Ralphs Grocery Company History

Company Perspectives:

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Company History:

Ralphs Grocery Company is the largest food retailer in Southern California, and is showing signs of eventually evolving into one of the largest grocers in the western region of the United States. The company operates over 400 stores throughout California, offering tens of thousands of products to its customers, with many of those products presented under Ralphs private label. Family owned until 1968, Ralphs went through two complicated mergers to arrive at its high profile status within the food retailing industry, eventually becoming a unit of food retailing giant Kroger Company. Ralphs became such a growing force in Southern California, in fact, that it was prevented from further expansion in the greater Los Angeles region until 2003. Though most traditional Ralphs stores operate under the Ralphs moniker, the company also runs several stores in Northern California under the names Cala Foods and Bell Markets, as well as large warehouse stores under the names Food 4 Less, Foods Co, and PriceRite in Nevada. In 2000, the company began transforming some of its stores into markets offering high-quality gourmet food products, known as Ralphs Fresh Fare.

1873-1968: The Evolution of a Family-Owned Grocery Store

In 1873, a young bricklayer named George A. Ralphs was injured in a hunting accident and sought employment at a grocery store in Los Angeles. Within a year, he had saved enough money to purchase his own small store and was soon joined in the enterprise by his brother Walter Ralphs. Together the brothers ran Ralphs Bros. Grocers in downtown Los Angeles, a neighborhood grocer offering regional produce and grains at low prices and priding itself on its customer service. As the area's population boomed over the next few decades, Ralphs' inventory and size increased as well. In 1909 the company was incorporated as Ralphs Grocery Company, and two years later it launched a much larger branch store.

By 1928, the Ralphs chain consisted of ten stores. The Ralphs brothers focused on modernizing these facilities, and home delivery service by horse-drawn wagons eventually made way for self-service and parking lots. In the 1930s, the Ralphs stores began featuring bakeries and creameries in their 25 stores; the 1940s would bring delicatessens and other in-store conveniences.

A new generation of Ralphs took over the company after its founder, George Ralphs, died, and by the middle of the century the family had made Ralphs one of the top grocers in the state. The company focused on marketing themselves as a high quality food retailer, but it was equally dedicated to keeping prices competitive, a combination which helped bring the number of Ralphs locations to over 100 stores by the 1950s.

By the 1960s, the company's growth was strong enough to attract the attention of a national retail giant, which believed Ralphs was ready, with the right backing, to reach beyond the confines of a family-owned business. After steadily expanding throughout the decade, Ralphs was approached in 1968 by Cincinnati-based Federated Department Stores, one of the largest grocery chain store owners in the country. Federated offered to buy the company from the Ralphs family, which had run the business from its inception. By the time Federated entered into negotiations with Ralphs, the family was ready to unload what had evolved into much more than a mom-and-pop operation. So at year's end, Ralphs was sold to Federated for just over $60 million.

1970s-80s: Ups and Downs

Ralphs operated well under its new parent company, with the small but vibrant chain maintaining a forceful and steady presence in the rapidly growing Los Angeles region. Throughout the 1970s and early part of the 1980s Federated ran Ralphs smoothly and quietly, and the chain remained centered exclusively in Southern California, with little plan for national or statewide growth. Nevertheless, Ralphs was influential in the industry; the company was among the first to introduce checkout stations with laser price scanners.

After about a decade under Federated, Ralphs had fresh life breathed into it with the arrival of a new and energetic CEO, a man who had been devoted to work within the grocery industry since his childhood. Byron Allumbaugh was appointed CEO of Ralphs in 1976, after having spent two decades working in almost every behind-the-scenes department of the company. Allumbaugh began his career in the food retail industry at the age of 12, when he went to work during World War II at his local grocer's meat department. From then on, Allumbaugh spent most of his time working in produce stores, and by college age had dropped out of school to devote himself to the industry full time. Allumbaugh joined Ralphs in 1958, already a seasoned, knowledgeable executive, and when the company began looking around for a new CEO in the late 1970s, Allumbaugh was the natural choice. He was universally liked by the company, and he aided sales by personally spending a certain amount of time each week on the floor, hearing customer complaints and preferences, and generally getting a sense of what was and was not working. As much as Allumbaugh was appreciated by his employees, however, the CEO's ambitions differed from those of his company's parent in a fundamental sense; he wanted no less than the statewide, and, eventually, national expansion of Ralphs Grocery.

In the middle of the 1980s parent company Federated became vulnerable to a growing number of competitors taking advantage of the new corporate trend of mergers and consolidations. A specific threat came from a Canadian company, Campeau Corporation, which during the 1980s had set its sights on acquiring its powerful rival from the south. In 1988, Campeau launched a $4.2 billion hostile takeover of Federated stock. In the midst of this ordeal, in order to stave off the mounting debt the company had accrued from fighting Campeau's takeover, Federated put some of its more lucrative companies up for sale, among them Ralphs Grocery.

It was at this time that Ralphs faced the most challenging threat to not only the company's success, but its very existence. When the chain was put on the market, several of Ralphs competitors, such as the California-based Lucky and American Stores, came forward with offers. In the end, however, Allumbaugh convinced his management team to raise over $1 billion in order to buy part of their own company from Federated. Therefore, when Campeau finally prevailed in its takeover of Federated, Ralphs was to be only partly owned by the Canadian corporation and was able to maintain a significant amount of independence via the Allumbaugh shares. Had Allumbaugh failed to buoy his fellow officers to fight for the company, Ralphs in all likelihood would have wound up either a wholly owned subsidiary of Campeau, which eventually filed for bankruptcy, or a nameless addition to the operations of one of its competitors.

Ralphs Grocery came out of its struggles in the late 1980s with its name and management intact, but the battle had cost the company dearly in terms of financial sacrifice. By 1990, the company had lost $51.3 million on revenues of $2.8 billion, and the losses threatened to continue unless some sort of restructuring took place. Allumbaugh, who had seen his company grow five times over during his 15-year tenure, was determined to bring Ralphs out of the red, and proceeded to shut down or relocate some of the chain's less lucrative sites.

Despite the company's setback, however, Allumbaugh and his team had set a stable groundwork for Ralphs, of a sort which would ensure the company's survival during just such a difficult time. The company had kept up with or been ahead of technological trends in the field, and had maintained a good reputation for fine produce and low prices. Most of the stores were cost-efficient, particularly in their use of automated systems, and were well prepared to make a financial comeback in the early 1990s.

1990-99: More Mergers and Further Growth

Campeau's takeover had slowed the company's goal of expanding beyond its Southern California center and had forced Ralphs to focus on strengthening its existing stores. With wise managerial guidance, Ralphs in the early part of the 1990s slowly began to make a comeback despite its own recent misfortunes and California's overall flat economy.

The renewed growth of the company was noticed by one of Ralphs' greatly visible cohorts, the highly successful company Food-4-Less, located in Northern California. At the time, Food-4-Less was larger and more profitable than Ralphs and was owned and funded by the huge Yucaipa Companies, which operated several chain companies around the country. In 1993, only a few years after Ralphs' flirtation with disaster, Food-4-Less approached the company with a friendly merger proposition. The idea was the brainchild of Yucaipa's charismatic and eccentric leader Ronald Burkle. Burkle was known not only in the grocery industry, but throughout the industry of Hollywood as well, as a man devoted to high-profile parties and collecting famous mansions; certainly somewhat of an aberration in the staid field of food retail. Already in possession of the Midwest's Dominick's Finer Foods, as well as the hugely successful Smith Food and Drug Centers, Burkle was looking for ways in which to increase his profits on the West Coast, and a union between Food-4-Less and Ralphs seemed the perfect way to accomplish such a goal.

After a little more than a year of negotiation, the two companies merged, with Burkle's company taking on much of Ralphs' debt, as well as paying Ralphs' shareholders about $525 million.

1872:George A. Ralphs begins working in a grocery store in Los Angeles.

1874:Ralphs and his brother Walter launch Ralphs Bros. Grocers in downtown Los Angeles.

1909:Company is incorporated as Ralphs Grocery Company.

1911:First branch store is opened.

1928:Ralphs chain consists of ten stores.

1950:Ralphs consists of over 100 locations.

1968:The Ralphs family sells business to Federated Department Stores for $60 million.

1976:Byron Allumbaugh is named CEO.

1988:Ralphs battles for independence through a hostile takeover attempt of Federated Department Stores by Campeau Corporation.

1994:Ralphs merges with Food-4-Less.

1998:Ralphs merges with Fred Meyer, Inc., and those operations are acquired by The Kroger Company, making Ralph's a division of Kroger.

Burkle differed from Allumbaugh in several ways, the most noticeable of which was the former's high-profile status within California's business and political community. Host to several fund raising parties for state Democratic leaders as well as for presidential hopeful Bill Clinton, Burkle's name was tied to powerful sources, the nature of which allowed the businessman access to areas beyond the more traditional routes of food retail. Involved with work in grocery stores since childhood, when he worked in his father's Claremont store, Burkle came to represent to the industry a changing trend in the grocery business: the entrepreneur was not only interested in steady growth and profits, he was also at the forefront of creating consolidation and huge chain stores where there were once primarily locally owned operations.

Indeed smaller independent stores were becoming increasingly rare in the middle of the decade, as corporations took advantage of a rapidly growing national trend of merging small companies, such as Ralphs, with other businesses of a similar size to create lower overhead, increased profits, and a smaller behind-the-scenes labor force. For Ralphs, the new partnership with Food-4-Less proved a profitable move and helped to shift the company in directions which were impossible for the business only a few years before. By 1995, the company had become a powerful state-wide presence and the most potent force in Southern California's grocery industry. In 1996 alone, Burkle and his team opened 27 new stores, a number which equaled half of all the new grocery stores in Southern California. Such an increase in activity did not go unnoticed by California's antitrust officials, however, and by the next year the company was forbidden to open any new locations around Los Angeles until 2003. The partnership between Food-4-Less and Ralphs by the middle of the decade had turned the company into a $5.5 billion business.

The 1990s proved to be the decade of shifting partners and mergers for Ralphs. In 1998, the increasingly powerful national grocery corporation Fred Meyer Inc. (which had recently acquired Yucaipa subsidiary Smiths) showed an interest in the profitable company, which was by this time the oldest and most recognized chain west of the Mississippi. That year, Ralphs was purchased by Fred Meyer, making the latter one of the largest grocers in the country. Those were not all the changes Ralphs saw that year; later in 1998 the most powerful food retailer in the country, Kroger, merged with Ralphs' new parent company, a union which made Kroger by far the largest grocer in the United States.

At decade's end, as a wholly owned subsidiary of Fred Meyer and therefore a division of Kroger, Ralphs continued its upward wave of expansion, having in 1999 over 440 stores in operation and several plans for out-of-state growth, some of which were realized through its acquisition of ten Nevada-based PriceRite stores. Following a long company tradition, the company did not turn its back on its community or, more specifically, the less fortunate members belonging to it. Through The Ralphs/Food-4-Less Foundation, the company gave away thousands of dollars in cash and products every year in an effort to support causes as wide ranging as relief for hurricane victims and abused women to drug prevention programs. Though such involvement of course helped to keep the Ralphs name at the forefront of its customers' minds, the company's efforts also aided in establishing and maintaining a reputation for both financial success and a humanitarianism often lacking in many other large corporations.

Principal Operating Units: Ralphs; Ralphs Fresh Fare; Food-4-Less; Cala Foods; Bell Markets; PriceRite.

Principal Competitors: Albertson's Inc.; Safeway Inc.; Stater Brothers Holdings Inc.; Lucky Stores Inc.; The Vons Companies Inc.

Further Reading:

• Darlin, Damon, 'Party Boy,' Forbes, November 18, 1996, p. 188.
• 'Fred Meyer, Quality Food Centers, and Ralphs Grocery Company Mergers Completed,' PR Newswire, March 10, 1998.
• Glover, Kara, 'Backseat Driver Steers Ralphs with Style,' Los Angeles Business Journal, September 9, 1991, p. 20.
• Knestout, Brian, 'Kroger: A Big Fish Gets Much Bigger,' Kiplinger's Personal Finance Magazine, January 1999, p. 34.
• Liebeck, Laura, 'Fred Meyer to Become $15 Billion Player,' Discount Store News, November 17, 1997, p.1.
• 'Ralphs Provides Disaster Relief to Salvation Army Workers in Port Hueneme,' PR Newswire, February 4, 2000.
• Weinstein, Steve, 'The New Ralphs,' Progressive Grocer, November 1995, p. 32.
• Zwiebach, Elliot, 'Food-4-Less, Ralphs in $1.5 Billion Pact,' Supermarket News, September 19, 1994.

Source: International Directory of Company Histories, Vol. 35. St. James Press, 2001.

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