Weis Markets, Inc. History

Address:

1000 South Second Street
Sunbury, Pennsylvania 17108
U.S.A.

Telephone: (717) 286-4571
Fax: (717) 286-3692

Public Company
Incorporated: 1924
Employees: 16,500
Sales: $1.56 billion
Stock Exchanges: New York
SICs:: 5411 Grocery Store Chain

Company History:

Weis Markets, Inc. is one of the oldest and most profitable supermarket companies in the eastern United States. Based in Sunbury, Pennsylvania, the company operates 150 stores in six states. Widely diversified, Weis owns and operates its own dairy, ice cream, and meat processing plants, its own fleet of trucks, and much of its own real estate, as well as Weis Food Service, a restaurant and institutional food supplier based in Northumberland, Pennsylvania. In addition, in 1993 Weis purchased an 80 percent share of SuperPetz, a pet supply company with 14 stores, with the expectation that the number would double by 1997. Fiscally conservative, yet innovative, and with a reputation for creatively exploiting new market trends, Weis Markets prospered, often ranking number one in profitability among U.S. supermarket chains in the mid-1990s.

The 122-year-old Weis dynasty began with a German immigrant named Sigfried Weis, who arrived in New York on March 16, 1867. Records show that Sigfried filed a petition for naturalization in 1874. Although it is not certain how this Weis patriarch supported himself during his first years in America, he eventually settled in Selinsgrove, Pennsylvania, where, according to an obituary citation in the Snyder County Tribune, he opened a small "notions and fancy goods" store that would eventually grow into the largest "mercantile emporium" in the county.

Sigfried Weis had two sons--Harry and Sigmund--both of whom attended Susquehanna University. In 1904, Sigfried's sons became his business partners. However, Harry and Sigmund were not as enchanted with the general store business and soon became interested in branching into other areas. In 1912, they opened their first grocery store--Weis Pure Foods--in Sunbury. By the time they opened a second store in 1915, their father's general store business had ceased operations. During the prosperous decade of the 1920s, the brothers opened more and more stores until, by 1933, they were operating 115 stores in 15 mid-state counties.

Grocery stores all over the country had by this time transformed from largely credit-based operations into cash-and-carry stores. This change, and others, were not always welcome. Initially, self-service supermarkets were not popular with American customers who were accustomed to corner groceries where they were waited on by clerks. But by the Depression, patrons were anxious for ways to save money, and self-service markets began to gain momentum. As the business changed, the brothers' roles became more proscribed, with Harry doing much of the work of setting up new stores, while Sigmund handled the grocery purchasing.

The two brothers in turn had sons--Sigfried and Robert--who each worked part-time in the Sunbury stores during the 1920s and 1930s. The cousins were both graduated from Yale University and served as officers in the armed forces during World War II. Upon returning to Sunbury, Sigfried and Robert Weis joined the family business. In the 1950s and 1960s, Weis Markets moved out of its traditional territory with new market regions in York and Lancaster. By 1965, when the company went public, the business was profitable enough to make millionaires of the Weis family. Expansion continued in the 1970s and 1980s with new targeted growth areas in Maryland, New York, Virginia, West Virginia, and New Jersey.

Fiscally conservative, the company had the remarkable advantage of being able to finance its growth internally, while remaining debt-free. But Weis received some criticism from outside investors who were discouraged by the slow rate of growth, which in turn contributed to the lack of progress in the company's stock price. The tendency of the company to only make acquisitions that paid for themselves in three to five years was considered by some an impediment to Weis' growth progress. The company was also criticized by some for its resistance to unions and for hiring mostly part-time workers.

In January 1995, Sigfried Weis retired as co-chairman due to health problems but remained as chairman emeritus until his death in June 1995. Robert F. Weis took on the positions of chairman and treasurer, while Norman S. Rich, formerly director of the company's quality control division, was named president. In September 1995, Les Knox was named vice-president of merchandising, a newly created position. Jonathan Weis, son of Robert, also began working at the company in the early 1990s. Groomed to eventually take over the business, Jonathan started out working in the real-estate end of the business.

In the early 1990s, Weis embarked on the most ambitious growth program in its 83-year history. This growth revolved around four major areas: acquisitions, expansion, merchandising/marketing strategies, and new technology. In December 1993, Weis purchased 14 Mr. Z's stores (IGAs at the time), eventually adding five more. This acquisition greatly expanded Weis' market in the northeastern region of Pennsylvania, including the popular Pocono Mountain area, and provided a strong base for expansion into New Jersey. Market analysts estimated that the former IGA stores would bring in an additional $100 million annually. In August 1994, Weis purchased King's Supermarkets, a six-unit operator based in Hamburg, Pennsylvania, with stores in the Allentown/Lehigh Valley region. In addition, Weis opened three Scott's Low-Cost outlets. The impulse behind this acquisition was to protect market share. Regarded by Weis as a good test format for the EDLP ("Everyday-Low-Price") strategy, these stores had a different configuration with less service than traditional retail stores, and were evaluated on an as-needed basis. Finally, at the end of 1993, Weis obtained 80 percent ownership of SuperPetz, a four-unit pet supply store. This acquisition in particular revealed Weis' pattern of taking an emerging trend and making it profitable. Under Weis ownership, the pet superstore format thrived, growing to 30 stores, with an expectation of doubling its units by 1997.

This program was in part a response to company performance during this time. After many years of uninterrupted growth, earnings had begun to dip in the early 1990s, with sales down in 1991 and 1992. Causes cited for this decline included deflationary market conditions, the rise in Pennsylvania's corporate net income tax, and increasing outside competition, which caused the company to lower prices and increase advertising expenditures. But by 1993, however, sales were up by 11.8 percent for the year, due in large part to Weis' purchase of 14 IGA Food Mart stores in the Pocono mountains. These 14 stores added an estimated $42 million to Weis' annual volume.

Same-store sales for 1993 remained low, however, due to strong competition, the absence of price increases at the retail level, and growing pains resulting from the added volume of 14 new stores and store opening expenses. Weis had also opened its first New Jersey store on the first day of the third quarter in 1993. In 1994, Weis had a record $1.55 billion in sales, an increase of eight percent over the year before. Earnings increased by 4.5 percent to $76.2 million. After the first three quarters of 1995, the company was reporting a sales increase of 8.2 percent and a net earnings increase of five percent. Three existing stores were remodeled and seven new stores were under construction. In addition, SuperPetz opened six new stores during the second quarter of 1995. Weis increased its supermarket expansion efforts as well, with 21 new stores and 16 major remodels.

Due to increased competition and encouraging preliminary feedback from initial expansion and enlargement efforts, Weis Markets began a deliberate effort to expand into new market territories, especially in Pennsylvania, Maryland, and New Jersey, where it already operated 150 stores. An April 17, 1995 article in Supermarket News indicated that Weis Markets had pledged $105 million in capital expenditure to cover opening eight or nine new stores and remodeling or enlarging an additional ten. These new stores were built in Weis' new "superstore" format, which emphasized customer service, prepared foods, and in many cases utilized Weis' EDLP approach. Later that same year, Supermarket News described Weis' plans to open stores in Laurel and Havre de Grace, Maryland, as well as in Lebanon, Mechanicsburg, Wellsboro, Gap, Altoona, and East Stroudsburg, Pennsylvania. Plans for another four to six undisclosed new locations and eight to 12 expansions were also under way. Although financing for the capital expenditures came from company funds, Weis maintained its "no-debt" status. (In 1995, it was estimated that Weis had nearly $457 million in cash and marketable securities, more than half of its $892 million in total assets.)

Primarily interested in growth contiguous to existing markets, Weis traditionally located stores within a day's round-trip time of its distribution facilities. To pave the way for expansion, the company often bought store sites where residential development was slated to occur, then held onto those sites, for as long as five years in some cases, in order to see what transpired in the area demographically.

In Pennsylvania, Weis considered itself a market leader, although it faced heavy competition from Giant Food Stores, a Carlisle-based chain. A June 25, 1995 Harrisburg Patriot-News article reported that Giant had another strong year, putting it within one percentage point and spitting distance of Weis. On a per-store basis, Giant had outpaced Weis by $18.4 million per store compared to Weis' $12.1 million per store. Together, Giant and Weis accounted for more than half of central Pennsylvania's supermarket business. While Giant's strategy seemed to emphasize new or replacement sites, Weis focused instead on modernization and remodeling of what it already owned. The slow pace of Weis' expansion, especially relative to its incredible cash reserves, stemmed in part from the fact that the population in many of the company's markets wasn't growing and that each new grocery store required a lot of time and effort to launch successfully. In addition, it took longer to obtain construction approvals. Giant's momentum in 1995 seemed to indicate, however, that it would surpass Weis in sales volume in central Pennsylvania for that year.

Through the years, the Weis family demonstrated a knack for monopolizing on emerging trends, from cash-only stores in the early 1900s to self-service shopping during the Depression. One old, but consistently viable, profit-building strategy they exploited to good end was private labeling. Sigmund and Harry Weis first started selling private-label products in the 1920s. They roasted their own coffee, produced their own mayonnaise and salad dressings, and started a line of canned goods. By the mid-1990s, Weis was offering more than 2,000 products, ranging from frozen vegetables to breakfast cereals, and accounting for nearly 25 percent of its total sales volume. Paper tags were posted beside the items, noting the price differences between Weis brands and brand-name items. Private labeling accomplished three things for Weis: it created a low-price image for the chain without hurting its margins; it convinced customers that they could buy products at Weis that they couldn't get anywhere else; and it ultimately bolstered the bottom line. The company had a premium brand (Weis Choice); a national brand equivalent (Weis Quality); and an economy brand (Big Top). This cornerstone of Weis' merchandising program was integral to maintaining its competitive edge, but the company made a deliberate effort not to compromise on quality, establishing a quality-control lab in 1964 to test products manufactured for them.

In the mid-1990s, Weis became much more aggressive in its price-comparison advertising, responding to the increasingly heated regional competition with lower prices and strong promotional activity. Whereas before Weis had confined price comparison to internal merchandising, in 1995, partly in response to an aggressive television and radio campaign initiated by Giant Food Stores that targeted Wal-mart, Weis began directing its price comparison advertising outside the store in hopes of remaining competitive in the tough central Pennsylvania region and to pump up its northeastern market.

A second Weis strategy was to shore up its one-stop shopping program. In addition to the traditional bakery, deli, and pharmacy, Weis made a concerted effort to get more and more banks into the stores, and introduced floral shops and natural food centers to its units. Non-traditional items such as greeting cards, books, and take-out foods, ranging from rotisserie chicken to cappuccino, were introduced with the goal of capturing a much greater percentage of customer business.

In 1995, Weis introduced a direct store delivery program that was implemented chain-wide. This meant that 25 to 30 percent of all grocery products were delivered directly to individual units, leading to significant cost savings. Other technological additions included the installation of VISION, an electronic marketing and financial services program, in 1992. Eventually phased out, VISION was replaced with ACTMEDIA, an in-store coupon dispenser located where products were sold, and the CATALINA system, a coupon dispensing system that provided coupons at point-of-sale.

Weis' Lewisburg, Pennsylvania, store, which opened in 1995, could serve as the blueprint for Weis' new store format, which included some 3,000 additional stock-keeping units. New store features included a bakery showcasing Weis' first bagel program, capable of producing 12 different kinds of bagels. The new deli, three times larger than traditional Weis delis, included a hot pizza program and cappuccino/espresso service. The produce section offered organic fruits and vegetables, and all departments were enlarged to allow for greater selection and variety.

A sizable health foods area, an ethnic foods area, and an extensive ice cream department, much of the ice cream manufactured by Weis itself, lent the store a distinctive, more promotionally savvy look. The new format reflects the overriding philosophy that has characterized Weis Markets over the years--conservative adaptability. In the words of Jonathan Weis, the fourth generation of Weises to lead the company, as quoted in the Harrisburg Patriot News: "I think our fundamentals would do well to stay the same. But we're always changing."

Principal Subsidiaries: Albany Public Markets, Inc.; Dutch Valley Food Co., Inc.; Martin's Farm Market, Inc.; Shamrock Wholesale Distributors Inc.; Weis Food Service; Mr. Z's Supermarkets, Inc.; King's Supermarkets, Inc.; SuperPetz (80%).

Weis Markets, Inc. History

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