December 07, 2010

Food Lion founder recalls thinking out of the (big) box

Interesting interview with Food Lion founder Ralph Ketner. Quopte - "I don't need to know what color shirt they were wearing or how much cereal and what brand they bought. All I want to know is they bought it at Food Lion. I'm narrow-minded that way."

Food Lion founder recalls thinking out of the (big) box -

By Ely Portillo
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Posted: Sunday, Dec. 05, 2010
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Food Lion founder Ralph Ketner, now 90 and retired, speaks to business students at Queens. T. Ortega Gaines - [email protected]

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When Ralph Ketner decided to slash prices at his struggling Salisbury grocery chain in 1967, he was gambling that higher sales volume would cancel out razor-thin profit margins, allowing the chain to grow.

His Food Lion strategy worked. Ketner, now 90, retired from the chain he founded in 1992, about a decade after the company was acquired by Belgian grocer Delhaize Group. The chain had opened more than 1,000 locations.

Since then, however, Food Lion's growth has slowed and the company has faced slipping market share and increased pressure from the economy and competitors such as Wal-Mart Supercenters. Food Lion, which now operates about 1,100 stores across the Southeast, has gone back to basics, bidding for shoppers with a heavily promoted lower pricing initiative.

He spoke with the Observer last week at Queens University of Charlotte before giving a talk to students at the McColl School of Business. The conversation has been edited for length and clarity.

Q: How do you think that a supermarket like Food Lion can compete with big-box supercenters like Wal-Mart and Target?

It's extremely hard, because if you don't have the volume, then you've got to add extra. Convenience is still awful hard to beat. The big-box store is one to a town or something like that, so people will factor in the time and the mileage, gasoline and so forth.

Q: Grocery stores now collect a lot of information from consumers with things like loyalty cards and Food Lion's own pilot program of filming shoppers in some stores. Do you think this is good for shoppers?

Maybe, if they don't have the (proper) price. If I were still running Food Lion and still had the lowest prices, then no, I wouldn't want it. There's a cost to getting that information. If you're catering to the person primarily because you're gonna take care of them and give them groceries at the lowest price possible, they're coming back next week.

I don't need to know what color shirt they were wearing or how much cereal and what brand they bought. All I want to know is they bought it at Food Lion. I'm narrow-minded that way.

Q: What do you think a grocery store will look like 20 years from now?

Lord, I'm 90 years old, so I don't have to worry about that. Looking back at the last 30 years, it hasn't changed that much. But (grocers) have increased the number of items tremendously. I think that when you try to be everything to everybody, you're going to charge everybody more.

Q: You cut cost and traded on price. Do you think price is still the No. 1 concern for consumers when deciding where to shop?

I would ask people questions like, "Where does price enter?" Well, people will never admit that, because it indicates they're a cheapskate.

There are people who are willing to pay for the organic items and better selections and so forth, but I would rather cater to 80 percent of the people than I would to the 20 percent who want certain things. I'd say, "Go somewhere else and buy it."

Q: Has the company acted the way you hoped since you left?

After I left in 1992, we had 1,017 stores. Our goal at that time was 2,000 at 2000. We planned to open 900 stores in the next eight years. We'd opened 318 in the last three years I was with the company, so it was not an unreachable goal.

But after I left - it's a funny thing. They didn't think we should sell stuff below cost. One-sixth of everything I sold was sold for less than we paid for it in carload lots. If we bought $10 million worth of Gerber baby food, we sold it one jar at a time for $8.5 million, 15 percent below cost. You can't take percentages to the bank, you take dollars to the bank.

Q: Is there anything you've learned in retirement that you wish you'd known while you were running Food Lion?

I wish I'd known I was going to live this long. I turned 90 a couple months ago, and probably I wouldn't have retired so early.

Q: What was a difficult price-cutting goal you had, and how did you reach it?

What's the one thing everyone buys if they go shopping? Sales tax. I cut sales tax from 4percent to 3 percent. Now, obviously I had to pay it (the difference). That cost $5.2 million off the bottom line just like that, but I figured that I could increase sales enough to offset it.

Well, it turned out that the law in North Carolina says you can do it, but you can't tell anyone. I put signs up that said, "The Attorney General says we can charge you 3 percent, but we can't tell you that's what we're doing," and we kept doing it.

Q: Is it difficult for you in retirement to watch the company being run by others?

When ABC had the exposé show (showing Food Lion employees purportedly selling out-of-date meats), I woke up about 4 in the morning thinking, "If I ran Food Lion, what would I do?" The answer is, "You don't run Food Lion any more."

Read more:

Food Lion founder recalls thinking out of the (big) box -

Posted by staff at December 7, 2010 10:19 AM