Riser Foods, Inc.

1907–1988

Riser Foods, Inc., a holding company, controls northeast Ohio's largest grocery chain. This leading retail and wholesale food seller and manufacturer is headquartered in a suburb of Cleveland, Ohio. The company was formed in 1988 through the combination of Fisher Foods, Inc.; Rini Supermarkets; Rego Supermarkets; and American Seaway Foods, Inc. The Riser name was arrived at through a combination of three company names: "RI" from Rini, "SE" from Seaway, and "R" from Rego. Riser's wholesale division distributes national brand and private label products to stores in Riser's subsidiary chains and to other retail competitors throughout Ohio and western Pennsylvania. The retail division, composed of 44 stores in northeastern Ohio, includes 42 groceries and two deep discount outlets.

Riser's oldest predecessor, Fisher Foods, Inc., was formed in 1907 as Fisher Bros. Co. by Manning and Charles Fisher. The two brothers moved from New York City to open a market in Cleveland because they heard that the city was growing fast and would need grocery stores. Their expectations were met and exceeded: within two years, Fisher Bros. had opened six additional stores, and by 1916, the chain boasted sixteen stores. The company built a state-of-the-art warehouse to supply its stores in 1923, and became one of the first area chains to open a "complete food store" offering fresh meats in 1928. Fisher Bros.' slogan, "It's Fresher at Fisher's," helped the chain win customers from traditional meat markets.

Even the Great Depression did not impede the grocery chain's growth: in 1930, the company doubled its warehouse capacity. By 1937, the founders had died and left the company to Ellwood Fisher, Manning's son. Fisher Bros.' gold and green signs adorned over 300 neighborhood stores at the end of the decade. With the advent of increased automobile travel and the interstate system after World War II, Cleveland became more suburbanized, and Fisher Bros. was able to consolidate many of its smaller stores. By 1948, the company had halved its number of stores, but remained Greater Cleveland's largest retail food distributor, with over $63 million in sales.

Fisher did not fare as well when competition intensified in the postwar era. By the mid-1960s, the 75-store chain was losing money on $86 million in annual sales, and held only 12 percent of the metropolitan Cleveland market it had once dominated. In 1965, a group of investors that included two sets of brothers, Carl and John Fazio and Sam and Frank Costa, purchased a controlling interest in Fisher Bros. for an estimated $3.1 million. The investors were all involved in the Stop-N-Shop Super Markets Association, and although at least one Fisher Bros. stockholder fought the sale, it was permitted. The purchase merged Fisher Bros. with the other investors' namesake chains, Fazio and Costa supermarkets.

Carl and Frank Fazio, who had owned six supermarkets before the merger, became chairman of the board and president, respectively. The new owners closed 28 stores and renamed and remodeled others in an effort to revive the languishing Fisher chain. The Fazios had been involved in Cleveland's grocery trade since the 1920s, when the Sicilian immigrants started a fruit and vegetable stand in the suburb of Cleveland Heights. Within three years, the chain was earning $4.5 million, and had regained a 21 percent share of the market.

The renamed Fisher Foods, Inc. made its first venture outside Ohio with the purchase of Chicago's Dominick's Finer Foods for $12 million in stock in 1968. This 18-store chain had been founded by Dominick DiMatteo, Sr., and was owned by Dominick DiMatteo, Jr. That same year, the Fazio's chain was extended to Columbus, Ohio, where it eventually grew to include six stores in Ohio's capitol city. In 1970, Fisher moved into the Warren-Youngstown area of Ohio with eight new stores, and two years later, the company acquired the 46-store Shopping Bag chain, which became Fisher's southern California division.

Fisher had experienced financial growth through strategic consolidation and acquisition during the decade after it changed ownership: the new management closed a total of 58 stores from 1964 to 1975, yet sales grew from $86 million to $1.3 billion during that period, making Fisher's the 26th largest retailer and 13th largest food chain in the United States. By the mid-1970s, Fisher had 197 stores in Ohio, Illinois, and California.

By 1948, the company had halved its number of stores, but remained Greater Cleveland's largest retail food distributor, with over $63 million in sales.

1973–1981

But this expansion was heavily financed, and several factors combined to stunt Fisher's growth in the late 1970s. Wholesale food prices had skyrocketed in 1973 and 1974, and when those prices plateaued, grocery surpluses glutted the market. This surplus, combined with a slowing of population growth in many areas (especially Cleveland) after 1975, forced many store owners to realize that the only way they could increase market share was to lower prices and bring in more customers. Price wars broke out in Los Angeles, Chicago, and Cleveland, but many industry analysts noted that, once the competition ended--or people could not decide which store had the lowest prices&mdash⁄oppers returned to their regular stores. To exacerbate the lowered profit margins and increased advertising outlay effected by the price wars, many supermarkets, including those in the Fisher group, were hit with higher labor costs and increased energy expenses during the oil crisis of the late 1970s.

In 1976, Fisher lost its number one spot in the Cleveland food market to Pick-N-Pay, which held a full third of the market. Later in the year, the Costa brothers retired from Fisher Foods' board of directors. Profits dropped another 64 percent in 1977, when the chain's share of the northeastern Ohio market dropped from 29 percent to 26.5 percent.

Fisher's California chain--which, at 46 stores, was still relatively small--was fined $5,000 in Los Angeles for fifteen charges of false advertising and one charge of mislabeling in July 1977. Fisher pleaded no contest, claiming that the infractions all stemmed from oversights, not deliberate deception. This, however, would not be the last time the grocery chain and its officials would be brought to court for charges such as these.

The chain seemed to bounce back somewhat in the last two years of the 1970s, when wholesale prices rose nine percent and ten percent. Fisher began to contend with Pick-N-Pay, regaining 28 percent of the Cleveland market to Pick-N-Pay's 29.1 percent. The grocery chain's profits soared to $9.83 million on sales of $1.45 billion in 1978. That year, the company sold its southern California stores to Albertson's, Inc., of Boise, Iowa for more than $50 million.

In 1979, Fisher turned to warehouse-style stores to save labor and overhead. It opened ten of the groceries, which asked customers to package their purchases with their own shopping bags and used computerized checkouts to cut labor requirements, in Akron and southern Ohio. That year, decades of rumors that the Fazio brothers had trouble working together culminated in the forced resignation of John Fazio as president and CEO. Dominick DiMatteo, Jr. succeeded him as president and three administrators shared the duties of the chief executive office: John's brother, Carl, DiMatteo and Robert G. Everett. John Fazio was Fisher's single largest shareholder, with 12.5 percent of the company's stock. Carl held 12.3 percent.

Although the new administration hoped that the new warehouse stores would help increase profit margins, the initial startup and conversion costs hit Fisher hard in 1979: Moody's Investors Service and Standard & Poor's Corp downgraded the company's long term bonds to "speculative investments" that year because the company could barely cover its debt. The company lost $7 million on sales that declined eight percent that year.

Fisher consolidated its position in the early 1980s, beginning with the closing of all eight Warren-Youngstown stores in the wake of numerous steel plant closings in 1979 and 1980. In the fall of 1980, Fisher also sold six Fazio's in Columbus to Seaway Food Town, Inc., of Maumee, Ohio. The divestments continued in 1981, when Fisher sold its two stores in northern Kentucky and three in Cincinnati. In December of that year, Dominick DiMatteo, Jr. bought back the 71-store Dominick's Finer Foods chain for over $80 million ($74.3 million in cash, and $4 million in stock). The sale of the Dominick's chain contributed the bulk ($20 million) of Fisher's 1981 profits of $21.1 million. The company used the rest of the proceeds of the Dominick's sale to reduce long-term debt from $60 million to $20 million and hoped to strengthen and expand the company's northeast Ohio stores. The sale left Fisher's with 64 components: 57 supermarkets in Ohio, a commercial bakery in Columbus, a doughnut plant in Cincinnati, an ice cream plant, a distribution center, a fruit basket company, a meat commissary, and a produce warehouse.

1957–1988

In the fall of 1981, price-fixing charges were brought against Fisher, contending that the company collaborated with First National Supermarkets, Inc. (parent of Pick-N-Pay stores) and the Association of Stop-N-Shop Stores to price goods below cost and thereby force others out of business. The company was slapped with five multi-million-dollar suits from individuals and companies. Later that same year, a second anti-trust suit was brought against Fisher and others by two nursing homes and a restaurant for fixing wholesale prices. Both cases enumerated infractions in the late 1970s. The first case resulted in the largest consumer class action settlement of a price-fixing case in U.S. history: one million households in seven northeast Ohio counties received $20 in grocery coupons. John Fazio, who was president and CEO of Fisher Foods when the violations occurred, was sentenced to five years of probation beginning in 1982, but his sentence was commuted in 1984.

Consolidation hit closer to home in 1982, when Fisher closed ten Cleveland-area stores. By the end of the year, the chain had been cut to 47 northeast Ohio stores. Management worked to extract concessions from grocery labor unions and concentrated on expanding the Heritage Wholesale Distribution Center that had been started in 1981. In 1983, Carl Fazio retired as chairman and CEO. He was succeeded by Bill J. Nichols, who had served only a few months when Cincinnati businessman Carl Lindner's American Financial Corp. bought 16.5 percent of Fisher's for $10.69 million. The following year, Lindner purchased all of the estimated 900,000 shares owned by Carl Fazio and family for $12.6 million. The acquisition increased American Financial's stake in Fisher Foods to more than 35 percent.

But Lindner had bought into an industry that was struggling with a familiar set of problems. The Cleveland-area market was plagued by decreasing population, high labor costs, new non-union competition, market saturation, and some of the lowest profit margins in the United States. The northeast Ohio market was the ninth largest in the United States: food sales in the 19-county area rose from $2.1 billion in 1973 to almost $4.8 billion a decade later. But population dropped by over 155,000 during that period, and from 1980 to 1982 alone, population in metro-Cleveland's Cuyahoga County dropped 25,400. Some industry observers noted societal shifts that hurt traditional groceries as well, including changing household and work patterns that favored more convenience store shopping and fast food restaurants.

In 1984, Fisher lost $5.5 million. Robert L. Hayden, who became president of the ailing grocery chain in the fall of 1985, tried to convert more stores to warehouse-type markets. By this time, Lindner's American Financial had become Fisher's largest shareholder, with 44 percent of the company's stock. Hayden worked to modernize many of the Fazio stores, and opened six Carl's Superstores and two Jax discount drugstores by 1986. Fisher Foods, the only publicly held grocery in the Cleveland area, lost $1.95 million that year due to remodeling costs and interest expenses.

In January 1987, Lindner sold his 44.6 percent stake in Fisher to 5300 Ricmond Road Corp., a private company, for $20.6 million. 5300 was a joint venture of American Seaway Foods, Rego's Stop-N-Shop, and Rini's Stop-N-Shop. American Seaway was the Cleveland area's largest food wholesaler, with $380 million in annual sales. American Seaway was formed in 1957 through the combination of four family-owned businesses: Eagle Wholesale, Economy Wholesale, J.F. Sanson and the David Lombardi Co. Rego's and Rini's, also family-owned and operated businesses, had 11 and 10 supermarkets, respectively, in 1987. The latter two chains operated under the advertising umbrella of Stop-N-Shop.

Fisher's new management closed 19 stores within six months of the purchase, and threatened to shutter the entire chain, unless it could negotiate concessions with the United Food & Commercial Workers. In mid-year, Fisher employees rejected, then accepted a compromise that eliminated 800 jobs in favor of maintaining the 42 remaining stores and the jobs they offered.

The 5300 Richmond Road Corp. and Riser proposed the merger of Rini's, Rego's, and Fisher's in the fall of 1987 through an exchange of stock. But the plan had to overcome the specter of price-fixing from the late 1970s. Part of the settlement reached in that case forbade Fisher from exchanging information with Stop-N-Shop or opening a store under the Stop-N-Shop umbrella. The three companies' shareholders and the appropriate federal agencies finally approved the merger in June 1988, after Fisher sold nine more stores in its effort to streamline operations.

1987–1993

The newly organized Riser Foods Inc. consisted of 53 stores: one Fazio's; 11 Rini's Stop-N-Shops; ten Rego's Stop-N-Shops; 18 Rini-Rego Stop-N-Shops; 11 Carl's Superstores; one Food Center Supermarket; and one Supersavers discount drugstore. The combination of American Seaway with Fisher's Heritage Wholesale operations created one of the largest food wholesaling concerns in the Midwest. Anthony C. Rego became co-chairman in charge of administration and joint CEO of the new entity. Charles A. Rini, Sr., headed Riser's retail operations and was named president of Riser, and Michael L. Borstein headed the wholesale operations and served as the other joint CEO.

Fisher lost $27.4 million in 1987 while management struggled to adjust to the new corporate culture. Their first move was to change the nameplate of nine Fazio's to Rini-Rego Stop-N-Shops. The renamed stores reported that sales jumped 20 percent in the first few months of operation under the new name. The Rini-Rego name conveyed a good reputation to replace the infamy Fazio's had earned in some neighborhoods. The new management also tried to infuse Carl's with new vigor, and even opened an 11th store in August 1988, but eventually had to close all the stores.

Riser went public in 1988 on the American Stock Exchange. During 1989, the company sold and subleased eleven stores and closed three others in a continuing austerity plan. The three-man management team tried to pare liabilities by increasing profit margins and reducing inventory. They hoped to use revenue, not loans, to remodel and expand. But a recession that started in the late 1980s and continued into the early 1990s prevented Riser's retail operations from achieving profit goals. During the recession, consumers were more willing to shop around for bargains. They found their deals at competing wholesalers, while discounters like Sam's Club, Kmart, and Twin Valu. The Food Marketing Institute warned grocers that alternative-format stores--including clubs, mass merchandisers and supercenters--would increase their share of the grocery business to 13 percent from six percent by the turn of the century. These low-cost outlets also helped fuel a 3.3 percent decline in food prices in the first few years of the decade.

Riser's responded to the low-cost challenge with its own bulk merchandise. The company's private label helped keep more of the profits in Riser's cash flow as consumers "traded down" to branded products during the recession. Riser capitalized on this trend by expanding its private label line to 500 items and repackaging the products to make them look better. But despite all these efforts, net sales for fiscal year 1991-92 declined 3.6 percent to $979 million, down from $1.022 billion.

Riser sold its unprofitable Food Service Division to Sysco Food Services of Cleveland, Inc. in 1992 and closed yet another retail store. The company also worked to enter more vibrant local markets by purchasing two stores, remodeling two, and replacing an outdated grocery with a larger store of 52,000 feet. Perhaps the most promising division of Riser resulted from the combination of the wholesale warehouses of American Seaway and Fisher, which enabled the company to supply up to 65 percent of a grocery's needs. In January 1992, this division got a lift when a competitor from New York, Peter J. Schmitt, filed for bankruptcy, leaving 85 northeast Ohio and western Pennsylvania supermarkets without a supplier. Riser's wholesale division was able to increase its volume to approximately 500 stores as a result of Schmitt's collapse.

Late in 1992, Riser's groceries held 25 percent of the Greater Cleveland grocery business, a virtual tie with its largest competitor, Finast Supermarkets. Although that year's profits dropped another 16 percent, to $8.12 million, the management planned to raise capital reinvestment for 1993 by about 2.5 percent, to $26.5 million. Riser planned to upgrade supermarkets and bank on the wholesale and food manufacturing divisions. Riser's plan for competing in the retail arena included new advertising, increased customer convenience features, and upgraded store facilities. The company hopes to utilize unique and regionally exclusive concepts to capture an even larger number of Greater Cleveland grocery shoppers.

In July 1993 Riser announced that it had entered into an agreement to purchase various assets of Boston Distributors, including a portion of that company's existing inventory and a 350,000-square-foot warehouse facility in Maple Heights, Ohio. Riser plans to use the acquisition to begin operations of its own health and beauty care and general merchandise warehouse.