PG WEB EXTRA: Associated Wholesale Grocers

Associated Wholesale Grocers is one of the largest grocery wholesalers in the United States and the nation’s oldest grocery cooperative. Founded in 1924 and incorporated in 1926, AWG has enjoyed more than 80 years of growth and success, driven by a dedication to helping retailers succeed, which have earned it the honor of being named Progressive Grocer’s 2014 Wholesaler of the Year.

A full interview with upper management about the co-op’s achievements, innovations and efforts to help its retailer members grow and thrive appears in PG’s February issue. A historical timeline appears below; further information is available on AWG’s website.

1926 – 1936

AWG’s history dates back to 1924, when a group of 20 independent grocers met to discuss the advantages of combining their buying and advertising power amid fierce competition from growing national chains. Deciding a cooperative effort was the only way in which to gain market strength, the group started purchasing collectively, storing their wares in the back of a store owned by J.C. Harline at 39th and Troost in Kansas City, Mo.

Deemed a success, the co-op incorporate in March 1926 as the Associated Grocers of Kansas City (AG). The company’s first warehouse was on the second floor of the Morehead Grocery Co. Rapid growth brought a move in 1928 to the W.E. Murray Transfer and Storage Co., where AG occupied the fourth and fifth floors.

In 1930, the company moved to a 16,000-square-foot former mattress factory. With three floors, a basement and elevator, the company had room to offer more lines of product. But when the second floor of the building collapsed in 1932, AG was forced to move into a new 3-story brick and concrete building, which it occupied for more than two decades.

1936 – 1946

The late 1930s was a time of expansion for AG. It purchased two warehouses: The first, in Joplin, Mo., came in 1936. Two years later, AG purchased all the merchandise from the bankrupt United Grocers’ Springfield, Mo., warehouse for $200 a month. These two facilities enabled AG to expand its service coverage area throughout southern and southwest Missouri and into eastern Kansas. AG’s sales force began soliciting business beyond the metro areas.

Chain stores still dominated most markets, but independents made gains through strengthened buying and advertising power. The Thriftway group began, and AG stores participated in daily radio advertising with a weekly budget of $178.

1946 – 1956

The decade after the war saw the evolution from service to self-service, with the typical store offering 4,000 items. In 1953, AG changed its name to Associated Wholesale Grocers Inc. (AWG); the following year, it paid its first year-end patronage of $20,441 to members, deemed a better deal than the dividends of $3 to $6 per share members received before 1954.

Amid the continued dominance of chains, AWG attempted to provide its retailers with greater name recognition with its Mr. AG advertising program. The gambit made little difference – in fact, chains offered such low prices that AG retailers often sent their wives to shop the chains’ weekly specials and then resold the items in their own stores.

1956 – 1966

By the late 1950s, AWG members began to realize real benefits as the result of a new pricing structure. With pricing of 3 percent over invoice, for the first time in AWG’s history retailers could buy groceries at a price that would enable them to compete with the chains.

Meanwhile, as the co-op’s membership grew, the need for more space became critical. In 1956, AWG moved into a 200,000-square-foot facility in the Fairfax District in Kansas City, Kan. In Springfield, Mo., a 200,000-square-foot warehouse was built to serve the needs of a growing customer base in Southwest Missouri and Arkansas.

The focus on selling groceries and supporting retailers led to the establishment of several new departments: Cash & Carry, where retailers could buy single- and half-case amounts; the controlled-label program; and produce, fresh meat, and health and beauty care became available from the Kansas City warehouse.

1966 – 1976

Retailers were becoming aggressive by remodeling stores and using merchandising and operating techniques supported by AWG employees. Price sensitivity rose among consumers, while computer technology became more prevalent in the business.

By the end of this period, AWG had two new warehouses: In Springfield, a 300,000-square-foot facility replaced one destroyed by fire in 1970, and in Kansas City, a 565,000-square-foot office and warehouse complex (above) opened in 1972.

1976 – 1986

AWG’s purchase and subsequent sale of 20 Kroger stores to its members ushered in this decade of growth. The development of the Price Chopper/Price Mart and Country Mart concepts and the rollouts of Always Save and Best Choice gave retailers a way to satisfy a price-conscious public.

As consumers began to eat out more often, retailers sought to satisfy demand for convenience and ready-to-eat items. AWG did this by launching its first bakery-deli department at a Price Chopper store in 1985.

Warehouse improvements included an automated produce area in Kansas City and an automated order carousel in Springfield that could process orders for eight stores simultaneously. By 1980, warehouse space topped more than 1.2 million square feet, and the company had reached its first $1 billion in sales.

1986 – 1996

AWG members bought 40 Food Barn stores and 29 Homeland stores, and the former Homeland warehouse in Oklahoma City became AWG’s third division. Valu Merchandisers (VMC), AWG’s wholly-owned subsidiary supplying health and beauty care products and general merchandise, launched with a selection of more than 12,000 items from its 219,000-square-foot facility in Fort Scott, Kan.

Store development continued with the Sun Fresh and Apple Market concepts gaining acceptance as consumer demand for variety in perishables increased. The Best Choice Save-A-Label program was introduced, with more than 3,000 charitable organizations participating. With a product line of nearly 1,600 items, AWG house brand sales topped $374 million in 1996.

The addition of 100 docks and 296,676 square feet to the Kansas City warehouse brought AWG’s combined warehouse space to more than 2.3 million square feet. Sales for 1996 topped $3 billion for the first time.

1996 – 2006

Sales grew from $3.1 billion to $4.95 billion through a combination of new members, acquisition of new distribution centers and an increase in existing members’ store sales.

In 2003, AWG expanded into the Southeast by acquiring two distribution centers: a 737,000-square-foot facility in Goodlettsville, Tenn., and a 675,000-square-foot warehouse in Southaven, Miss. The 2003 acquisition also included a distribution center in Memphis, now operated by VMC.

2006 – Present

In 2007, AWG acquired a distribution center in Fort Worth, Texas. This facility – AWG’s largest, at 1.1 million square feet – serves members in Texas, New Mexico and Louisiana. Also in 2007, AWG built a state-of-the-art, 800,000-square-foot distribution center in Oklahoma City.

In 2011, AWG broke ground on its Gulf Coast Division in Pearl River, La., to better serve retailers in Louisiana, Texas, Mississippi, Alabama, Georgia and Florida. It began shipping in January 2013, and will eventually service more than 300 stores.

Sales continued to rise – from $4.95 billion in 2006 to $7.25 billion in 2010. Also in 2010, sales of AWG’s private label products reached the $1 billion mark for the first time.

In 2012, AWG completed a 30,000-square-foot expansion of its Kansas City headquarters, home to more than 1,000 employees, including corporate, distribution and 100 VMC employees. That year, sales reached $7.85 billion.