King Kullen Grocery Co., Inc. History

Address:

1194 Prospect Avenue
Westbury, New York 11590
U.S.A.

Telephone: (516) 333-7100
Fax: (516) 333-7929

Private Company
Incorporated: 1930
Sales: $720 million (1993)
Employees: 4,500
SICs: 5411 Grocery Stores; 5912 Drug Stores & Proprietary Stores

Company History:

King Kullen Grocery Co., Inc. is a regional supermarket chain centered on Long Island, with 45 stores in 1995. Often described as the world's first supermarket chain (and recognized by the Smithsonian Institution as America's first supermarket), it was founded by Michael J. Cullen in 1930 and, in the mid-1990s, was still owned and operated by his descendants. King Kullen, through affiliated companies, entered nonfood lines of business in the early 1990s, including real estate and data processing.

Michael Cullen joined the Great Atlantic & Pacific Tea Co. (A&P) grocery chain as a clerk at the age of 18 and remained with the company for 17 years. Ten years later, in 1929, he was general sales manager of a Kroger Stores branch in Herrin, Illinois, when he presented to the company's store a plan for five prototype self-service, cash-and-carry supermarkets "monstrous in size." Because of a high volume of business and low overhead, he asserted, such stores could earn profits with much lower markups than had previously been thought possible. His proposal, never seen by the president, was rejected by a subordinate.

Cullen resigned his position and moved to New York City. With a partner, he leased an abandoned garage in the borough of Queens and in August 1930 opened the first King Kullen store. It occupied 6,000 square feet and stocked about 1,000 items, including hardware and automotive accessories. As Cullen had proposed to Kroger, he offered well-advertised price discounts on a wide range of merchandise and, as he had predicted, the public flocked to the store. Aided by a parking lot, it attracted customers from as far away as 30 miles and averaged 20 times the volume of its average competitor. By the time he died in 1936 there were 17 King Kullen stores doing a combined total of $6 million worth of business per year.

Following Cullen's death his widow, Nan, assumed control of the company. She remained its chairman into the 1960s, when her son John A. Cullen was president. By the end of 1952 King Kullen had 30 stores ranging from 10,000 to 15,000 square feet of space and about 1,000 employees. It was the first supermarket chain in its area to offer trading stamps, in 1956. Between fiscal 1956 and 1960 sales grew from $30.9 million to $48.4 million, and net income rose from $329,374 to $712,507.

King Kullen was operating 41 stores on Long Island (including the New York City boroughs of Brooklyn and Queens) in 1962, all of them leased premises, and had 971 employees. It built a 95,000-square-foot warehouse on a 10-acre plot in Westbury, Long Island, in 1961. Total assets came to $10.6 million in that fiscal year. The company went public in 1961, offering shares over the counter, but the Cullen family reserved enough stock for itself to retain a controlling interest. During the 1960s the Cullens considered buyout offers from Gristede Bros., Inc. and First National Stores Inc., but ultimately rejected them.

The King Kullen operation of the 1960s was centered around the meat operation, because the company believed that meals were designed around the meat entree and that housewives would buy groceries where they bought meat. The company warehouse offered "naturally aged beef," which, it believed, made up for slightly higher cost by attracting more customers. Almost one-fourth of revenue came from the meat department in this period. The company also offered private-label merchandise under the King Kullen, High Chief, and Lady Nan labels. In 1966 King Kullen acquired the nine-store Blue Jay chain in Suffolk County, Long Island, for $1.3 million in cash. It purchased Hinsch Produce Co., Inc. in 1969.

With the full endorsement of President James A. Cullen, a management team of "young turks" led by Walter H. Miller, the executive vice-president, determined to rejuvenate King Kullen in the late 1960s. Miller told Progressive Grocer in 1969, "We had our heads in the sand for so long, we weren't really merchants anymore. We were going no place. Our methods were antiquated. We had lots of money, but we weren't spending it." That year King Kullen dropped trading stamps but softened the blow and retained sales volume by selling certain staple items at 1931 prices for three weeks.

During fiscal 1970 King Kullen passed the $100-million mark in sales, reaching $114.5 million. Net income rose to $1.1 million. During fiscal 1975 sales grew to $192.2 million and net income to $2.7 million. King Kullen had 45 stores in that year and was listed as 43rd in annual sales among publicly owned food chains in the United States. By the end of fiscal 1978 King Kullen leased 49 retail outlets, ranging from 10,000 to 30,000 square feet in size, and a 33,000-square-foot produce warehouse in Jamaica, a Queens neighborhood. The company-owned Westbury warehouse had grown to 240,000 square feet, and it owned three parking lots adjacent to retail outlets.

Miller became president of King Kullen in 1971 and chairman of the board as well in 1974. In 1980--the company's 50th anniversary--it had 53 stores, of which 31 were in Suffolk County. "We've got a loyal following," Miller told a Progressive Grocer interviewer. "Our customers kind of grew up with us, and their children have grown with us. That's why we stick to our basic operation. We're not heavy in general merchandise." He indicated that King Kullen, which had only reluctantly accepted Sunday openings, would avoid 24-hour-a-day operation and would not stock generic brands.

By the end of fiscal 1983 King Kullen owned, rather than leased, the trucks it used to distribute grocery and meat items to its 55 stores, which ranged in size between 10,000 and 44,000 square feet. At that time the Westbury facility was providing about 45 percent of the groceries and 95 percent of the meats sold by the retail outlets. Non-warehouse goods were being delivered directly to the stores by various other suppliers. In-store bakeries were introduced in 1982. Net sales grew from $318.4 million in fiscal 1979 to $439.2 million in 1983, and net income increased from $1.8 million to $2.5 million during this period. Total assets rose from $40.7 million to $63.4 million.

In addition to food items, King Kullen was selling a variety of housewares and health and beauty aids, amounting to 4.5 percent of sales volume in fiscal 1981. These items included automotive accessories, kitchen products, personal-care appliances, and sewing notions and were mostly being purchased from merchandisers like Star Drugs, Supermarket Services, Fishman, and Supro. Best-selling merchandise included brooms and mops, disposable foilware, greeting cards, and soft goods like socks, underwear, slippers, pillows, and hand towels.

Records for fiscal 1983, the last year King Kullen was required to file an annual statement with the federal Securities and Exchange Commission, reported about 285 stockholders. An employee stock-ownership plan held one-third of the shares and family trusts held another one-fifth. Other major shareholders included the Mutual Shares Corp., James A. Cullen, Jr., John B. Cullen (son of James A. Cullen), and Walter H. Miller. After 1983 King Kullen stock ceased to be traded on the NASDAQ exchange, and the company subsequently came to be listed as private.

By the end of fiscal 1990 John B. Cullen had become chairman and chief executive officer of King Kullen. Bernard D. Kennedy, another grandson of Michael and Nan Cullen, had become president and chief operating officer. The company held 49 stores and was Long Island's second-largest private employer, with 4,200 employees (up from 3,600 in 1983). Virtually all of its stores were in Nassau and Suffolk Counties, but one had been opened in the Queens neighborhood of Astoria in 1985, and the company also had entered the New York City borough of Staten Island. A store in Suffern, New York, 20 miles north of New York City, was closed in 1989. Sales came to an estimated $650 million in fiscal 1990. The company was slowly replacing stores in the range of 20,000 square feet with units of 40,000 to 50,000 square feet. King Kullen ranked third on Long Island in market share in its field behind Waldbaum's and Pathmark, with an estimated 15 percent.

Interviewed for Supermarket Business in 1990, Thomas K. Cullen, a vice-president and another third-generation member of the family business, acknowledged that "some of our competitors are way ahead of us" in perishables, seafood, and bakery items. A remodeling program was intended to shore up these departments, enlarge salad bars, introduce stand-up snack bars, and add such services as automatic teller machines, fax machines, pharmacies, photo developing, and postage stamps. The delis were expanded with more international gourmet foods and catering services, and self-service cheese counters were introduced.

Faced with a shortage of warehouse capacity at this time, King Kullen was building a 55,000-square-foot produce warehouse on the grounds of its 38-acre Westbury corporate headquarters to replace the antiquated Jamaica operation. The company also was using supplementary space provided by White Rose Foods, which was supplying King Kullen with its dairy items. By the mid-1990s King Kullen also was operating a 40,000-square-foot meat, deli, and seafood warehouse on its Westbury grounds.

In January 1991 King Kullen announced a diversification program, with the authorization of five new businesses, in addition to a real estate firm already disclosed. Two of these affiliated companies were founded in 1991 at King Kullen Westbury offices. The Realty Development Co. was a multifaceted construction firm, with the ability to work on projects ranging from interior renovations to complete site development. Transking Inc. operated King Kullen's fleet of 36 tractors, 108 dry trailers, 36 refrigeration trailers, and several sleeper-trailers and also served outside customers.

Shelf Life Inc., Crown Advertising Agency, and Royal Data, Inc. were established in 1992. Shelf Life acted as an independent jobber, supplying both King Kullen and outside markets with housewares, soft goods, and sundries. Crown, a full-service advertising agency, handled all of King Kullen's print, broadcast, and promotional needs and also took on outside clients in a number of commercial areas. Royal Data dealt with data processing, consulting, personnel, and related services for King Kullen and other clients. Prospect Provisions, Inc. was founded in 1993 as a wholesale distributor of dry goods and perishables. All of the above had their headquarters on King Kullen's Westbury property except Shelf Life, which had its offices in Hauppauge, Long Island.

King Kullen installed a new communications network called Kingnet between 1989 and 1991. The use of packet switching on this network allowed every application--including scanning, inventory, security, energy management, and automatic teller machines--without new telephone lines or manual switching from modem to modem. The system also included data/voice multiplexers, making the company the first retailer in New York to use data-over-voice technology.

King Kullen opened its second store on Staten Island and its largest store to date, 53,000 square feet, in November 1992. By then all of its 47 stores--33 in Suffolk County and 11 in Nassau County, as well as the Astoria and Staten Island stores--were operating around the clock except on Sundays, when they closed at 9:00 in the evening. King Kullen ranked eighth in gross sales in 1993 among grocery chains in the New York metropolitan area.

In 1995 the company added Wild by Nature, a new division, at the initiative of Dana Conklin, daughter of the chairman of the board. King Kullen opened an 18,000-square-foot Wild by Nature store dedicated to organic and natural foods to replace a former company supermarket in East Setauket, Long Island. It was the first store by a mainstream supermarket chain given to this use. Ms. Conklin said at least 80 percent of the produce and the majority of the other items would be organic and that nothing in the store, including cosmetics, would contain artificial colors, preservatives, or flavors. A second Wild by Nature was expected to open in Huntington, Long Island, in 1996.

Principal Subsidiaries: Crown Advertising Agency; Prospect Provisions, Inc.; The Realty Development Co.; Royal Data, Inc.; Shelf Life, Inc.; Transking Inc.

King Kullen Grocery Co., Inc. History

Company History:

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