K & B Inc. History

Company History:

K & B Inc. is a regional drug and convenience store chain operating in six southern states with a home base in New Orleans, Louisiana, where it was founded. Its outlets in 1994 numbered 177, with over 100 located in Louisiana. At that time, among Louisiana-based businesses K & B ranked 22nd in size, while nationally, among drugstore chains, it ranked 21st. Its rate of growth was increasing with the region's economic recovery from a deep recession caused by the oil industry's sudden slump in the mid-1980s, and its prospects for future expansion were considered excellent. Sensitive to changing market conditions, K & B offers a wider range of general merchandise than most drugstore chains and at some locations has other convenience-store features, including drive-thru and 24-hour services. In addition to its stores, K & B has two large distribution centers, an ice cream manufacturing plant, and a photo processing laboratory.

Following the typical pattern of many chain retail stores, K & B evolved from a single store, opened in 1905 at 732 Canal Street, in the heart of downtown New Orleans. It was the first venture of a new partnership formed by Gustave David Katz and Sydney J. Besthoff, Sr. under the incorporating name of Katz and Besthoff, Ltd.

Katz was a native of New Orleans and a graduate of the Philadelphia College of Pharmacy. In 1896, after working briefly in a drugstore located at Canal Street and Chartres Avenue, he opened his own business at the corner of Jackson Street and St. Charles Avenue, in an uptown, residential section of the city. His store operated under the slogan "An uptown store with downtown prices," and Katz, who had just turned twenty-five, was quickly credited with being among the first to compete aggressively with higher-volume downtown stores. Katz also implemented a policy of double checking prescriptions, using the telephone for calling them out and in, and making home deliveries by bicycle.

Sydney J. Besthoff, Sr., from Memphis, Tennessee, who was also a registered pharmacist and a successful drugstore owner, first went to New Orleans to marry Florence Stich, a native of the city. While there, he met briefly with Katz, then later returned with plans to relocate in Louisiana. Katz had already made up his mind to expand his operation into the downtown area, thus he was very receptive to the idea of entering a partnership with Besthoff when the latter came to consult with him. Katz decided to sell his original store and give his full attention to the new Katz and Besthoff enterprise. By arrangements made at the firm's first board of directors meeting on November 2, 1905, his store's inventory was purchased and transferred to the new drugstore.

The business was situated in the downtown shopping area, a risky location that had proven disastrous for other drugstores that had opened and closed there. Initially, the most dependable patrons of the store, which sported the motto "Only the Best," were some of Katz's old customers. Then teenagers and young adults started visiting the shop for late afternoon or evening sodas or ice cream and friendly conversation. They insured a summer clientele, providing important trade in a season when prescription drug sales were light. Their parents soon followed in their younger family members' footsteps.

Quite by accident, in 1908 the store also developed a highly visible public-recognition emblem: a lavish purple wrapping for items bought there. A large quantity of the paper had been refused by a merchant who apparently found the color too intense or gaudy, leaving the paper dealer with the problem of unloading the consignment. Katz and Besthoff bought the shipment at a bargain price and began to use the paper in conjunction with newspaper ads announcing "If it's purple on the outside, it's only the best from Katz and Besthoff." The purple remained a distinct hallmark of K & B ever since.

The two partners contributed different but equally important skills to the firm. Katz, named president in 1905, was an excellent fiscal manager and careful organizer, while Besthoff, secretary/treasurer, was a good public relations man and the partnership's main innovator. Katz had instituted in his old store what would become an important business policy for the new company and one that would help it grow: customer credit purchasing. However, it was Besthoff who pushed for expansion, convincing Katz that they should begin a retail chain.

In 1910, that expansion began. The partners opened a second store, at 837 Canal Street, not far from the first. It was managed by Edward L. Chapotel, who would later become a vice-president and the company's general manager. Like the first store, the second was efficiently run, with special care taken in the filling of prescriptions and in maintaining a clean and sanitary soda fountain.

The chain was thus forged, and it continued to grow, slowly at first, because operations were limited to downtown New Orleans. The expansion in fact reflected the growth of the city, and it was not until 1920 that the third Katz and Besthoff opened, at the corner of St. Charles and Louisiana Avenues. The fourth store, at Carroliton and Oak Streets, opened in 1923.

By that time, Sydney Besthoff, Jr. had already joined the company as a store manager. He had graduated from Newman College, and in 1921, when he started working for the firm, he was completing his degree in pharmacy at Tulane University. By 1924, he was a registered pharmacist, and, in 1926, when his father died of a heart attack, he succeeded the elder Besthoff both as Katz's principal partner and as the company's secretary/treasurer. With Chapotel, the new general manager, he aided Katz, the senior partner, in overseeing all phases of the business.

In 1928, stores five and six were opened. By that time, too, the firm, which had always made its own, in-house ice cream, had opened a small but modern, well-equipped ice cream plant and a laboratory for the manufacture of other proprietary products. Ten years later, in 1938, the company also began its own in-house developing and photo finishing laboratory, located on the third floor of the firm's drugstore at 1011 Canal Street. Under the management of William Leeper, Sydney J. Besthoff III, the grandson of the firm's co-founder, worked there between 1939 and 1941.

Gustave Katz, the remaining original partner, died in 1940, when the Katz and Besthoff chain consisted of fourteen stores and its supporting laboratories and processing plants. Katz had remained active in the business right up to his death. His heirs elected to sell his share of the business to Sydney J. Besthoff, Jr. and his family. Thereafter, the Besthoffs were the sole owners of the company, but during World War II, while Sydney Besthoff, Jr. served in the U.S. Army, the business was managed by two vice-presidents: Maurice Stich, the director, and Edward Chapotel, the general manager.

Major Sydney Besthoff, Jr. returned home in October 1945 to resume his position as the firm's senior officer. He was then joined by his cousins, Jac and Charles Stich, who witnessed the next phase of the business' expansion in the postwar boom. In 1947, Katz and Besthoff consolidated parts of its operation in a single building, located at 900 Camp Street. The new, four-floor facility housed the executive offices, originally quartered on the second floor of a Canal Street drugstore, plus a store with a soda fountain and cafeteria, a new ice cream plant, kitchen commissary, and printing, prescription, tobacco, and general merchandise departments.

Part of the firm's growing business resulted from its ice cream manufacturing and marketing. Although Katz and Besthoff had from the first made its own ice cream, its bulk packaging for home consumption was limited. The company had sold ice cream in "flat fifths," slim packages that fit in the small freezer compartments of old-style refrigerators, but after installing new equipment at the plant in the Camp Street building, the company began to make ice cream in much greater quantities, both quickly and economically. Aided by the increasing home use of bigger combination refrigerator-freezers and separate freezer units, the ice cream trade of the company prospered. The firm also began a home delivery service, making it easy for customers to get a special treat with just a telephone call. It was a product and service that caught on and held.

By 1955, during its 50th anniversary, the company had filled over ten million prescriptions. The chain at that time consisted of eighteen stores, still within New Orleans and its immediate suburbs. The drugstores ran golden-anniversary promotional sales and gave away prizes, including a brand new Ford sedan, and the company held a gala celebration at the Roosevelt Hotel, honoring its employees and its business achievements.

A new period of accelerated expansion began soon after 1962, when Sydney J. Besthoff III was made executive vice-president of the firm. While he had graduated from the Wharton School of Business at the University of Pennsylvania and had continued graduate study at Tulane University, he had also worked in the business for years, learning it from the ground up. When Besthoff took his new post, the chain had grown to 24 drugstores, but all were still in the New Orleans vicinity. In 1965, after he was made president and his father became chairman, Sydney J. Besthoff III instituted some forward-looking changes, including a policy of expansion beyond the New Orleans area. In 1968, Katz and Besthoff opened a drugstore about 30 miles away, in Slidell. Soon after that, it opened one in Baton Rogue, the state capital. Both tentative ventures were successful, convincing the firm's officers that it was worth a risk to open in other places, first within, then without the state.

In 1974, the executive offices of Katz and Besthoff moved into headquarters in K & B Plaza, at Lee Circle. The building, which won several design awards, had been planned by the world renowned architectural firm of Skidmore, Owings & Merrill and had been built to accommodate an art collection, begun there in 1977 by the Virlane Foundation. It would become the most important contemporary art collection in the city, free and open to the general public. Katz and Besthoff, furthering the development of culture in New Orleans, a year earlier had agreed to allow the Contemporary Arts Center to locate at its old 900 Camp Street site.

By 1975, Katz and Besthoff Inc. had filled nearly 50 million prescriptions. Its drugstores were also undergoing a timely facelift, wholly in keeping with changing times. The corner drugstore was becoming a relic, popular in the 1950s but not the 1970s, and the company reflected that change in a variety of ways. Most importantly, it phased out its soda fountains and added convenience-store shelves for beverages and foodstuffs. It had also opened its first distribution center, located in Metairie, moving its ice cream plant there and centralizing its stocking, shipping, and handling. The newer, streamlined, cash-and-carry drugstores no longer provided a place for customers to sit and talk, but the payback for patrons was realized in lower prices and more efficient and quicker service.

The new look was reflected in the company's new name, which, in 1977, changed from Katz and Besthoff, Inc. to K & B, Inc., and, for public relations, simply K & B. Since the business was rapidly expanding outside of New Orleans, the family names were quickly losing what had been a hometown recognition. By that time, too, Sydney Besthoff, Jr. had retired, and his son had become the firm's CEO.

K & B's expansion slowed when the great oil boom of the 1970s and early 1980s fizzled, and Louisiana went into an economic slump, but it did continue. In 1982, Sydney Besthoff died, in the same year that the company opened a second distribution center to facilitate growth; although it only opened one to two stores per year in the lean period following the oil bust, the company did increase its range of operation, finally to several out-of-state locations within a 400 mile radius of New Orleans.

As the State of Louisiana pulled out of its economic slump, K & B began a new period of growth, under the direction of James J. LeBlanc, who had been named president and chief operating officer on November 27, 1987. LeBlanc had been with K & B since 1975, working first as a pharmacist, then as a store manager, district supervisor, assistant operations director, and finally, in 1984, vice-president and operations director. A native of Paincourtville, Louisiana, LeBlanc was a graduate of Loyola University and the South School of Pharmacy. At the time of LeBlanc's promotion to president, K & B was operating 148 stores.

Under LeBlanc's tutelage, the company opened stores in Alabama and in Tennessee, where, in 1991, it bought out Osco, a small drugstore chain in Memphis. By then it was operating 170 units in six states: Louisiana (103 stores), Mississippi (25 stores), Alabama (20 stores), Florida (nine stores), Tennessee (seven stores), and Texas (six stores). It had also further streamlined its operations, downsizing its prototype store from close to 20,000 square feet to 12,000. And starting with a store located at Gentilly Boulevard and Elysian Fields Avenue in New Orleans, in 1991, it had begun 24-hour convenience service at select, high-volume locations. Its stores' merchandise inventories, reflecting K & B's new emphasis on its convenience-store service, carried an extensive array of items, including health aids, toiletries, cosmetics, household goods, tools, automotive supplies, foodstuffs, paperbacks, magazines, toys, school and office supplies, cameras, electronic items, greeting cards, and, where permitted, alcoholic beverages. In 1993, in the New Orleans K & B stores, prescription drug sales accounted for about 30 percent of K & B's annual sales, while the sale of health and beauty aids and general merchandise had grown to over 50 percent and would continue to account for a growing share of the business.

By 1994, K & B was employing nearly 2,000 full-time and 2,500 part-time workers, either in its home office or in one of its two distribution centers, 177 drugstores, separate camera center, ice cream plant, or superphoto laboratory. The company's new prototype stores were given a contemporary look, with wider aisles, better lighting, and a distinct exterior facade. The firm had also taken further steps to update both its customer services and computerized capabilities. For example, in 1993, at its Veterans Highway store in Metairie, the company had installed its first drive-thru prescription service. K & B had also expanded the use of fax equipment and inventory control computers to link individual stores with the company's distribution centers, ensuring accurate and efficient inventory control.

Reacting well to changing social and business trends, K & B was likely to have a bright future. Some have suggested that the key to such success would be in the company's response to the needs of two large consumer groups: senior citizens and women from middle and lower income households. Clearly, too, much of its expansion was likely to occur outside of Louisiana, in states where K & B had just begun to be a household name.

Further Reading:

• Brookman, Faye, "K&B: Withstanding the Test of Time," Stores, November 1992, pp. 20-26.
• "Katz & Besthoff Fetes 50 Years," New Orleans Times-Picayune, April 14, 1955.
• "Katz and Besthoff Mark Twenty-Fifth Anniversary of Successful Business," New Orleans Times-Picayune, May 10, 1931.
• Rosendale, Iris, "New Orleans Retail Scene as Diverse as the City," Drug Topics, August 17, 1992, pp. 89-90.

Source: International Directory of Company Histories, Vol. 12. St. James Press, 1996.