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Schultz Sav-O Stores, Inc.

 


Address:
2215 Union Avenue
P.O. Box 419
Sheboygan, Wisconsin 53082-0419
U.S.A.

Telephone: (414) 457-4433
Fax: (414) 457-6295
http://www.shopthepig.com

Statistics:
Public Company
Incorporated: 1911 as The Schultz Brothers Company
Employees: 1,550
Sales: $453.92 million
Stock Exchanges: NASDAQ
SICs: 5411 Grocery Stores; 5141 Groceries--General Line; 5149 Groceries & Related Products, Not Elsewhere Classified; 2086 Bottled & Canned Soft Drinks


Company Perspectives:


A strong entrepreneurial spirit complemented by an 85-year tradition of quality, value and customer service has continued to guide the strategic plan for Schultz Sav-O Stores, Inc., as a successful regional supermarket wholesaler and retailer.


Company History:

Schultz Sav-O Stores, Inc. is a major presence in the wholesale and retail grocery industries in the upper Midwest. The company operates 16 company-owned retail supermarkets under the name Piggly Wiggly across eastern Wisconsin and northeastern Illinois. Under the name Sav-U Foods, Schultz operates warehouse food supermarkets throughout the same region. In addition to its 16 company-owned Piggly Wiggly and Sav-U stores, Schultz's wholesale operation supplies about 68 independently owned franchise stores of the same names, as well as 25 independent retail supermarkets that go by other names in the same geographic range.

Schultz Sav-O has risen to a prominent position among grocery chains through careful positioning. The company tends to locate stores in small to mid-size markets, while providing the kind of product variety, pricing, and promotional savvy usually found only in bigger cities. In addition, Schultz benefits from its unique structure as a sort of hybrid of retailer and wholesaler. As a result of this split personality, the company refers to itself as a "virtual chain," meaning that all stores, whether franchised or corporate, share a single identity through unified looks, advertising, merchandising, and, above all, products. The combined buying power of the "virtual chain" enables the company to provide its services as a wholesaler more effectively.

Early Growth

The company was founded in 1911 by brothers Herman, Arthur, and Oscar Schultz, and called appropriately, The Schultz Brothers Company. They set up their wholesale grocery business in a Sheboygan, Wisconsin, building purchased from their father, Martin Schultz, who had previously run a general store in the space. After several years of steady growth, the brothers expanded the official name of their business in 1920 to Schultz Brothers Company Wholesale Grocers. During most of the 1920s, the company thrived by dealing primarily in national brands of grocery products. By 1928 they were ready to begin distributing their own brands as well. The two grocery brands initially added to the mix at Schultz Brothers were Schultz's Finest and Pine Hills.

Soon, the retail stores that the company was serving were loosely organized into a voluntary retail group called Buy Low. As the Schultz Brothers' distribution network continued to grow, various expansions took place at their Sheboygan warehouse. Primarily a wholesaler of canned and dry goods through the mid-1940s, the company decided in 1945 to begin dealing in fresh produce and frozen foods--a rapidly growing segment&mdash well. To accommodate these new departments, the warehouse was given a major overhaul, and the new products were added to the distributing operation the following year. With the addition of produce and frozen foods to the Schultz operation, a new position, manager of produce and frozen foods, was added. One of the first employees to hold this position was Howard C. Dickelman. Dickelman's ability was recognized immediately, and he quickly made his way up the corporate ranks, from merchandising manager of all divisions, to vice-president/general manager, to president, and eventually to chairman of the board. Dickelman's vision helped shape the company's direction through several decades of growth and prosperity.

The Piggly Wiggly 1950s

The name Piggly Wiggly came into the picture in 1949. That year, Schultz Brothers signed a franchise agreement that gave the company the right to use the Piggly Wiggly name in southern and eastern Wisconsin. The company soon began to sell franchises throughout the region. Early store locations included the Wisconsin towns of Sturgeon Bay, Manitowoc, Green Bay, and Kaukauna. The following year, the Schultz Brothers opened their first company-owned Piggly Wiggly store right at home in Sheboygan. These early Piggly Wiggly stores, both franchises and company-owned versions, formed the core of what went on to become a hugely successful regional supermarket chain.

As the Schultz's chain of Piggly Wiggly stores continued to grow, the need to associate itself with a solid, nationally known private label program became evident. In 1954 the company joined Topco Associates, a large purchasing cooperative. This move gave the Piggly Wiggly stores access to Topco brands such as Food Club and Top Frost, assuring both the stores and their customers of consistent quality and competitive prices for these grocery items. Topco provided other services as well, including on-site meat selection at the processing plants and produce selection at the agricultural source.

The Schultz Brothers company purchased a new facility in 1957. This site, located on an eight-acre plot in Sheboygan, remained the company's main distribution center into the 1990s, eventually doubling in size to 20 acres. In 1962 Schultz Brothers bought out the Sav-O Corporation, a trading stamp operation, and merged it into the existing company to form Schultz Sav-O Stores Inc. Schultz Sav-O went public the same year, with an initial public offering of 75,000 shares at $6.36 a share. Those shares went so quickly that an additional 85,000 were offered to the public almost immediately.

In 1969 Schultz Sav-O shifted gears entirely with its retail operation. That year, all of the company's retail stores were converted from standard supermarkets into total discount food stores. The move resulted in record retail sales for the company. The following year the company purchased the Springtime Beverage Company, a bottler of carbonated beverages. Within a decade, the bottling plant was relocated to Schultz's main distribution center in Sheboygan, and refitted with state-of-the-art, high-speed bottling equipment. By 1972 there were 30 stores in the chain, up from 24 the previous year.

The 1980s: The Warehouse Era

As warehouse food stores began to seize an increasing share of the retail grocery market, Schultz Sav-O looked for ways to survive, and even prosper, from that trend. In order to compete in the warehouse food store battle, the company formed Sav-U Foods, its own answer to the rise of large format, inexpensive chains that were appearing in Schultz's Wisconsin home territory. In 1982 that territory was expanded to include northern Illinois and Michigan's Upper Peninsula as well, through the purchase of Piggly Wiggly/Sav-U franchise rights in those regions.

By the 1980s, another Dickelman, Howard's son James Dickelman, was playing an important role in company affairs, serving as president and chief executive officer, while father Howard retained the board chairmanship. While the company was extending its geographical reach, it was strengthening its grip on company control as well, by purchasing back 51 percent of the company's then-outstanding stock from a shareholder. During the mid-1980s, Schultz launched a major facility expansion program, costing $4.6 million, centered around the construction of a one million cubic foot freezer facility. Upon the project's completion in 1987, the company's Sheboygan office and distribution complex was approximately 400,000 square feet in area.

As the company celebrated its 75th anniversary in 1986, sales reached a record $406 million, with healthy net earnings of $2.39 million. By the end of that year, Schultz Sav-O operated 28 Piggly Wiggly company stores and 11 Sav-U company stores. It also serviced 40 Piggly Wiggly and Sav-U Warehouse franchise stores, and provided wholesale products to about 90 independent groceries. Around this time, the company also took steps to unify the appearance of the Piggly Wiggly stores in its region. Among those steps was a new floor care program, developed with the help of Johnson Wax, that awarded incentives such as trips and parties to stores maintaining high standards of floor appearance during the sloppy Wisconsin and northern Illinois winter months.

Focus on Wholesaling in the 1990s

During the early 1990s, the company began to place more emphasis on the wholesale end of its business. As a result, Schultz began selling off some of its less profitable stores. In 1992 alone, stores in Milwaukee, Janesville, Muskego, Fond du Lac, and Ripon--all in Wisconsin--were sold, mostly to managers within the corporation. Initially, the move created a bit of conflict with employees, since some of the new owners were hesitant to rehire all of the stores' existing employees. By the end of 1992, however, the majority of the labor grievances had been settled, and most workers retained their jobs, albeit at somewhat lower salaries than under corporate ownership. As a result of this reduction in the number of company-owned stores, sales in 1993 dropped to $470 million, down from $490 the previous year. Net earnings, on the other hand, nearly doubled, reaching $4.75 million for 1993. By the end of 1994 there were 20 corporate stores in the Schultz empire, and 65 franchised outlets.

In 1995 Schultz introduced a new electronic card marketing program called the Piggly Wiggly Preferred Club Card. The card-club concept offered several advantages for customers. In addition to providing coupon-less discounts, cardholders were able to receive incentives for high-volume purchasing and special savings on future "Pig Deals" during subsequent visits. Meanwhile, the company continued to streamline by either closing or converting to franchises those corporate stores that were not performing up to par. The company also invested resources into helping its franchise owners maintain the quality of their stores, providing financial assistance in addition to the advertising, marketing, and merchandising efforts it was already contributing. For 1995 the company's sales again declined a bit, to $440 million. By years end the chain consisted of 66 franchised stores and 19 company-owned units.

As the 1990s continued, Schultz took steps to try to reverse its downward trend in sales. It was hoped that the electronic card program would create greater customer loyalty as it spread to more and more Piggly Wiggly markets. In 1996 the company restructured its retail supervisory organization in order to better coordinate developments at its corporate and franchise stores. Whereas in the past franchise operations and corporate operations were each supervised by a separate officer, now both branches were united under veteran executive Bill Jacobson, who was given the newly created title senior vice-president of retail operations. Lines between meat, deli, and bakery departments at the corporate level were also eliminated, placing greater emphasis on whole-store operations. 1996 also brought the development of the internet segment of the company's multimedia "Shop the Pig" campaign, in the form of Schultz Sav-O's "Shop the Pig" site on the World Wide Web. The web site featured information about store locations, hours, specials, and contests and other promotions. It also gave background information on the company's history and offered links to Ticketmaster, which has outposts in over 30 Piggly Wigglys.

Sales at Schultz Sav-O increased in 1996 to $454 million, representing the first time since 1992 that the total was greater than the previous year, and in spite of the closing of two outdated corporate stores and the conversion of another into a franchise store. The company also reported net income for the year of $6.5 million, the highest total in company history. By the end of the year, 50 Piggly Wiggly stores had installed the necessary equipment to support the electronic card program, the success of which was given much of the credit for the sales turnaround. In fact, management directly traced increases in same-store sales and average transaction amounts to the card. Focus remained on improving operations through technology, including business systems upgrades and work on installing the card-club equipment at the remaining stores. The company also continued to increase emphasis on it fresh food departments, including produce, meat, bakery, and deli, at both the retail and wholesale levels.

In the closing years of the century, management at Schultz Sav-O hoped to maintain its niche in the small and medium-sized towns of the upper Midwest by offering high-quality supermarket items at competitive prices and with superior service. As Schultz's "virtual chain" approach evolves further, the company expects to find further ways to take advantage of the unique relationship it has cultivated between its franchise stores and its own wholesale operation. If that relationship remains fruitful, the success of this "virtual chain" will continue to be more than a "virtual" reality.





Further Reading:


"Grocery Union Quits Action," Wisconsin State Journal, September 15, 1992.
"Janesville Food Mart Closes to Reorganize," Wisconsin State Journal, July 10, 1992.
"Piggly Wiggly Workers Get Raise," Wisconsin State Journal, December 21, 1993.
"Schultz: Card Program Fattened Piggly Wiggly's Sales," Supermarket News, April 21, 1997, p. 29.
"Schultz Cites Moves to Fight Sales Dips," Supermarket News, April 29, 1996, p. 85.
"Schultz Reports Earnings," Supermarket News, February 17, 1997, p. 66.
"Schultz Sav-O Floor-Care Plan Sweeps Chain," Chain Store Age Executive, November 1987, p. 213.
"Store Chain Profits Sink," Milwaukee Journal, May 12, 1972.
Tibbits, Lisa A., "Schultz to Grow Franchises but Scale Down Expenditures," Supermarket News, May 22, 1995, p. 22.
Zwiebach, Elliot, "Schultz Shifts Management to Aid Piggly Wiggly," Supermarket News, May 20, 1996, p. 24.

Source: International Directory of Company Histories, Vol. 21. St. James Press, 1998.




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