Harris Teeter Inc. History

Address:

701 Crestdale Drive
Matthews, North Carolina 28105
U.S.A.

Telephone: (704) 845-3100
Fax: (704) 432-6111

Wholly Owned Subsidiary of Ruddick Corporation
Incorporated: 1960 as Harris Teeter Super Markets, Inc.
Employees: 14,500
Sales: $2.43 billion (2003)
NAIC: 44511 Supermarkets and Other Grocery (Except Convenience) Stores

Company Perspectives:

Harris Teeter is a company that offers top-quality meat, seafood, and produce; insists on the best in customer service and satisfaction; believes in nourishing the communities they serve in a variety of ways; a company that makes you feel like family, and you'd be proud to call "neighbor."

Key Dates:

1939:: Harris Super Market opens in Charlotte, North Carolina; Paul and Willis L. Teeter open Teeter's Food Mart in Mooresville, North Carolina.
1960:: The two companies formally merge to create Harris Teeter Super Markets Inc.
1969:: The Ruddick Corporation acquires Harris Teeter.
1980:: The company purchases Hunter Farms.
1984:: Ruddick buys Food World, a Greensboro, North Carolina-based supermarket chain.
1988:: Harris Teeter adds 52 new stores through an acquisition, this time purchasing the supermarkets of Big Star.
1990:: Borden Dairy Plant is added to the firm's holdings.
2001:: Twenty-six stores are sold; the company exits the Atlanta market.

Company History:

Harris Teeter Inc. has grown from a small North Carolina grocer into a chain of almost 140 grocery stores throughout the Carolinas, Tennessee, Virginia, Florida, and Georgia. While the company maintains stores in both urban and rural areas, Harris Teeter's primary focus is on an upscale urban clientele with a taste for quality and variety in food. Harris Teeter is a subsidiary of Ruddick Corporation, a holding company whose other primary interest is in American & Efird, Inc., a manufacturer of sewing thread. In 2004, Harris Teeter ranked as the 37th largest supermarket in the United States.

Harris and Teeter Teaming Up in the 1950s

The chain that became Harris Teeter started as two small North Carolina enterprises in the late 1930s. The first of these was Harris Super Market, opened in Charlotte in 1939 by W.T. Harris, who had borrowed $1,500 to start the business three years earlier. Although nothing like the vast shopping palaces that would eventually characterize the Harris Teeter chain, Harris Super Market had several notable distinctions: It was the first air-conditioned supermarket in its county, and it stayed open until nine o'clock on Friday nights. In 1939, in the town of Mooresville, North Carolina, Paul and Willis L. Teeter opened Teeter's Food Mart with $1,700 in capital.

The two stores grew into small chains, and by 1958, the Harris and Teeter companies had begun to merge their buying efforts and storage facilities. On February 1, 1960, they formally united as Harris Teeter Super Markets, Inc., with a combined force of 15 stores. Soon thereafter, in Kannapolis, North Carolina, they opened their first new Harris Teeter store, and by 1963, the company had a total of 25 stores. Harris Teeter opened a newer and larger warehouse, with offices, and in the 1960s made the first two of many acquisitions. First the company purchased five Tilman's Grocery stores in the North Carolina town of Shelby, then it added an independent store in Gastonia and another in Charlotte.

Acquisition Followed by Growth: 1970s-80s

In 1969, Harris Teeter itself was purchased, this time by Ruddick Corporation. The latter had begun business in 1919 as R.S. Dickson & Company, an investment banking firm based in Gastonia, North Carolina. Founder Rush Dickson offered a capital planning service to public and private firms, and in 1968 his sons Alan and Stuart made R.S. Dickson a subsidiary of Ruddick Corporation, along with Efird Mills, a textile company. The corporation had provided financial backing to Harris Teeter, and by purchasing all of the chain's assets in 1969, Ruddick--traded on the New York Stock Exchange--made Harris Teeter its third subsidiary.

In the 1980s Harris Teeter began an expansion program, in large part by acquiring other stores and companies. First came Hunter Dairy, a firm older even than Ruddick Corporation. In 1917, bookkeeper Harvey B. Hunter had started Hunter Dairy, and in 1921 he took over the Selwyn Dairy Farm in Charlotte. In its early days, Hunter Dairy serviced only the nearby area and developed a reputation for delivering its product within four hours of the time the cows were milked. Harvey Hunter was an innovator in his cooling system, using brine water, and he took what was then considered extraordinary care to prevent bacteria or spoilage. In 1937, eight years after the company acquired Burchmont Farm in Charlotte, Hunter began pasteurizing its milk--a first in the area--and a decade later it built a new, modern facility near its Burchmont Farm location. From 1956 to 1980, Harvey Hunter's son Charles ran the company, and in 1980 his younger brother James became general manager, continuing in that position after the acquisition of Hunter Dairy by Harris Teeter in the same year.

Harris Teeter's growth by acquisition continued. In 1984, Ruddick purchased Food World, a Greensboro, North Carolina-based supermarket chain founded in 1917 by George E. Hutchens, and merged it with Harris Teeter. Food World had 52 stores in North Carolina and Virginia, giving Harris Teeter (which had expanded into South Carolina and Tennessee) stores in four states. With Food World's 3,000 people, Harris Teeter now had 7,000 employees--or "associates" as it preferred to call them--making it the second largest food chain in the Carolinas. The Food World acquisition also added a distribution center to the company's holdings.

Four years later, in 1988, Harris Teeter again added 52 new stores through an acquisition, this time purchasing the supermarkets of Big Star, as well as a warehouse from the Grand Union Company. In 1990, ten years after acquiring Hunter Dairy, Harris Teeter bought a Borden Dairy plant, and in 1991 it added a 139,000-square-foot freezer facility to Hunter's 550,000-square-foot nonperishable storage and distribution facility in Greensboro.

During the early 1990s, Harris Teeter moved its corporate offices to a 97,000-square-foot building in Matthews, North Carolina. With the purchase of five Bruno stores in South Carolina in 1993, Harris Teeter increased its presence in that state, one of America's most competitive arenas for grocery stores. Perhaps even more competitive, however, was the Atlanta market, and Harris Teeter moved into Georgia in the fall of 1993 with the opening of a new store in Atlanta's upscale Buckhead district.

Coffee Bars and Floral Shops in the 1990s

Atlanta, with a high per capita income and a large population of transplants, represented a potential growth market for a high-end grocery chain. And yet it was a highly competitive area. According to Progressive Grocer, in 1994 the city had 4.2 chains competing for every customer, as compared with 2.9 nationally, and though population growth was explosive, supermarket square-foot growth had outpaced it by 7 percent. "Every supermarket operator thinks his market is the most competitive in the country," Progressive Grocer announced in 1994, adding, "Right now, Atlanta retailers may be correct." Among high-end chains, Bruno's had not succeeded in that market, but Publix Super Markets was making inroads, and now Harris Teeter moved in, with an appeal to a somewhat higher income level than that of Publix.

One observer called the Buckhead store a "yuppie heaven," and referred to it as "a giant deli with a few groceries thrown in." Some questioned how the facility, with a floral shop, coffee bar, sushi bar, juice bar, deli, and plenty of other attractive amenities, could possibly make money. Yet it apparently did, and Harris Teeter continued to expand in the Atlanta market, with stores in Dunwoody in 1995, and in the area near Emory University in 1997. Although the company eventually cut back on the features at the Buckhead location, it began to set the tone for Atlanta supermarkets, which started to adapt to a more high-end strategy.

Harris Teeter's activities in Atlanta are noteworthy precisely because of that market's high competition factor. Although conditions may have been marginally less fierce in other areas where Harris Teeter operated, its base was within some of the fastest-growing areas of the United States, including the "research triangle" of Raleigh-Durham-Chapel Hill, North Carolina, and parts of South Carolina.

To an extent, the company did not follow set patterns with its stores, as Progressive Grocer explained in a 1995 profile: "The 139-store chain does not believe in prototypes. It prefers something new every time it opens a store. If the new approach works, it will be used in some, but not all, new and remodeled stores." Instead of concerning itself with economies of scale when entering a new market--that is, establishing several stores at once to reduce per-store start-up costs--Harris Teeter, as it demonstrated in Atlanta, was willing to open just one store at a time.

"We worry about the neighborhood, not the entire market," Fred Morganthall, vice-president for operations, told Progressive Grocer, adding, "We only need one store in a market to make it viable." In its concern for the economic environment, the company divided its facilities into two types: neighborhood stores and community stores. Neighborhood stores, which comprised approximately two-thirds of all Harris Teeter operations in the mid-1990s, were the so-called "yuppie heavens," which catered to customers who, in Morganthall's words, "want good variety, chef-prepared entrees and ... every new frozen food entree and ice cream that comes on the market." Community stores, by contrast, appealed to what Morganthall called the "Mayberry RFD" clientele, a reference to a television show in the 1960s set in rural North Carolina. At community stores, the appeal was more broad, with greater emphasis on customers shopping for bulk items such as "25-pound bags of flour and 10-pound bags of sugar."

A Continuing Urban Emphasis in the 1990s

Despite the apparent lack of a prototype, there were certainly key elements common to most Harris Teeter stores, a fact acknowledged by Morganthall in 1994 when he noted that the company was moving from a typical store size of 33,000 square feet to one of 50,000 square feet. He added in an interview with Progressive Grocer that the company's primary interest was in 45,000-square-foot urban stores. Thus the "typical" Harris Teeter store was large and urban, with an upper-middle class customer base. Certain other features distinguished the chain as well.

One of these features was the level of service, which Service Industries Journal highlighted in an April 1992 article: Harris Teeter employees are encouraged to "take excellent care of customers," an element of the company's mission statement. Another key feature was the size and design of the stores, which were typically very large--as much as 60,000 square feet, slightly larger than a football field--with high ceilings, elegant lighting, and pleasing architectural features that, in the words of Chain Store Age, "recall a turn-of-the-century market hall."

At this time, the company placed a high emphasis on selection, with dozens of brands or variations on a certain item--salad dressing, frozen pizza, bagels, or beer. Among meats, for instance, the choices far exceeded the traditional chicken, beef, pork, and lamb. Even customers with a taste for rattlesnake, if they placed a special order, could purchase this delicacy fresh. The company had a number of on-duty chefs, working in the deli, the bakery, and various specialty areas such as a salad bar where customers could have chef salads made to order. On weekends in some stores, Harris Teeter featured omelets with a choice of ingredients, which customers could enjoy with a cup of coffee chosen from a wide selection at the coffee bar.

Although Harris Teeter stores often included plenty of nonfood items, the emphasis was clearly on food. When it opened in 1997, the Emory University-Sage Hill Shopping Center store in Atlanta was remarkable for consisting of two stories, a result of the fact that when the company purchased a run-down Winn Dixie that it converted (in the process sprucing up the shopping center and repaving the parking lot), it underestimated its need for size. Among students at the nearby campus and residents of adjoining neighborhoods, a considerable Jewish population prompted the company to feature a kosher deli run by a rabbi at the store. There was also a large coffee bar, which Emory students kept busy for much of the day. Moreover, in addition to its many food-related features, the store had a large section devoted to greeting cards, which sold briskly with students. Unlike many grocery stores, however, it offered neither a pharmacy nor many general merchandise product lines. Morganthall stated a key company principle when talking to Progressive Grocer: "We go after the customer who likes food; we don't have a lot of general merchandise."

Amenities such as those at the Emory University store came with a price, and customers whose primary concern was cost tended to shop at chains other than Harris Teeter. The company, which ironically started as two different small-town grocery store chains, kept its focus on bigger stores in the more lucrative and upscale urban markets. In 1996, for instance, Harris Teeter sold seven stores in what Ruddick Corporation's annual report called "less urban markets," and closed down three small stores. It also replaced several older facilities, and as a result had 134 stores at the end of the year--five fewer than when it began. Yet sales increased by 5 percent, a fact that the annual report attributed to "customer acceptance of larger, new-format stores, strong feature plans, merchandising and advertising, strong holiday sales, and a 4% increase in store square footage during the year." During the mid-1990s, the company also instituted its VIC ("Very Important Customer") program, which made use of specially coded cards presented at the time of purchase, to assist in tracking its best customers' buying habits.

Harris Teeter was involved in a number of community-oriented activities during this time, and often the opening of new stores was accompanied by donations to charitable associations. When the company opened a new facility in Nashville's Peartree Village Shopping Center in April 1997, for instance, the company announced donations ranging from $2,000 to $3,000 to organizations such as the Special Olympics and the Nashville Symphony. Harris Teeter was also involved in activities such as Child Safety Awareness Day, a scholarship program at UNC-Charlotte, and Metrolina Food Bank. Through such efforts the company pledged to continue fostering a sense of community pride in the locations Harris Teeter stores serviced. Such locations were bound to increase in number, as the company remained focused on an aggressive expansion program into the late 1990s.

Harris Teeter in the New Millennium

Harris Teeter entered the new millennium on solid ground, but the company faced several challenges. Intense competition forced the supermarket chain to rethink its expansion strategy. In 2001, Harris Teeter made the decision to exit the Atlanta market and to sell 12 South Carolina-based stores. Overall, 26 stores were jettisoned. Thomas W. Dickson, president and CEO of Ruddick Corporation during this time, commented on the move in an August 2001 Progressive Grocer article: "A sale of our stores in these areas is a prudent business decision that will substantially strengthen the company's overall performance." He went on to explain, "Capital can now be committed to our core markets, which have consistently generated the attractive levels of profitability and, we believe, offer the greatest potential for long-term return on capital and increased shareholder value."

Along with a renewed focus on its core markets, Harris Teeter also relied heavily on its VIC program. In 2001, the company used information from the program to offer its loyal customers incentives to return. New inventory controls also were put in place in order to reduce waste and lower costs. By the end of 2001, it appeared as though Harris Teeter's efforts were paying off. Despite an economic slowdown, both sales and profits had increased over the previous year's figures.

While continuing to face heightened competition amid a period of sluggish consumer spending, Harris Teeter remained successful. The company opened 12 new stores during 2002. In 2003, it finished construction on a new location in downtown Charlotte, North Carolina. Meanwhile, customer satisfaction remained at the forefront of Harris Teeter's strategy. In 2002, the Harris Teeter Rancher beef program was launched, giving its shoppers high-quality branded beef, selected by a consortium of ranchers.

In 2004, the company secured a 2.97 percent increase in comparable store sales--among the highest increases in the supermarket retail industry. Overall, sales rose by 5.8 percent over the previous year, to $2.6 billion, and profits grew by 11.5 percent. During the year, seven new Harris Teeter stores opened their doors in North Carolina. Fifteen stores were remodeled and nine underperforming locations were shuttered.

In the years to come, Harris Teeter would no doubt remain in fierce competition with other supermarkets as well as supercenters, chain drug stores, and dollar stores. The company's success in recent years proved it was a stronghold in its core markets. By listening to its customers and adapting its strategy to comply with market demands, Harris Teeter appeared poised to serve shoppers well into the future.

Principal Competitors: Food Lion, LLC; Ingles Markets, Inc.; Wal-Mart Stores, Inc.

Harris Teeter Inc. History

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Key Dates:

Company History:

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