—who own stock through their retirement program, their employee stock option or 401(k) plan, or through a direct purchase.

George Jenkins began offering stock to Publix employees right off the bat. He hatched the plan at a time when very few people could afford to buy shares of preferred stock, and is said to have been so committed to employee ownership that he gave everyone a $2 raise, withheld the money, and put it toward the purchase of one share of stock for each employee.

Employees now own about 29 percent of Publix, while directors and executive officers own another 43 percent. In recent years, the share price, which is determined quarterly by the board of directors, has hovered in the range of $37 to $48.

Wolf says ownership motivates the chain's people to do their best. "By being able to share in the success of the company, they have a vested interest in wanting to take better care of it."

While employees have been highly influential contributors to the chain's accomplishments, Publix's family-centered management team is clearly a talented, dedicated group that has done an exceptional job of managing assets while avoiding crippling long-term debt, Wolf notes.

Howard's turn

Howard Jenkins, the son of Publix's late founder who took over the chief executive spot from his father in January 1990, presided over the company during its largest period of expansion and diversification.

During his 11 years of leadership, sales nearly tripled from $5.3 billion to $14.6 billion, and store count increased from 367 to 655 with dramatic expansion into new markets. Over the period, the stock price increased from $8 per share, adjusted for a 5-for-1 stock split, to $48.50 per share.

Howard Jenkins was also the force behind Publix's foray into Internet retailing with its PublixDirect Web-based home delivery service that was launched in South Florida in 2001. PublixDirect, which charges a $7.95 delivery fee and has logged more than 200,000 orders, recently began accepting coupons for groceries just as the stores do.

But the most significant development during the Howard Jenkins years was Publix's expansion into the Atlanta market. In November 1991, the chain tiptoed into Georgia with a store in Savannah. A year later, it stampeded into the Peach State and, 138 stores later, has closed the gap with long-time market leader Kroger.

Industry observers are awed at the speed with which Publix moved into Atlanta. "How many chains can announce they're going into a major metro market, and in 10 years go from nothing to becoming the co-market leader with Kroger?" asks Matthew Casey, a Clark, N.J.-based real estate and market research consultant.

Wolf echoes that sentiment. "The most visible example of Publix's success and growth is what they did in Atlanta in the Nineties," he says, adding that being privately held was a critical factor. "To go into that kind of expansion mode in an entirely new market would be unheard of for a publicly traded company, which would be required to be more profitable than the prior year to appease both stockholders and Wall Street."

Publix's smooth move into Atlanta was also made possible by what Wolf calls one of the chain's most important operational strengths: its keen ability to adapt to the community and incorporate changes when necessary in much the same way as an established regional operator.

"Publix does a tremendous job of making consumers feel like they're shopping in a community market rather than in a large, impersonal chain," says Wolf. "Their Atlanta stores convey a feeling of being in a genuine Southern market; they've got regional merchandising down to a science."

Testifying to the chain's pull on shoppers is the fact that it succeeds with fewer store hours than other local grocers. Casey says he knows of no Publix stores open past 10 p.m. "It is noteworthy that they are able to do extremely impressive volumes in a shorter work day versus their round-the-clock and extended-hour competitors," he says.

Valuable anchor

The cachet of having a Publix as a shopping center's anchor has put upward pressure on real estate rentals in both Atlanta and Florida. Casey says developers are able to charge neighboring tenants 15 to 20 percent more for space in a Publix-anchored center than they would normally charge.

In May 2001, Charles H. Jenkins Jr. became Publix's c.e.o. when cousin Howard Jenkins resigned. Although no longer involved in the company's day-to-day affairs, Howard Jenkins remains at the helm of the board of directors.

Charlie Jenkins, a Harvard Ph.D. and previously c.o.o. of the company, is described as a meticulous planner. He joined Publix in 1969 and focused his career in real estate, warehousing and distribution, and facilities.

He wasn't in the c.e.o.'s office long before detractors began speculating whether the operations specialist would be aggressive enough to face off against the mighty Wal-Mart during a period of economic decline. Those doubts appear to have been put to rest following a string of recent developments that fit right in with Publix's style of making haste slowly.

Since 2001, the company has opened Pix gasoline-convenience stores at supermarkets in Lakeland, Winter Haven, Deltona, and Kissimmee, Fla. In addition to gas, the stores offer a limited selection of groceries, deli, and fresh food items. The Pix units range from 1,000 to 3,000 square feet; Publix supermarkets range from 27,000 to 61,000 square feet.

Lakeland's daily newspaper, The Ledger, reports that while the Pix format appears to be satisfying customers and building sales, the company has no plans to expand beyond the four units.

Last summer, Publix made an interesting move by investing in Crispers LLC, a 13-unit, Lakeland-based restaurant company targeting health-conscious customers with a broad variety of salads, sandwiches, and soups in a quick-serve format.

The next frontier for Publix is Nashville, where the chain has reportedly made plans to obtain up to 30 stores over the next few years. Thus far, Publix has opened four of the seven stores it acquired from Albertsons following the Boise, Idaho retailer's exit from Tennessee's Music City.

And if things go well, observers envision Publix giving Kroger another solid run for its money in a market that is considered ripe for the picking. "Nashville is vulnerable, and I see Publix doing very well there," says Casey.

Wes Ball, retired president of the Tennessee Grocers Association who is now the trade group's government relations director, says he was "really impressed by the thoroughness with which Publix entered the market. They certainly did their homework by setting up meetings with all the necessary state and local regulatory agencies."

Ball continues, "I was also very impressed with their upfront style and desire to do things right the first time. Their attention to detail was something I have not seen from others who have made the same effort, and it just makes so much sense. It was also evident, as an ESOP company, that the people you are dealing with on every level are the owners."

After the first two Nashville stores opened, Ball says, "Publix demonstrated a level of service that some of the competitors are now having to emulate here. They really went all out during their grand openings, despite the inclement weather they had to contend with."

Ball relates how associates with umbrellas manned the parking lots to escort customers to and from the store while another associate packed groceries in their cars. "They really rolled out the red carpet and put their best foot forward," he says.

The vendor community appears to hold Publix in equally high regard. Says Herb Bell, president of Advantage Sales & Marketing's Tampa office, "Publix is the most wonderful retailer in America. They treat people with the highest respect, and do business in a manner that is phenomenal. They set the standard for the industry."

Noting Publix's "strictly business" approach, Bell says the chain offers vendors of all sizes an equal opportunity to play ball. "Publix conducts itself today with the same high standards as it did 30 years ago. Relationships don't mean a thing. If you have the best program and the best prices, anyone can request an appointment and expect to be treated as fairly as anyone else."

'Something better going on'

At a time when customer loyalty cards are more the rule than the exception, Publix has sought to offer its customers equal treatment with low prices by promising "No forms. No cards. No hassles. Publix makes savings simple."

"While they do not offer a loyalty program, it is clear they are trying to key on a price image by extensively promoting their no-card strategy in tandem with their 'extra value advantage buy' promotional deals," says one local observer.

Publix seems to be one of the few chains that can sustain itself without a loyalty card, according to Wolf, "because it's got something better going on. A loyalty card is not powerful enough to trump what they offer, which is better merchandising, better service, higher quality, and superior facilities."

Indeed, the company's stores have played a large part in winning over the shopping public. "Publix has always been known for cleanliness," says Casey. "When you enter a Publix, things are immaculate. The aisles are particularly wide and are wonderfully merchandised. The stores are bright and cheery green, and all of their associates, from managers on down, convey a highly professional image."

Casey quips: "Even the pimples on the faces of the teenagers who work at Publix don't look as bad as they do in the competition."

Another point worth mentioning, according to a member of the local selling trade, is the stores' pristine public restrooms, which he calls "another example of their outstanding operations and commitment to cleanliness. It may sound silly, but I've been in plenty of Publix stores, and their restrooms are immaculate in comparison to the conditions of the facilities I've seen in both independents and other chains. It's often the little things like this that keep customers loyal and satisfied."

The company is more than halfway through its move to a new corporate headquarters at Airport Road and the Polk Parkway. The shimmering green, three-story complex is 320,000 square feet and shaped like a crescent.

The new headquarters is symbolic of more than the chain's impressive growth rate, says an industry observer. "It signifies to the locals that they're committed to staying in Lakeland." There had been reports that the chain was considering a headquarters move to Atlanta, where its PublixDirect subsidiary is based.

Looking ahead, the observer expects to see Publix remain within the geographic confines of its distribution centers. "For now, I think they will be content to stay within a 250-mile range of Atlanta. Publix tends to pride itself on not buying other chains, so if they decide to push further, I would expect to see them do it themselves rather than buying up another chain."

As the industry has consolidated, says Casey, there isn't a major supermarket company that hasn't lusted after Publix. "The rapid consolidation over the past few years finds Publix as one of the last remaining high-quality independent chains that hasn't been gobbled up yet," he says. "Anybody would love to have them, but there are very few who would be able to come up with necessary funding."

While Wolf believes Publix is perfectly poised to continue its tradition of growth and prosperity, he says the chain's primary vulnerability would be "if they enter a new region and fail to catch on to local tastes and merchandising preferences."

Perpetuation of management talent will be essential, he adds, as will having enough people to run the stores and maintaining a culture of excellence. If the chain's growth outruns its ability to manage stores the way it wants to, says Wolf, Publix risks diluting the offer by compromising its ability to have the better mousetrap.

So far, that's never happened.

**The print version of this article contains sidebars and charts not included in the online version. To order the February 15 issue, contact the VNU Bookstore at (646) 654-4501.
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