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Lifelong Commitment

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Looking forward is what keeps a company on top of its game. That’s why, on the occasion of its diamond anniversary, Schnuck Markets Inc isn’t spending too much time looking back on its first 75 years. No, the -based supermarket chain is too busy looking ahead to a future where it remains one of the country’s most successful family-owned and -operated grocery retailers.

For Schnucks, a large part of guaranteeing another 75 years of success means investing in the communities where it does business and delivering a personalised shopper experience to the loyal consumers who’ve helped bring the company from a single store that opened just before World War II to a 100-location chain with locations in Missouri, Illinois, Indiana, Wisconsin and Iowa.

“The key to the future is customisation of our stores,” says Scott Schnuck, third-generation family management and president/CEO for the past eight years, who’s passing the reins of the company to his brother Todd this month. Scott Schnuck became CEO after his brother Craig, who took over shortly before their father died in 1991, and led the company for 17 years. Scott credits Craig with doubling the size of the company — “a significant achievement for a third generation to achieve” — and for expanding Schnucks’ in-store pharmacy operations, which was “a tremendous part of our growth.”

When Scott assumed the big chair, “the industry was really changing,” he says, noting the huge inroads being made by Walmart and Whole Foods Market, which were “attacking at the top.” With the game changing, Schnucks needed a new direction to stay competitive. “We were in danger of not standing for anything,” Scott says. “We didn’t stand for anything that would allow us to compete for the future.” The answer was right before their eyes. “I got us more focussed on food,” Scott says, “food expertise for our staff and our customers.”

Under Scott’s leadership, the grocer significantly upped its food-centricity, boosting its fresh offerings, enhancing its prepared food departments, launching a gourmet-focussed market in downtown St. Louis and a next-generation concept store in the suburbs, opening a cooking school, and, through its Schnucks Cooks initiative, offering in-store demos of featured recipes and showing shoppers how to prepare restaurant-inspired meals at home with economical ingredients available right at their neighbourhood market.

A significant part of this mission includes extensive training of associates — which Schnucks calls “teammates” — and inspiring them to get excited about food and pass along that zeal to shoppers who, influenced by the rise of The Food Network, were already coming in with the idea of boosting the profile of their home kitchens.

“Our people are not just about stocking a case,” Scott says. “We inspire them to learn about what they’re serving our customers. “We want our teammates involved in decisions and bring out through them the food experience.”

Scott recounts a story about a former store dairy manager who was transferred to the wine and spirits department. What seemed like an odd reassignment turned out to be a career renaissance for this Schnucks teammate, who went on to successfully complete training as a sommelier. “These people have become passionate about their jobs, about selling,” Scott explains. “They’ve become passionate about the food business.”

Family Ties, New Perspectives

It’s that kind of passion that Scott says will help drive Schnucks’ future growth. However, with many managers expected to retire over the next five to eight years, he says Todd will be challenged to recruit a new generation of passionate leaders to maintain the momentum.

“It can be a problem, but also a tremendous opportunity,” says Scott, who has worked in the family business full-time since graduating from business school in 1975. Historically, many grocery leaders have moved up through the ranks by starting as, say, a bagger and, taken under the wing of a mentor, being nurtured along a leadership path.

But the industry as a whole is facing an evolving job climate with far greater mobility and turnover than in years past, and a smaller crop of teammates passionate enough to stick around for a generation. “Our challenge will be with the Millennials,” Todd says, citing analysts’ predictions that this demographic will have 12 jobs over the span of a 30- to 40-year work career. “How do we engender the same kind of loyalty with them?”

It’s going to be up to the industry to start turning business leaders into grocers. “This could allow us to recruit people like college graduates, and give them a store experience training programme that can lead to management positions,” Scott says.

As for the Schnucks, a fourth generation is already working in the business, “and there are more coming,” says Todd, who’s completing a run as COO before succeeding Scott at the helm. Some of those younger Schnucks are currently working outside the company, “which we encourage so they can see how things are done elsewhere, and bring in new perspectives.”

Schnucks benefited from some other new perspectives when it looked outside the family late last year to hire Anthony Hucker away from the presidency of Ahold USA’s Landover, Maryland-based Giant Food to be its EVP and chief strategy officer. Hucker, whose 30-year grocery career also includes stints with Walmart and Aldi, becomes COO this month as part of the transition of leadership from Scott to Todd.

“This is a premier grocer with a leading market share and an incredible legacy,” Hucker says, noting that he’s been truly impressed by the loyalty of the company’s teammates to the family. “They say, ‘I am proud to tell people I work at Schnucks.’ That’s such a rare commodity.”

Hucker experienced this to the extreme as he immersed himself in the company’s operations shortly after coming aboard. “I’ve worked in every department in different stores — at our distribution center, our pharmacy, our floral design center, our bakery plant,” he says. “The sense of pride and loyalty among the teammates is a phenomenal strength the big guys don’t have.”

Serving the Entire Community

Encouraging loyalty among current and potential company leaders is one thing, but it’s all for naught if you can’t ensure the loyalty of those spending money in your stores. And in a retail environment that’s growing increasingly fragmented as Schnucks enters its next 75 years, grocers need to maintain their relevance among core consumers as well as new shoppers.

“Everybody out there selling food — grocers, dollar stores, drug stores, hardware stores — everybody is using food to get people into their stores, or as an add-on to build their own basket,” Todd points out. When operators like Aldi and Whole Foods are “picking at you on the fringes,” he says, grocers need to “make sure people are using you as their stock-up store.” As such, there are opportunities to be had “across the economic spectrum,” he observes. “We’re not a niche that only serves a certain part of the community.”

Scott adds, “We’ve made a commitment to serve all neighbourhoods in St. Louis,” noting that the company now has eight stores within the city itself. Among Schnucks’ latest projects: the extensive remodel of its South City store, a 74,000-sqft inner-city location originally opened in 1990, which has been “renovated from floor to ceiling,” according to Store Manager Nick Collora, and now provides an enhanced shopping experience for neighbourhood customers. As Scott remarked upon South City’s grand reopening last December, “Investing in this store community is one of the best ways to celebrate our anniversary year.”

Meanwhile, not far away, in the heart of downtown, is the upscale Culinaria — A Schnucks Market, a 21,000-sqft store aimed at downtown residents, commuters and tourists, which opened in 2009 with extensive prepared foods, a wine bar and its own ultra-premium private-brand products. Not long after, Schnucks launched its new 74,000-sqft flagship store in the suburb of Des Peres, site of the grocer’s first Schnucks Cooks cooking school. The location offers cooking demonstrations, in-store dining and a walk-in beer cave. Kehrs Mill, a smaller version of the Des Peres store, opened in fall 2012 in Ballwin, Missouri.

“You’ve got to continue to reinvest in your business and in the community as well,” Todd says, adding that the way to do that is with “modern facilities that serve all parts of the community.”

Just about every grocer cites “fresh” as a key grabber, but beyond that, the vast territory of health and wellness is an important opportunity. With pharmacies already in most of its stores, Schnucks is moving on to additional health services; last fall, it opened an outpatient infusion therapy center, “which we see as a logical extension of our pharmacy business,” Todd says (the grocer launched a specialty pharmacy division in 2008).

There’s broad agreement that gluten-free (and free-from products in general) will continue to grow in significance, and Schnucks has invested in merchandising this important category with dedicated sections that include products that are gluten-free not only by design, but also products that customers might not be aware are naturally so.

The effort hasn’t gone unnoticed, according to Todd: “We had a customer come in with tears in her eyes and say, ‘Thank you, because now I can take my child down an aisle and not tell them no.’ That goes a long way.”

Saying ‘Thank You’

Schnucks’ attention extends beyond its stores as well. To be sure, frequently refreshed and remodeled stores are part of its way of thanking the communities that, through their loyal patronage, have helped the company grow for three-quarters of a century.

But, as Todd notes, “Your business is only as strong as the community in which it lives. It’s important to make sure you have a strong community. When you’ve been blessed with the support of the community, it’s incumbent on you to give back.”

The Schnuck family is many in number, and most are deeply involved in philanthropic activities, among them the Urban League, Junior Achievement, St. Louis-area hospitals, the city’s zoo and botanical garden, and the Salvation Army — and they help out not just with their checkbooks, but also with many hours of personal time devoted to volunteer work. But perhaps the company’s most significant association is with Operation Foodsearch, St. Louis’ largest food bank.

“We thought the best way to celebrate (Schnucks’ anniversary) was to leverage our anniversary to provide substantial assistance to Operation Foodsearch and other food banks in other communities where we have stores,” Todd says. “We provide one out of every three meals that Operation Foodsearch provides. … it’s a very important need in our community. … as the lower strata of the economy continues to grow, the need gets greater. As a food retailer, it’s a logical thing to help and talk to those we’ve been partners with — food manufacturers and suppliers. We’ve supported their products over the years.”

Schnucks also is involved with United Way; in fact, Scott is chairing the organization’s 2014 campaign for the entire St. Louis area, an undertaking he says was made possible by his passing the CEO’s torch to Todd and assuming the chairman’s role, thereby freeing up more of his time for the philanthropic post.

The company’s generous outreach has had the residual benefit of building up trust equity within the community, something that was put to the test when Schnucks and its customers were the victims of a cyberbreach in early 2013, compromising an estimated 2.4 million credit and debit cards used at its stores. Schnucks found itself defending half a dozen lawsuits as a result, though the Missouri Attorney General’s office declared last July that the grocer wasn’t at fault and was itself a victim.

“It had a significant impact on our business,” as customers lost confidence in their ability to make electronic payments at stores, Scott admits. “It was very difficult to communicate with customers because we didn’t know the extent of it right away.”

The company’s “slow and steady” rebound from the cyberattack has been somewhat mitigated by “years of building up trust with our customers,” he’s quick to add, however. “They know we’ve been there for the community. That helped us get through that crisis.”

Hucker says Schnucks’ commitment to outreach is indeed one of the company’s key strengths. “I didn’t realise just how entrenched it is,” he says of how the grocer’s philanthropy is perceived by the public. “When people talk about Schnucks, they talk about how much it cares about the community.”

That devotion to the family’s brand is an asset that few retailers can claim, and such a reputation will be an important weapon in its arsenal as it faces an increasingly competitive future.

“It is a ruthless and relentless industry,” Hucker concedes. “We have to defend our market share, whether that’s through our existing stores, acquisition or a fill-in strategy. You can flex your format or flex the channel, which is about responding to who and where and how the consumer wants to shop.”

Moving forward, an omnichannel strategy will be important for traditional brick-and-mortar retailers as online shopping options grow more popular, Hucker notes. “St. Louis is a very traditional town with a traditional demographic that’s changing,” he says. “It’s about skating to where the puck is going to be. Putting the customer in the middle of the decision-making process is what we’re really good at.”

So, as the Schnuck family prepares confidently for a future supported by a rich history of tradition, loyalty, growth and innovation, what is it most proud of on the occasion of the company’s 75th anniversary?

“Being in business as a family for 75 years,” Todd replies. “We’re thankful for the support of our customers and the dedication of our teammates.”

Scott takes a long, reflective pause when asked the same question, and then at last responds, “Our commitment to people — building the culture of our teammates, helping them realise their potential.”

Schnucks History

Founded in north St. Louis in 1939, Schnuck Markets Inc has grown to include 100 stores in five states: Missouri, Illinois, Indiana, Wisconsin and Iowa.
The seeds for the Schnucks of today were sown in 1937, when Edwin H. Schnuck started a wholesale meat business. Two years later, his wife, Anna, opened the family’s first retail store — a confectionery in north St. Louis. Their oldest son, Edward, followed his parents’ lead and also opened a corner store in the area. Soon after, two additional stores were opened by daughter Annette and her husband, Hanhardt, and their third child, Donald, with his wife, Doris. While these were separate enterprises, the four Schnuck families operated as one when it came to corporate philosophy, advertising and buying.

By 1947, the family had opened seven retail grocery stores among them. Edward sold his stores to join his father in the business he had established at 4356 Manchester in St. Louis. Later, Donald and Doris sold their store to assist in the acquisition of a second major grocery location in the St. Louis suburb of Brentwood. Those two locations became the nucleus of today’s company.

In 1952, Edwin and his two sons incorporated as Schnuck Markets Inc. They had learned a lot about managing a grocery store from serving independent grocers in their wholesale meat business. That experience also gave them a solid foundation for developing the outstanding meat departments for which Schnucks is still known today.

The company also became known for the friendliness of its employees, referred to at Schnucks as “teammates.” In 1961, Schnucks adopted the slogan “The Friendliest Stores in Town” to highlight what customers felt was a primary strength.

By the late 1960s, Schnucks was operating 10 modern stores in and around St. Louis. Schnucks was the first major food retailer in the area to drop its trading stamp programme in favour of lower prices, in a move dubbed “The Price Revolution” campaign. A new symbol accompanied this theme: a friendly saluting soldier, which is still one of the most recognised corporate logos in St. Louis.

In the late 1960s, on the verge of tremendous growth, Schnucks opened its first warehouse for produce and high-volume grocery items. The location and size of its distribution facilities have grown through the years to serve the needs of more customers shopping at an expanding array of stores.
In 1970, Schnucks opened a new grocery warehouse facility with the capacity to handle future growth, which occurred more rapidly than anticipated when the company acquired the Bettendorf-Rapp chain of stores in St. Louis later that year. More than doubling its store count overnight, this purchase allowed Schnucks to serve an even greater number of customers throughout the St. Louis metropolitan area.

As the needs of customers changed, Schnucks became a leader in developing combination food-and-drug stores, beginning in the mid-1970s. The company remains committed to this format today, continually adding and modifying the exact product mix in each store to match local customers’ demands.

Schnucks began adding manufacturing facilities in 1961, with the opening of its first bakery plant. In the early 1990s, the grocer consolidated its food preparation at one central USDA-inspected kitchen, where entrées, side dishes, salads and smokehouse specialty items are prepared for retail sale in its deli and Chef’s Express departments.

The 1980s and ’90s brought a transition in leadership at Schnucks from the second generation of the Schnuck family to the third. Overseeing operations of the company today are the six children of Don and Doris: Scott, Todd, Craig, Mark, Terry and Nancy.

In June 1995, Schnucks acquired 57 stores from National Supermarkets, its single largest competitor in the St. Louis metropolitan area. In 1998, the company entered the Rockford, Illinois, market with the acquisition of Logli Supermarkets, another family-owned company. In 2005, Schnucks opened its first Iowa store, in Bettendorf. To better compete in the Rockford market, Schnucks acquired seven area Hilander stores from The Kroger Co. in 2011, bringing its Rockford-area store count to 11.

Schnucks expects to open three new stores in 2014, and the company remains open to further acquisitions as opportunities arise.
For more information, visit www.schnucks.com