Giant Food Inc. Business Information, Profile, and History

History of Giant Food Inc.

From its Depression-era beginnings as Giant Food Shopping Center Inc., Giant Food Inc. has become a large, vertically integrated regional supermarket and pharmacy chain. Giant operates 173 supermarkets (133 of which are combination food and drug stores); 110 are in the Washington, D.C., metropolitan area; 42 are in the Baltimore, Maryland, metropolitan area; with the remainder elsewhere in Virginia and Maryland and in Delaware, New Jersey, and Pennsylvania (they operate under the name "Super G" in these last three states; under "Giant" everywhere else). Its stores are large (average size is 45,000 square feet; 61 stores are larger than 50,000 square feet), and focus on providing their customers with quality, value, and service. Giant dominates its main market areas with 45 percent of the Washington market and a large share of the Baltimore market. The company also runs three freestanding pharmacies in Virginia, Maryland, and Washington, D.C. In addition, Giant's GFS Realty, Inc. subsidiary owns or controls 18 shopping centers and five freestanding combination food and drug stores. Distribution centers are located in Landover, Maryland, and Jessup, Maryland. Half of Giant Food's voting stock is owned by U.K. food retailer J. Sainsbury PLC, which also owns Shaw's Supermarkets, a New England grocery chain.

Great Depression Beginnings

Starting a new business during the Great Depression was a risk for Giant's founder, Nehemiah Myer (N. M.) Cohen, but he had been watching the progress of the "supermarkets" that had begun to open in the early 1930s and felt that they were the business of the future. Cohen, a rabbi, had emigrated from Palestine after World War I and settled in Carnegie, Pennsylvania, where he soon opened a kosher meat market. He later moved to Lancaster, Pennsylvania, and eventually opened three butcher shops there. To open his first supermarket Cohen sought the help of food distributor Samuel Lehrman, who provided the financial backing. Lehrman's son Jacob was also a partner in the venture. They chose Washington, D.C., as their location, figuring that government employment would keep the economy there stable. Giant Food Shopping Center opened its doors in early 1936 as Washington's first mass-merchandised supermarket. Amid the unemployment and breadlines that followed the 1929 stock market crash, Giant Food made its impact on the community by introducing both self-service and one-stop shopping to the consumer. Coupled with its lower prices, these features kept the store busy and crowded from its opening days.

By 1939 Giant had expanded to three stores. Giant's fourth store had a brick-and-glass facade that spelled out its name and was lighted at night, an innovation at the time. Just as the United States entered World War II, Giant opened its sixth store, in Arlington, Virginia, the first outside of the District of Columbia.

The war had a detrimental effect on the supermarket industry as personnel shortages, product shortages, and rationing became prevalent. Giant, like many other businesses, began employing women to counter the manpower shortage, and female checkers soon became a permanent part of the American grocery store.

Moved to Vertically Integrate in Postwar Years

Giant stopped expanding during the war, but in 1945 it opened two new stores in Washington and one in Virginia. In the late 1940s, Giant began to move toward vertical integration, leasing a slaughterhouse to ship meat to all its stores. In 1948 Giant bought the Sheridan Bakery, which had been supplying baked goods to the chain. Renamed for Jacob Lehrman's daughter, Heidi Bakery continuously provided bread and baked goods for all Giant stores both from the original bakery location in Silver Spring, Maryland, and from the in-store bakeries developed in later years. (In 1965 the bakery baked a 700-pound cake for President Lyndon Johnson's Inaugural Ball.) In 1952 Giant opened the Giant Retail Bakery in downtown Washington to sell only bakery goods, but this venture was not successful and was closed within a few years. By 1949 Giant had 19 stores, including three in Maryland and three in Virginia.

Between 1950 and 1952, Giant added five new stores, joining in the general expansion of the American economy. At this time, the shopping center concept was taking hold in America and Giant put a new store in the Congressional Plaza Shopping Center in Rockville, Maryland. In 1955 Giant Construction Company was incorporated to build Giant stores. Giant Food Properties--an independent company which eventually came under the control of Giant and was later known as GFS Realty, Inc.--was established to handle the sale and lease of real estate for the company.

In 1955 the chain opened its first store in Baltimore and in 1956, its first in the Richmond, Virginia, market. By this time 48 percent of all its stores were located in shopping centers. In 1958, riding a new merchandising trend of combination supermarket/department/discount stores, Giant opened its first Super Giant store and within a year had opened eight more. Also in 1958 the company opened its new headquarters and distribution center on a 40-acre site in Landover, Maryland. At the same time, an addition to the Heidi Bakery doubled its production capacity.

In 1957 Giant Food Shopping Center Inc. became Giant Food Inc., and fiscal 1958 saw sales of more than $100 million dollars. In 1959 the company, with 53 stores (including nine Super Giants) went public.

During this time Giant computerized its inventory data, customer information, and payroll and bookkeeping operations. Customer service features added in the 1950s included self-opening doors, mechanized checkouts, and open display cases to make meats and frozen food directly accessible to the customer.

In the 1950s, Giant initiated a scholarship program to encourage students to pursue food management careers. Two of the first five recipients later became senior vice-presidents at Giant. This scholarship program is only one of the ways in which Giant has contributed to the community over the years. In the aftermath of the racial unrest of the 1960s, Giant took a leading role in providing food for those made homeless by riots. Giant's then-president Joseph B. Danzansky also directed a food drive, in which local and national businesses supplied food for demonstrators camped in "Resurrection City" in Washington during a two-week protest to call attention to the poor in America.

In 1961 Giant's stock began trading on the American Stock Exchange as well as the Washington branch of the Philadelphia-Baltimore Stock Exchange. In its stores, Giant began developing its private-label products and offering plastic housewares and specialty food items in response to customer demands. Giant built its first combination food store and pharmacy in 1962.

Although the company had been criticized for bypassing predominantly black neighborhoods, by the mid-1960s Giant did begin to open stores in the inner city. In the rioting that followed the assassination of Martin Luther King, Jr., in 1968, store managers and black employees faced down angry mobs at Giant stores, and the chain escaped much of the looting and damage of the period.

Giant's management implemented three policies during this time which were designed to decrease employee turnover. It began recognizing talented young workers (age 25 and under) and giving them increased management responsibility--the company dedicated itself to promoting from within--and an employee tuition-assistance program was started.

In 1964 founder N. M. Cohen stepped down as president and became chairman of the board, a newly created position. Joseph Danzansky, longtime legal counsel, became president. This election touched off a legal battle for control of Giant between the Cohen family and Jacob Lehrman. The Cohens gained operating control of the company, through their control of four of the seven seats on the board of directors, but Lehrman remained on the board (the Cohen and Lehrman families continued to each hold 50 percent of Giant's voting stock). In 1977 N. M. Cohen was made honorary chairman of the board, Danzansky became chairman, and N. M.'s son Israel became president and CEO--becoming chairman as well upon Danzansky's death in 1979. Izzy, as he was known, had been in the business since he was a delivery boy in his father's butcher shops before the days of Giant Food. He continued his father's informal and friendly, but strict, management style.

The 1970s were the "decade of the consumer"; Giant responded to this movement by hiring its own consumer advocate, Esther Peterson, formerly a consumer adviser to the Kennedy and Johnson administrations. The company began a program of providing information to consumers about the food they were buying, and also worked with the Food and Drug Administration to develop and test nutrition labeling. Educational and informational brochures were distributed for free, and unit pricing and open dating were implemented. In 1972 Giant opened its Quality Assurance Laboratory to monitor the quality and safety of the food it sold, and in 1974 the company implemented a toy-safety program by pledging to sell only those toys certified safe by the manufacturer.

In another move toward vertical integration, Giant built a warehouse and grocery-distribution center in Jessup, Maryland. The Jessup center opened in 1973 and was a model of automated operations. Danzansky described it in 1974 to Nation's Business as "a Buck Rogers kind of thing. Push a button and the stuff almost jumps on the truck."

In the early 1970s Giant sold its four freestanding Super Giant stores to Woolco and rededicated itself to food retailing. In the inflationary period of the middle 1970s, Giant began discounting its prices, gambling that increased volume would counterbalance lower prices. In fiscal 1979 the company had its first billion-dollar year.

In 1975 Giant began using computer-assisted checkout and in 1979 it installed price-scanning equipment in all of its stores. While Giant was making supermarket history by implementing scanners, consumer activists and legislators in Washington accused the company of using the scanning system to trick unwary customers into paying higher prices since prices were posted only on shelves, not each item. Giant weathered the storm of protests and proved with its data that the system reduced operating costs.

Continued to Expand and Vertically Integrate in the 1980s

Giant Food in the 1980s continued both expansion and vertical integration to hold and build its place in its market. In 1982 it opened Someplace Special in McLean, Virginia, a gourmet food store that sold specialty items and offered services such as menu planning, flower arranging, delivery service, and catering for its affluent customers. While not its most profitable store, Giant used Someplace Special to test consumer demand for gourmet food and other specialty items. The chain also experimented with warehouse-type stores, opening three under the name Save Right; these were eventually converted to the Giant name. In 1982 Giant closed its Richmond, Virginia, stores after 25 years of operating in that city. By the mid-1980s about half of Giant's stores were food and pharmacy combinations. In the 1970s Giant had created Pants Corral stores in its Super Giants as part of a deal to sell Levi's jeans. The Pants Corral division, which also included 30 freestanding stores, was sold in 1985.

Expansion at Giant in the 1980s included increasing store size; in 1983 it opened a 60,000-square-foot store in a former Super Giant. This flagship store stocked some 40,000 items and combined such features as gourmet food, cosmetics, bulk food items, an in-store bakery, and a salad bar. Vertical integration continued with the opening of an ice cream plant and a soda-bottling plant in 1985, both in Jessup, Maryland. Giant also focused on remodeling and redesigning existing stores in the late 1980s.

Giant attributed much of its success over the years to the principles on which it was founded, the personal philosophy of founder N. M. Cohen. Cohen not only closely monitored his business to spot trends, but was the force behind the company's continuous emphasis on quality, value, and service. Active in the company until he was 90, the elder Cohen died in 1984 at age 93.

Consumer-oriented programs continued to be a part of Giant's service. Giant initiated a point-of-purchase "special diet alert" shelf label to increase customer awareness of low-fat, low-calorie, and low-sodium foods. Sales of these items were monitored for two years and data supplied to the U.S. Food and Drug Administration for use in measuring the effectiveness of such shelf-labeling programs. Giant also participated in an "Eat for Health" campaign with the National Cancer Institute. Bulk food bins, which allow customers to buy the amount they want, and increased availability of specialty food items were offered in response to consumer input, and Giant launched a corporate customer service center to handle questions, concerns, and compliments from both customers and employees.

Expanded into New Territories in 1990s

Giant's growth slowed some in the early 1990s as the company found that it had little room to expand within the existing markets it served. Competition was becoming more heated; discounters and warehousers--including Leedmark, Shopper's Food Warehouse, Price Club, and BJ's Wholesale Club--were cutting into Giant's market share in Washington and Baltimore. Giant began the decade with 149 stores and had added just 6 stores to the total by the end of 1993. The company did, however, enter the discount drugstore market in 1991 with the opening of its first Super G Deep Discount Drug Store in Maryland. Two other freestanding pharmacies were soon opened in Virginia and Washington. In September 1992, Israel Cohen, then 79, named Pete L. Manos president of Giant, while Cohen remained chairman and CEO. Manos, who was now Cohen's heir apparent, had joined Giant as an accounting clerk in 1960 and worked his way up to the position of vice-president of food operations by 1985.

The years 1994 and 1995 were particularly momentous ones for Giant Food. In early 1994, the company opened its first store outside of Washington, D.C., Maryland, and Virginia with the debut of a store in Bear, Delaware, a suburb of Wilmington. Eastern Pennsylvania and southern New Jersey were soon added to the mix as well, with the company counting on these new northern markets as its base for future growth. Barred from using the Giant name in Pennsylvania, the company decided on the name "Super G" for its supermarkets in the new territories. By mid-1997, there were two Super Gs in Delaware, six in New Jersey, and two in Pennsylvania.

In November 1994, the heirs of Jacob Lehrman (who had died in 1974) sold their 50 percent voting stake and their 16 percent in nonvoting equity to J. Sainsbury, a U.K. supermarket firm, for $325 million. Cohen still held the other 50 percent in voting equity and control of four of the board seats, while Sainsbury now controlled three board seats. Sainsbury, unable for regulatory reasons to expand further in its home country, had turned to the United States for growth. It had purchased an initial stake in Shaw's Supermarkets, a New England chain, in 1983 then gained full control over Shaw's four years later. Analysts speculated that Sainsbury would eventually take control of Giant as well, and use its two U.S. chains as a base for a nationwide chain.

When Cohen died in November 1995 at the age of 83, speculation about the control of Giant was once again rife. Cohen's will, however, passed his 50 percent voting stake and control of Giant to a holding company controlled by a five-person management team consisting of Manos, who succeeded Cohen as chairman and CEO; Alvin Dobbin, executive vice-president and COO; David W. Rutstein, senior vice-president and general counsel; David B. Sykes, senior vice-president of finance; and Lillian Cohen Solomon, Cohen's sister. Although Sainsbury continued to deny that it wanted to take over Giant, the U.K. firm did increase its nonvoting stake in Giant to 20 percent in 1996.

Despite tough competition in its new Delaware, New Jersey, and Pennsylvania markets, Giant stepped up its expansion plans in 1996 when it announced it would open between 35 and 45 new stores in these states over the next decade. In June 1997 the company announced that it planned to open a new discount drugstore chain called Giant Discount Drug, with an initial 10 to 20 freestanding units slated for the Baltimore and Washington, D.C., areas. Meanwhile, a five-week truck driver strike that ended in January 1997 hurt Giant's financial performance in fiscal 1997; sales increased only marginally, from $3.86 billion in 1996 to $3.88 billion, while net income fell from $102.2 million in 1996 to $85.5 million.

Despite the small setback of 1997, Giant Food was still one of the most admired regional supermarket chains in the country. Throughout its history, its emphasis on quality, value, and service had held it in good stead. By continuing to expand geographically and increasing its freestanding drugstore operations in the late 1990s, Giant seemed to have a solid plan for growth within its highly competitive, low-margin fields.

Principal Subsidiaries: Giant of Maryland, Inc.; Giant of Salisbury, Inc.; Giant Construction Company, Inc.; GF McLean Shopping Center, Inc.; GFS Realty, Inc.; Warex-Jessup, Inc.; Bursil, Inc.; Cole Engineering, Inc.; LECO, Inc.; Giant Automatic Money Systems, Inc.; Shaw Community Supermarket, Inc. (85%); Bayside Traffic Services of Maryland, Inc.; Super G, Inc.; Montrose Crossing, Inc.; Friendship Macomb SC, Inc.; Giant of Talbot Co., Inc.; Giant of Cherry Hill, Inc.