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Young's Market Company, LLC

 


Address:
2164 N. Batavia Street
Orange, California 92865
U.S.A.

Telephone: (714) 283-4933
Fax: (714) 283-6175
http://www.youngsmkt.com

Statistics:
Wholly Owned Subsidiary of Young's Holdings, Inc.
Incorporated: 1906
Employees: 1,700
Sales: $1.1 billion (1999)
NAIC: 42281 Beer and Ale Wholesalers; 42282 Wine and Distilled Alcoholic Beverage Wholesalers


Company Perspectives:


The Corporate Mission of Young's Market Company is to be the premier spirits and wine distributor in the United States by diligently marketing and selling our portfolio of brands and by providing the most effective and efficient customer service in the industry.


Company History:

Young's Market Company, LLC is one of the largest wholesalers and distributors of beer, wine, and distilled spirits in the United States. With branch offices in Los Angeles, San Diego, Stockton, Santa Rosa, Eureka, Bakersfield, and Fresno, the company's market territory includes most of California. Its presence is strongest, however, in the southern California/Los Angeles area. Young's Market also operates in the state of Hawaii through a subsidiary called Better Brands, which has branch offices on several of the islands. The company is the sole distributor of most of its brands.

1888-1930: Building a Food Retail Empire

In 1888, John G. Young, founder of Young's Market Company, opened a small food retail store in downtown Los Angeles. When his fledgling business began to grow, Young's four younger brothers joined him in the venture. In 1906, the five Young brothers incorporated their business as Young's Market Company and opened their first joint store at 9th and Main Street in Los Angeles. Four years later, the company opened its first manufacturing plant to produce several of its own food lines, including salad dressings, mayonnaise, corned beef, and sausage products. It also established a facility in a nearby building for receiving fish and seafood.

In 1925, the Young brothers opened a luxurious new store on the corner of 7th Street and Union Avenue. The store, which also served as the Young's Market Company headquarters, was to become a landmark in downtown Los Angeles and an important part of the city's heritage. Built in an Italian Renaissance Revival style, the store's decor featured tile mosaics and friezes. Inside, affluent shoppers could find such gourmet offerings as chocolates made on-site, Young's own line of coffees, and a delicatessen that claimed to offer anything in the world. Young's Market quickly became the caterer of choice for Los Angeles, concocting elaborate wedding cakes for prominent area weddings and supplying William Randolph Hearst with food for his ranch. The company's delivery trucks made deliveries twice each day to many parts of the city.

In 1925, with their flagship store thriving, the Young brothers began opening a chain of what they called "neighborhood" retail stores. The company spent the next several years growing its chain, expanding as far south as San Diego and as far north as Santa Maria. In 1934, Young's opened its first supermarket. The store, named Thriftimart Cash and Carry, was geared less toward the company's traditional gourmet fare and more toward standard grocery products. Four more Thriftimarts soon followed. In 1937, however, the Young brothers sold the five-store chain of supermarkets to Fitzsimmons Markets.

1930s: Post-Prohibition

While the Youngs were working on their Thriftimart chain, a momentous change was taking place in the United States. With the end of Prohibition in 1933, the federal government's ban on alcohol sales was lifted. Retailers immediately jumped into action, providing a thirsty public with drinks that had been illegal for 13 years; Young's Market was in the vanguard of the new liquor business that was quickly forming. The company began wholesaling liquor, while at the same time maintaining its retail grocery business. In 1934, it turned its San Diego store into a combination wholesale and retail food and liquor operation.

As a liquor wholesaler, Young's took an approach slightly different from that of its competitors. At the time, wine and liquor brands were carried by several different distributors, usually with no territorial exclusivity. This meant that competing distributors often carried the same brands. Young's, however, sought exclusive rights to the labels it carried. The company also aligned itself closely with smaller, independent distillers. This approach led to several beneficial and long-lasting alliances with brands such as Bacardi rum and Christian Brothers brandy.

One of the company's most notable successes was the introduction of the José Cuervo tequila line in the United States. The José Cuervo relationship was established by one of Young's new salesmen--Vernon Underwood. At the time, most Americans were unfamiliar with the strange-tasting Mexican liquor. Underwood, who had become acquainted with the drink during his college years at the University of Arizona at Tucson, was sure that it could be a good seller in the United States. He managed to convince both Young and the head of the Cuervo distillery, and Young's obtained U.S. distribution rights from Cuervo.

Tequila might not have become as popular as it did, however, without some further help from Underwood and Young's Market's advertising agency. The main obstacle to popularizing tequila was finding a way to drink it. In Mexico, the traditional method of tequila drinking involved licking salt from the back of the hand, gulping the liquor, and then sucking on a lime. It seemed unlikely, however, that this routine was going to catch on in the United States, and sales of the drink were slow. At that time, however, a Los Angeles restaurant suddenly started ordering five cases of tequila at a time, and Underwood decided to pay a visit to the restaurant's bar to investigate what was behind the increased sales. What he found was the margarita--a new tequila drink invented by the restaurant's head bartender. Young's ad agency used the drink as a springboard for a new tequila campaign, which proved very successful. Sales of Cuervo took off, eventually attaining such popularity that Young's sold the national distribution rights, retaining distribution only in its own territory.

The successful introduction of José Cuervo was to be only the first of Underwood's many contributions to Young's Market. Eventually, he married company founder John Young's daughter, Adrienne, and assumed an increasingly significant role in the business, becoming general manager and chief financial officer.

1940s-70s: Exclusively Wholesale

Since Young's had begun wholesaling liquor in the early 1930s, it had dealt with increasing conflict between the wholesale and retail sides of its business. Some of its wholesale customers were unhappy about doing business with a company that was competing directly against them on the retail level. In 1940, when Young's acquired a Dr Pepper franchise, it appeared that the time had come to choose between retail and wholesale. The company decided to give up its retail segment and focus exclusively on wholesaling wine, spirits, and food. It quickly set about selling its chain of neighborhood stores, which by that time numbered 60. In May 1940, the company closed the doors of its famous headquarters store at 7th and Union.

With a newly defined focus, Young's Market expanded its liquor business in the 1950s, opening branch operations in Long Beach and Rialto, California. The company also built a new headquarters at 500 S. Central Avenue in Los Angeles and moved its meat and food processing segments into a new facility just down the street.

In 1963, Young's Market President William G. Young died. He was replaced by Vernon Underwood, John Young's son-in-law and the company's general manager. One year later, the company established its first subsidiary wine and spirits wholesale business, which was named the William George Company. The new subsidiary opened its first wholesale branch operation in Anaheim, California, in 1967.

Also in 1967, Young's Market first forayed outside its native California with the acquisition of two Hawaii-based liquor wholesale firms. The companies--Cereal and Fruit Products and Better Brands Ltd.--were located in Honolulu. One year after the acquisition, the companies expanded their operations by opening a branch office in Kahului, Maui. A second Hawaii branch operation was opened in 1972, in the community of Hilo. In 1975, Young's added a food wholesaling operation to its growing Hawaii liquor business. The company--Young's Meat and Provisions--was based in Honolulu and provided service to all of the islands.

In the meantime, Young's also was exploring new domestic expansion and diversification possibilities. In 1968, the company became a vintner as well as a distributor when it purchased the Buena Vista Winery in Sonoma, California. A year later, Young's acquired 700 acres of land overlooking the San Francisco Bay to use as a new vineyard for the 100-year-old winery. Buena Vista's vineyard was a part of the Carneros viticultural region, which was characterized by its shallow, dense soil, cool summers, and mild winters. The climate conditions in the Carneros region allowed for longer growing seasons and produced grapes with distinct flavors.

In 1976, with its vineyards thriving, Young's added a new, state-of-the-art fermenting winery to the Buena Vista Winery. Just three years later, the company sold the vineyards and winery to the A. Racke GmbH & Co. of Germany, a family-owned wine and spirits business, which had been founded in 1855.

1980s: Steady Expansion

Young's started off the 1980s with more expansion. In 1980, the company's Hawaiian subsidiaries, Better Brands and Cereal and Fruit, established a third wholesale branch, on the island of Kauai. Back home in Los Angeles, the company opened a warehouse operation in Orange County to service chain stores carrying liquor and wines. In addition, Young's Specialty Foods Division, which carried gourmet and natural food items, moved into an expanded space in Cerritos. The division moved to an even larger facility in just three years, because of increasing business and a growing product line.

1888:John Young opens his first retail food store in downtown Los Angeles.

1906:Young's Market Company is incorporated.

1925:Young's Market opens its famous headquarters store in Los Angeles.

1927:Young's begins to build a chain of 'neighborhood' stores.

1933:Young's begins wholesaling wine and spirits.

1940:The company decides to focus exclusively on wholesaling and begins selling its chain of neighborhood stores.

1963:Vernon Underwood, Sr., becomes president of Young's Market Company.

1967:Young's acquires Better Brands and Cereal and Fruit Products subsidiaries.

1968:Young's purchases the Buena Vista Winery.

1979:Buena Vista Winery is sold.

1990:The Underwood family buys out all remaining stockholders of Young's Market, becoming the company's sole owners.

1994:Young's Market moves its headquarters from Los Angeles to Orange, California.

1997:Charles Andrews becomes president and CEO of the company.

By the mid-1980s, Young's distributorship covered virtually the southern two-thirds of California, stretching as far north as Santa Clara. In 1985, the company inched a bit further north when it acquired a wholesale liquor distributorship in Union City and Santa Rosa. The distributorship--Rathjen Wines and Spirits--was absorbed into Young's and renamed Young's Market Company.

In 1988, Vernon Underwood retired from the business he had helped build for more than 50 years. Having served as the company's CEO and chairman of the board since 1974, he was named chairman emeritus upon his retirement. He was succeeded as chairman and CEO by his son, Vernon Underwood, Jr. The younger Underwood, like his father, had spent his entire career in the family business, starting as a warehouse worker in 1955. He had served as the company's president since 1975.

1990s: Underwood Buyout

Although Young's Market had always been controlled and managed by descendants of the founding Young brothers, the company had acquired a handful of outside investors in its 100-plus years of existence. In 1990, however, the Underwood family bought out the other shareholders, purchasing 37,500 shares at $3,500 per share, and assumed full ownership.

After the buyout, the Underwoods set about making some changes in the business. Perhaps most significantly, the company tightened its focus on the wine and spirits business, shedding its wholesale food distribution divisions. Young's meat distribution business, which was purchased by Con-Agra, and its seafood business, which was purchased by Hunt Bros., accounted for a combined $100 million in sales.

Another of the Underwoods' major changes was the relocation of the company's headquarters. In 1994, Young's moved from downtown Los Angeles to a newly built, 210,000-square-foot facility in Orange, California. According to Underwood, the relocation put Young's closer to more customers and closer to one of its biggest suppliers. Also in 1994, Young's Market reached $1 billion in sales.

In 1997, Young's Market entered into a strategic alliance with Sunbelt Beverage Corporation. Sunbelt was a large liquor distributor with operations in Florida, Maryland, Arizona, Pennsylvania, and South Carolina and affiliated companies in New York, Connecticut, and Washington, D.C. This alliance made Young's a part of the largest distribution network in the United States. Shortly after becoming a part of Sunbelt Beverage, Young's appointed Charles Andrews as its president and CEO. Andrews had served previously as the president and CEO of Sunbelt Beverage.

Looking to the Future

Since reaching the billion-dollar mark in 1994, Young's Market had posted only modest gains in sales; in 1999, the company's sales totaled $1.1 billion. This was due in part to relatively flat sales of wines and spirits industrywide. Consumption of wines had reached a peak, and then a plateau, in the 1980s. Meanwhile, sales of distilled spirits decreased for several years before finally stabilizing in the late 1990s. Because Young's revenues depended entirely upon sales of alcoholic beverages, the company's future performance was inextricably tied to that industry's market conditions.

Principal Subsidiaries: Better Brands Ltd.

Principal Competitors: National Distributing Company, Inc.; Southern Wine & Spirits of America; Charmer Industries, Inc.; Clare Rose, Inc.; Jaydor Corporation; Johnson Brother Wholesale Liquor Company; Paterno Imports Ltd.; Peerless Importers Inc.; Sunbelt Beverage Corporation; Wirtz Corporation.





Further Reading:


Britton, Charles, 'Young's Market: Food Industry Innovator,' Southern California Business, December 1, 1985, p. 7.
Klayman, Gary, 'In High Spirits: Family Firm Takes New Approach to Its Old Business,' Orange County Business Journal, October 2, 1995, p. 1.
Wilson, Daniel, 'A Fresh Look at Young's Market Co.,' Wines & Vines, May 1, 1994, p. 37.

Source: International Directory of Company Histories, Vol. 32. St. James Press, 2000.




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