C & S Wholesale Grocers, Inc. Business Information, Profile, and History

Company Perspectives:

For 85 years, C & S has provided first-class warehousing and distribution services to our customers. In 2002, Forbes magazine ranked C&S the 11th largest privately held company in the nation. From over 25 warehouse facilities throughout the Northeast and Mid-Atlantic, C & S Associates serve some of the largest supermarket chains in the nation. Never satisfied with the status quo, we strive to live the Vision each day. The C & S Vision is: 1.) Braggingly Happy Customers; 2.) Quality In Everything We Do; 3.) Everyone Involved in Everything; 4.) Braggingly Happy Team Members; 5.) And, Have Fun In The Process.

History of C & S Wholesale Grocers, Inc.

C & S Wholesale Grocers, Inc. is ranked the third largest grocery wholesaler behind Fleming and SuperValu in the United States and the largest grocery wholesaler in New England. A third-generation family-owned business, C & S distributes wholesale groceries to supermarket chains, independent stores, and military bases across the northeastern and midwestern United States. The company is headquartered in Vermont and maintains warehouse facilities in Connecticut, Massachusetts, Maryland, New Jersey, New York, Ohio, and Pennsylvania. C & S claims A & P, BJ's Wholesale Club, Safeway, and Shaw's among its numerous customers and projects annual sales of $11 billion.

Origins

In the early 1900s, the founder of C & S, Israel Cohen, worked in wholesale grocery in Worcester, Massachusetts. In 1918, he partnered with Abraham Siegel to found their own company, C & S Wholesale Grocers. At the start, the company employed three warehouse workers in its 5,000-square-foot building on Winter Street in Worcester and distributed 1,200 products to independent grocers.

C & S entered a highly competitive market at a time in which wholesale grocers were vying for the business of large numbers of independent neighborhood stores. After World War I, independent retail grocers began to form cooperatives to boost their buying power, a strategy that in turn enabled wholesalers to consolidate orders and operate more efficiently. In 1921, as the company began to benefit from the new industry structure, Cohen bought out Siegel's share in the business.

Under Cohen's leadership, C & S distinguished itself from its competitors by focusing on the needs of its customers as its top priority. Whereas many wholesalers did not allow their customers much, if any, say in how they stocked store shelves, C & S salespeople listened to their customers and stocked shelves according to their needs. C & S also increased their speed of delivery through efficient warehouse procedures. In 1929, the Winter Street facility and its entire inventory was destroyed by a flood. The following year, the company moved to a warehouse space on Hygeia Street that was twice the size of the original facility.

Second Generation Success: 1945 to the 1970s

After serving as a B-24 navigator during World War II, Israel's son Lester, who had worked in the family business before the war, returned home. From his experience in the military, Lester recognized an opportunity to expand C & S by selling to military commissaries. Following the war, Lester secured the company's first government commissary contracts. By the year 2000, C & S would serve 27 East Coast military bases.

During the postwar years, when many other wholesalers entered the retail side of the grocery business, C & S maintained its focus on wholesale distribution. Lester introduced a roller system in the company's warehouse to increase speed and efficiency. The company's initial $200 purchase ultimately paid off when their delivery time improved, and they earned new customers.

By 1955, with Israel and Lester at the helm of C & S, the company grew into a successful mid-sized wholesale grocer operating out of a 35,000-square-foot warehouse. Lester carried on his father's tradition of making personalized service a priority and maintained close contact with customers. At this time, the elder Cohen passed executive power to his son.

Until the late 1950s, most grocery stores were still small independent businesses. Big D, an eight-chain supermarket, led the industry and heralded the move away from independent grocers to supermarket chains. C & S gained the Big D account in 1958 and was soon acquiring more large accounts. Sales soared to $2 million, and by 1963 the company moved to a still larger facility--the historic Pullman Street warehouse, where Pullman train cars had previously been housed. Utilization of both the truck and train loading docks at the facility increased the distribution capabilities of the company. C & S continued to grow throughout the 1960s and early 1970s. By 1974, annual sales for the company had reached $14 million. That same year, Rick Cohen, Lester's son, joined the company.

Third Generation Continues Growth: 1980s-90s

Although the Pullman Street warehouse had served the company well, by the late 1970s it was evident that the century-old facility could no longer accommodate the growing needs of modern food warehouse distribution to large supermarkets. Having been located in Massachusetts since its founding, Rick proposed C & S build a new facility outside their current locale where they would be close to interstate highways and new markets. In 1981, C & S opened a new 300,000-square-foot warehouse and distribution center in Brattleboro, Vermont.

The opening of this new facility, which was twice as large as the Pullman Street operation and the largest single structure in the state of Vermont, carried with it great sacrifice. In order to meet the costs of the expansion, employees took pay cuts on a temporary basis. The company set a $300 million sales goal to be reached in five years. The Brattleboro facility, with its modern capabilities, attracted the attention of such large customers as A & P, Edward's, Walbaum's, and Stop & Shop. C & S soon surpassed its goal, and employees wages were raised above previous standards.

Employee concerns were not overlooked at C & S. In 1987, when a group of warehouse workers approached Rick Cohen about frustrations regarding their jobs and management communication, Cohen listened. At the same time, he happened to be reading Thriving on Chaos, a best-selling book by management consultant Tom Peters. Following a week-long seminar with Peters and a tour by the author of the company's distribution center, Rick Cohen initiated self-managed warehouse teams in 1988. The premise behind this self-managed team approach was to empower workers by allowing them the potential to increase their wages through team productivity incentives. The teams were composed of three to eight workers. Each team coordinated every aspect of a customer's order from the time the order was placed to its delivery to the customer. Rather than reward individuals on the team, which can create counterproductive work practices, the team as a whole would be rewarded equally based on orders that were delivered successfully. Conversely, teams could be penalized for unsuccessfully delivered or damaged orders. The team approach induced cooperation among workers as well as reduced employee absenteeism, which dipped to under 3 percent within the program's first six months. Essentially, the self-managed teams eliminated the need for supervisors and placed control in the hands of employees. As Rick Cohen acknowledged in U.S Distribution Journal in September 1993, "We were cautious going into [self-managed teams], but it wasn't anything we were afraid of. The ideas came from the employees and we trusted them."

The new warehouse team structure quickly proved to be a success. Within six months of its inception, shipping volume increased by 35 percent and labor costs decreased by 20 percent. Bonuses earned by team employees increased their hourly wages. According to U.S. Distribution Journal, hourly wages in 1993 for strong teams could range between $14 and $16, far above the industry average of $9.87 for nonunion shop workers. With the success of the warehouse teams, C & S employees exercised additional empowerment through a variety of employee committees whose decisions influenced company policies, employment practices, and expenditures. The team-based incentive program was used in other areas of the company in addition to the warehouse. According to the company's Web site, by 2003 75 percent of C & S employees were either working on incentive pay or were members of a self-managed team. As Cohen acknowledged in Ken Blanchard's Profiles of Success in 1996, "Part of the reason this is working so well and continuing to motivate employees is that there is no cap on what a person can make. We publicize successes and we go over the company's profit and loss statements every week with all the employees. They now see how they affect the totals."

Innovation, Expansion, and Acquisition: 2000 and Beyond

C & S easily surpassed its $300-million-sales goal established when they first moved into the Brattleboro facility. By the end of the company's first decade in Brattleboro, annual sales had reached over $1 billion. The company began adding warehouse facilities in 1993 with the opening of a 350,000-square-foot warehouse in South Hatfield, Massachusetts. In 1994, C & S transferred their perishable operations to a 445,000-square-foot center in North Hatfield, Massachusetts. In 1996, C & S opened its largest facility, a one-million-square-foot distribution center in Windsor Locks, Connecticut. That same year, the company purchased one of the largest freezers in the world, a 347,000-square-foot freezer in Westfield, Massachusetts, that had a capacity of 15 million cubic feet. C & S plans to expand this freezer to increase its capacity to 22.7 million cubic feet and make it the largest freezer in the world. By 2003, C & S owned and operated 18 warehouses.

The opening of numerous warehouse and distribution facilities was necessitated by the increased customer contracts that amounted to an annual growth rate of 30 percent by 1996. In September of that year, C & S acquired Winter Hill Frozen Foods and Services of Westboro, Massachusetts, and, in 1997, the company took over the distribution of ice cream and frozen foods from New England Frozen Foods, adding 4,000 new stores. By the late 1990s, C & S showed steady sales growth, gaining the 25th ranking of the 500 largest private companies by Forbes magazine in 1998, 20th in 1999, and 18th in 2000. In 2002, C & S partnered with Tops Markets to add over one million square storage feet in Ohio and New York, pushing C & S to operate 26 facilities in eight states.

In late 1995, the financially troubled New Jersey and New York-based Grand Union Co. announced it would close its New Jersey centers. C & S proposed to take over distribution for the company's New York-area supermarkets. Five years later, in October 2000, C & S entered into new agreements with Grand Union Co. when it filed a third time in five years for bankruptcy protection. C & S agreed to a $300 million purchase of 185 of Grand Union's 197 stores as well as a distribution center in Orange County, New York. As Grand Union's chief creditor, with $7.8 million owed, C & S found itself in the unusual position of also being Grand Union's chief supplier, with $1 billion of $7 billion in annual sales to Grand Union. Additionally, C & S was the supplier to some of Grand Union's rivals such as Pathmark and ShopRite. Most industry specialists speculated that after the sale C & S would not run the stores but instead would resell them to supermarket chains in order to keep the third-party buyers as customers. After C & S won the bid to purchase Grand Union for $301.8 million, A & P charged C & S with conspiring with several supermarket chains, including Stop & Shop, Tops, Pathmark, Price Chopper, and Hannaford, to silence bids through secret deals. Kevin G. DeMarrais reported in the Record that A & P noted in its court filing, "Obviously concerned about the possibility of losing a substantial piece of its business, C & S undertook a plan to assure that it would continue to service the [Grand Union] stores, even after the [company] no longer owned them." Some observers speculated whether or not A & P's claim was based on sour grapes that they had not participated in the deal as well as the fact that this missed opportunity would accelerate their diminishing market share.

In early December 2000, a New Jersey bankruptcy judge ruled that C & S had operated under a joint bid that the company had not attempted to hide and that C & S had not violated federal laws. Following the favorable judgement, C & S had agreements to sell 102 of the Grand Union stores to third-party supermarkets and would temporarily run 83 stores under the Grand Union name. Several specialists wondered how C & S would fare in the retail world with virtually no experience operating stores. As negotiations neared conclusion in February 2001, C & S was left with 94 stores that would not be purchased by a third-party grocer. When the dust finally settled at the closing on March 3, C & S purchased 150 of 168 Grand Union supermarkets and would resell 95 of the 150 stores to six supermarket chains, including Stop & Shop and Pathmark. Many of the remaining stores would be sold to smaller food retailers and non-food retailers or would be faced with liquidations and closings. Union officials estimated that 1,400 workers would lose their jobs. C & S maintained that they would keep 30 stores open under the Grand Union name if they could prove to be profitable.

GU Family Markets, a subsidiary of C & S, was led by 30-year Grand Union veteran James J. Santamarina. While C & S sold or closed many stores in upstate New York, the company focused on revamping its two most promising Grand Union stores in Hoosick Falls and Glenmont, New York. By April 2002, the two updated stores opened with such attractions as artisan breads, sushi bars, and natural foods to compete with Price Chopper and Hannaford. Additionally, the Glenmont Grand Union added a Pride of New York section that featured products grown locally. Santamarina maintained that with GU Markets improved operations, they planned to renovate the 26 remaining Grand Union supermarkets in New York, Vermont, and Pennsylvania. By November 2002, however, GU Markets announced it would close its Glenmont store, largely due to increased competition from the new, nearby 56,000-square-foot Price Chopper. The 25 remaining GU Market stores were not closed.

Following the acquisition of Grand Union and the resultant widespread changes in wholesale grocery in the Northeast, C & S moved ahead with a definitive agreement in July 2001 with Grocery Haulers, Inc., a Brooklyn-based grocery wholesale supplier of Key Food Stores Co-Operative. C & S agreed to acquire certain assets of Grocery Haulers, which served 110 supermarkets. Growth in the company also produced the development of new facilities. In late 2001, C & S had begun construction on a state-of-the-art facility in York County, Pennsylvania. Scheduled to open in mid-2002, the two-million-square-foot project would include two warehouses and a maintenance building and would employ a staff of 200. In June 2002, C & S entered agreements with Tops Markets to purchase two of Tops' distribution centers in the Buffalo, New York, area and one in northeastern Ohio, all of which were staffed by union workers. C & S asserted union contracts would be honored at all three distribution centers with no planned layoffs.

By 2003, C & S had established itself as a major player in the wholesale grocer market as the third largest wholesaler in the United States and the largest in New England with projected annual sales to meet $11 billion. Despite its growth, the company prides itself in maintaining its goals of excellence in customer service and innovation set by Israel Cohen over eight decades ago.

Principal Divisions: GU Markets.

Principal Competitors: Di Giorgio; Fleming Companies; SUPERVALU; Penn Traffic.

Chronology

• Key Dates:
• 1918: Israel Cohen partners with Abraham Siegel to found C & S Wholesale Grocers in Worcester, Massachusetts.
• 1929: The Blackstone River floods the C & S warehouse, destroying all of the company's inventory.
• 1930: Company opens new, larger warehouse in Worcester.
• 1940s:Lester Cohen, Israel's son, establishes contracts with U.S. military commissaries.
• 1955: C & S moves to larger warehouse facility in Worcester.
• 1958: The company lands the eight-store supermarket account Big D.
• 1963: C & S moves into a 200,000-square-foot former Pullman train facility with truck and train loading docks.
• 1974: Rick Cohen, Lester's son, joins the company.
• 1981: The company builds a 300,000-square-foot warehouse and distribution center in Brattleboro, Vermont.
• 1988: Rick Cohen initiates self-managed teams in the warehouse, increasing total volume shipped by 35 percent.
• 1996: The company opens one-million-square-foot warehouse in Windsor Locks, Connecticut.
• 2002: Forbes magazine ranks C & S the 11th largest privately held company in the United States.