Food City: Food, Family and Fun
K-VA-T Food Stores Inc./Food City
Throughout its trading areas, the Food City name is synonymous with NASCAR, as the retailer is a longtime sponsor of two of the sport’s most popular events, the spring Food City 500 and fall Food City 300 at Bristol Motor Speedway, in Bristol, Tenn. In 2017, Food City celebrated the 25th anniversary of its race sponsorships, as well as the 30th anniversary of Food City Race Night. The company is the second-longest-running sponsor in NASCAR history.
“The way we got our Food City name is we bought Quality Food Stores doing business as Food City in 1984,” he recounts. “We went from 11 stores to 30 stores overnight. Then, five years later, we went on to Knoxville, Tenn., and bought the White stores, which totaled a little over 40 stores, and doubled the size of the company.”
He became CEO in 2001 and by 2008, a year after the elder Smith passed away, Food City had opened its 100th location. More steady growth followed, and then, in 2015, Food City experienced another growth spurt when it acquired 29 Bi-Lo locations from Jacksonville, Fla.-based Southeastern Grocers, enabling it to move into northern Georgia.
While Food City has achieved much of its growth through acquisition, when asked if there’s a preferred method of growth for the company, Smith responds: “It depends. If you are going into a town the size of Chattanooga, Tenn., and you need 10 locations, I would rather acquire someone. You get instant scale and people.”
“People” is a word that comes up a lot during a conversation with Smith, because the company’s employee ownership model and value proposition to run the best store in town is dependent on caring associates providing top-flight customer service. Roughly 13% of the nearly $3 billion company is owned by employees, a fact that prompts Smith to share some folksy wisdom.
“No one ever washes a rented car,” he says. “If you own something, you take a little better care of it. You’ve got to have the best people to run the best stores, and you have to give them the tools to do their job.”
Running the Best Stores
Just as Steve Smith assumed leadership from his father, Smith’s daughter Katie Penny is expected to one day become CEO. Such a change isn’t imminent, however. Smith, 64, says, “I love what I do and I feel good,” noting that Penny “ is learning the business just the way I learned the business.”
For example, he cites a piece pick program in which the company will ship a single item to a store if requested by a customer. This is operationally inefficient, to be sure, but a move that contributes to customer loyalty over the long run.
Another example of a service Food City offers that would have been done away with years ago at a publicly held company involves a checkout process called “cashier unload.” As the name implies, Food City cashiers unload shoppers’ purchases before scanning items.
John Jones, EVP and director of store operations, knows the process, currently available in 80% of Food City stores, isn’t efficient, but when asked about removing it, he says, “We’ve been a little hesitant, because we don’t want to be perceived as taking away a service.” Instead, the company is adding self-checkouts and expects to have that option in 40 stores by year end.
Jones, a 41-year Food City veteran, oversees a field operations organization that consists of three divisions, each with three to four districts comprising between 12 and 15 stores. The stores are served by a single 1.2 million-square-foot distribution center near the company’s headquarters in Abingdon, Va., in the western part of the state.
In addition to Jones and Sparks, another of Smith’s top lieutenants is Dan Glei, EVP of merchandising and marketing. He joined the company in 2014 after holding key merchandising, e-commerce and format development roles with Ahold USA and its Giant Food Stores division. Before that he was with A&P, Polaroid, Harris-Teeter and Frito-Lay.
“We have more fun here than any place I’ve ever been,” Glei says. What makes it fun is the freedom that comes with pursuing the “run the best store in town” vision that Smith inherited from his father, Jack. At the company’s new store, in Winchester, those words appear on a large sign with the likeness of Jack at the front end. “We have a simple mission statement, and I doubt we will ever have another,” Glei notes.
As for Smith, he sees the benefit of being a regional operator with a fairly concentrated group of stores — 86 of its 137 stores are in Tennessee — and in having a team of senior leaders with diverse experiences.
“We have a group of people that have come from different backgrounds,” he observes. “We are able to embrace new ideas and try to take the best of those ideas and meld them together.”
National brands are an important element of Food City’s merchandising strategy, but the retailer also employs a unique approach with store brands. As part of the Elk Grove Village, Ill.-based Topco cooperative, Abingdon, Va.-based Food City offers brands that are also sold by other members, but also has its own company-specific brands, in addition to having acquired regional brands that it offers exclusively.
“We are big supporters of Topco, as they are a center of excellence we can draw upon,” says Dan Glei, Food City’s EVP of merchandising and marketing.
Food City store brands are sold under an extensive roster of names such as Food Club, Food City Fresh, Full Circle Market, Wide Awake Coffee Co., Tippy Toes, Harvest Club, Paws Happy Life, Evolve, Over the Top, Nostimo, Crav’n, CharKing, Misty Mountain, Flock’s Finest, b-lieve, Simply Done, TopCare, Culinary Tours, That’s Smart and Pure Harmony.
In addition, Food City has resurrected some regional brands that had gone under in its trading areas and breathed new life into them. Brands such as Kern’s Bread, Kay’s Ice Cream, Lay Meats, Terry’s Snack Foods and Moore’s Potato Chips have become household names once again, thanks to Food City’s backing.
“We have a pretty good variety of regional brands,” Glei notes.
In some categories, Food City may even have four separate store brands, as is the case with pasta and peanut butter, which Glei gestures to while standing in the aisle of the company’s newest store, in Winchester, Tenn.
Why so many? According to Glei, it’s about customer choice. He describes the concept of SKU rationalization employed by some retailers as a strategy for not carrying the products that customers want.