The Fred W. Albrecht Grocery Co. History

Address:

P.O. Box 1910
Akron, Ohio 44309
U.S.A.

Telephone: (216) 733-2861
Fax: (216) 733-8782

Private Company
Incorporated: 1920
Employees: 3,000
Sales: $480 million
SICs: 5411 Grocery Stores

Company History:

With its chain of 11 Acme supermarkets, nine Acme SuperCenters (which combine general merchandise and grocery items), and 14 Y-Mart convenience pharmacies, The Fred W. Albrecht Grocery Co. is a leading player in the 19-county northeast Ohio retail food market. Founded before the turn of the twentieth century, the family owned and operated firm has used a strategy of acquisition and adaptation to capture and maintain a dominant position in the Akron market.

Ironically, company namesake Fred W. Albrecht was a reluctant grocer. As a youth, he had hoped to avoid "all [the business's] hardships, all its long hours and its unpleasantness." Nonetheless, he took over his older brother's store in the small town of Massillon, Ohio, in the late nineteenth century. A family dispute may have compelled his 1891 move to nearby Akron, where he bought a storefront at a sheriff's sale and founded his own grocery. Later characterized as a "paternalistic" manager, Albrecht juggled the dual roles of patriarch and businessman in the early days of the enterprise. His wife Mary handled the accounting, their three children learned to clerk and deliver goods in their after-school hours, and brother-in-law Edward Buehl hired on as resident pharmacist.

In those days, grocery stores were very different from the megamarkets common in the 1990s. For most of the late 19th and early 20th centuries, small neighborhood groceries offered a limited selection of bulk dry goods, including tea, coffee, spices, sugar, and flour. Homemakers bought produce, meat, and fish elsewhere. Customers dropped off (and later phoned in) their orders, which were filled by white-aproned clerks behind high counters and then hand delivered. Grocers typically extended credit to all their customers.

Albrecht's early disdain for the grocery business may have aroused his desire to reform it. By the end of his first decade in business, he had already abandoned the industry's widespread--and admittedly "promiscuous"--credit practices. Just two years after he founded his store, the Panic of 1893 plunged the country into the worst economic depression to date. High unemployment throughout the 1890s exacerbated endemic problems with late payment and nonpayment of bills in the grocery industry's indiscriminate credit system.

After enduring several years of unpredictable cash flow and what Albrecht called the "unpleasantness" of collecting past-due accounts, the grocer decided to convert his store to a cash basis. In an effort to retain as many customers as possible, Albrecht closed shop and circulated a flyer announcing a comprehensive remodeling. Mimicking strategies he had observed at a Philadelphia grocery chain, Albrecht painted his store an outrageously bright--and incidentally eye-catching--yellow. Black lettering proclaimed the store's new name, The Acme Grocery, which had also been appropriated from the eastern store. The announcement of the new payment policy was almost an aside, but Albrecht assured his customers that his store's lower cash prices would offset any inconvenience.

Although some consumers balked at the new policy and the rather garish color scheme, Albrecht's cash flow must have benefited; by 1909, he owned a chain of 13 stores. Four years and seven more groceries later, he had started warehousing goods on his own. The fast-growing chain surpassed $1 million in annual sales for the first time in 1914. It was around this time that Albrecht made a second significant business innovation. Upon returning from a trip to California, an employee told Albrecht of a chain in Pasadena that had cut its costs significantly by eliminating delivery service. Lower retail prices kept the customers coming in spite of the reduced service. After a test market quintupled its sales, Albrecht decided to convert his entire chain to cash-and-carry, renaming them Acme Cash Basket Stores.

With the local tire industry booming, the Acme chain grew to 40 stores by 1918 and incorporated two years later. A limited number of shares were offered to customers and employees, the proceeds of which were used to finance construction of a bakery and cracker factory.

By the 1920s, Albrecht had built Akron's largest grocery chain. When the city celebrated its 100th anniversary in 1925, Acme established its 100th store. With this significant milestone to his credit, the founder went into semi-retirement and sons Hurl and Ivan took the reins. The business continued to grow during this prosperous decade; by the early 1930s, the chain boasted 125 stores in and around Akron. The Great Depression, however, brought Acme's four decades of fantastic growth to an abrupt halt and ushered in a slump that was not truly surmounted until after World War II. The end of the war lifted a 20-year veil of consumer restraint and heralded what Fortune magazine called "The Great American Boom." The Acme chain, and the grocery industry in general, underwent a profound transformation during this period of rapidly increasing consumer demand.

Unfortunately, Acme found itself slightly behind the times. While other grocers in the region had begun the switch to the supermarket format, the vast majority of Acme stores were old-fashioned corner groceries, where clerks still fetched goods from floor-to-ceiling shelves for waiting customers. The Albrechts had tested supermarketing in the 1930s and early 1940s, but had had little luck with the format. Then, in 1949, the company tested a radically new idea: the Food-O-Mat. The Food-O-Mat concept featured a single, long display of specially-designed automatic shelves that were stocked from behind. One competitor compared the appearance of the distinctly 1950s-era gimmick to that of a bowling alley. Although the Food-O-Mats failed because they were too standardized for the burgeoning variety of consumer goods that were coming to market, they signaled the end of an overly-conservative period in Acme's history.

The early 1950s were a period of rapid change for the Acme chain. Ivan "Ike" Albrecht succeeded his brother as company president in 1950, when Hurl became chairman. Upon Hurl's death just three years later, Ike moved up to chairman. Fred C. Pockrandt--who, although not a member of the Albrecht family, had worked at Acme since he was in high school&mdashsumed the presidency.

Upon realizing that large-scale, self-service stores were the wave of the future, the chain's management began closing its vast network of neighborhood groceries and opening regionally-focused supermarkets. The new shops were often referred to as "double stores" because they were literally twice as large as the old ones. New features included expansive parking lots, meat and produce departments, and health and beauty aids. The chain opened its first store in a suburban shopping center in 1952.

Acme underwent what company historian Priscilla M. Harding called "a major management realignment" when Pockrandt retired in 1959. It seems apparent that, under increasingly intense competitive pressures, the non-family executive favored a strategic merger or a profit-generating sell-out. But that was a proposition to which his successor, Fred I. Albrecht, was adamantly opposed. The third-generation leader vehemently stated his position in a company newsletter: "Acme has no intention of selling. This is our chain. We have made it what it is today ... kept it strong and healthy. One and all, we are proud of it, for it means more to us than just another business enterprise. It is part of us--it is our reputation--it is our life as well as our livelihood." Fred I. Albrecht continued the chain's postwar modernization program in the 1960s. Acme's 75th anniversary in 1966 coincided with the closure of the chain's last corner grocery.

Ever-intensifying (and sometimes self-defeating) competition characterized the supermarket industry in the last half of the 20th century. Northeast Ohio was an especially hard-fought market; increasing expenditures for promotions (such as trading stamps, couponing, contests, and preferred customer cards), print and television advertising, overhead, and labor combined with a shrinking consumer base, the encroachment of strong national chains, and the general economic malaise that gripped the once-prosperous Rust Belt to squeeze profit margins and virtually eliminate growth.

As a result, supermarketers looked for ways to cut costs and boost margins. In the 1970s, Acme used automation, cooperation, and diversification to enhance its competitiveness. The company installed its first mainframe computers and barcode scanners during the decade, helping to streamline operations from the warehouse to the checkout line. Acme also cut its wholesale food costs by joining a national food cooperative, Topco, in 1971. This move enabled the chain to offer its own private label line and thereby retain more of the profits on those items. Diversification into pharmacies and one-stop superstores also helped raise Acme's profit margins. In 1970, Acme acquired the six-store Youngfellow Drug chain through an exchange of stock and began converting old Acme Cash Baskets into "Y-Marts." The company hoped to make the Y-Mart "the ultimate convenience store" by combining drugstore and grocery items. Acme launched five new Click general merchandise outlets (later renamed Acme SuperCenters) over the course of the decade as well.

Albrecht's annual revenues increased by over 160 percent from 1970 to 1978, to $202 million. In spite of formidable competition from The Great Atlantic and Pacific Tea Company (A&P), the Acme chain claimed over half of the Akron grocery market at the end of the decade. Although A&P deserted the cut-throat northeast Ohio market, the home team faced a parade of national and regional opponents in the 1980s and early 1990s.

In 1983, longtime rival Kroger Company launched the first salvo in an especially bitter price war with a triple coupon campaign. Acme returned fire with an everyday low price (EDLP) campaign, marking down prices on over 8,000 grocery items. The battle heated up in 1984, when Pittsburgh-based Giant Eagle Inc. entered the Akron market. Although Acme suffered a significant loss that year, it was able to withstand the onslaught. Kroger abandoned the northeast Ohio market in 1985, blaming high labor costs for its closure of 27 area stores and a regional distribution center. Steven Albrecht, the fourth generation of the family to lead the company, called Acme's acquisition of four locations formerly owned by Kroger "exhilarating."

In the wake of price-fixing charges against three Cleveland supermarket chains as well as its victory over Kroger, Acme went on the offensive in the mid-1980s, establishing its first store in the metropolitan Cleveland market. Billed as Ohio's largest supermarket, the suburban store cost $8 million to build, occupied 72,000 square feet, and featured a bake shop, deli, floral center, and areas leased to other merchants. Albrecht was able to launch at least one other store in the Cleveland area in the early 1990s. As the underdog, however, Acme faced what one rival called "very active and aggressive efforts by all the competition" in its new haunts. In 1987, Cleveland's three largest grocery chains--Fisher Foods, Inc., Rini Supermarkets, and Rego Supermarkets and American Seaway Foods, Inc.--merged to form northeast Ohio's largest grocery chain, Riser Foods, Inc.

The supermarket industry's ongoing problems of decreasing population, market saturation, and some of the lowest profit margins in the United States were exacerbated by competition on new fronts. Some of these challengers, including Food 4 Less and Minneapolis-based Twin-Valu, used nonunion labor to lower their costs and pull Acme's attention back to its home market. Supermarkets also began to feel the pressure of intra-industry competition from alternative-format stores including wholesale clubs, mass merchandisers, and supercenters launched by Wal-Mart Stores, Inc. (Sam's Club), and Kmart Corporation (Super Kmart), for example. A recession that started in the late 1980s and continued into the early 1990s compelled cash-strapped consumers to shop around for bargains. These low-cost outlets helped fuel a 3.3 percent decline in food prices in the first few years of the decade. The Food Marketing Institute warned grocers that these new rivals would increase their share of the grocery business from six to 13 percent by the turn of the century. Acme responded with general merchandise/supermarkets of its own known as Acme SuperCenters. One industry analyst predicted that this "battle of the supercenters ... promises to be long and bitter." Some observers noted societal shifts that hurt traditional groceries as well. For example, changing household and work patterns favored more convenience store shopping and fast food dining.

The combined competitive forces exerted by a large new opponent in Cleveland (Riser Foods), poor economic conditions, and new superstore rivals compelled Acme's 1994 retrenchment. That year, the company sold its Cleveland locations to Rini-Rego Supermarkets Inc. One of the few remaining privately and family-owned supermarket chains in the area, the Fred W. Albrecht Grocery Co. worked to continually update and expand its merchandise offerings, remodel stores, and gain economies through computerization in order to compete in this ever-challenging industry.

The Fred W. Albrecht Grocery Co. History

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