66 Jim Collins KROGER, AP, AND THE MARKET Cumulative Value of
$1
Invested,
1959- 1973 General Market
$3 42 Notes
1. Kroger transition point occurred in 1973.
2 Chart shows value of $1 invested on January 1, 1959.
3. Cumulative returns,
dividends reinvested, to January 1, 1973.
KROGER, AP, AND THE MARKET Cumulative Value of $1 Invested,
1973
-
1998 Kroger $1 98.47 Notes
1 Kroger transition point occurred in 1973 2 Chart shows value of $1 tnvested on January 1.1973 3. Cumulative returns, dividends reinvested, to January 1, 1998.
G o o d to Great 67 A&P had a perfect model for the first half of the twentieth century, when two world wars and a depression imposed frugality upon Americans cheap, plentiful groceries sold in utilitarian stores. But in the affluent second half of the twentieth century, Americans changed. They wanted nicer stores,
bigger stores, more choices in stores. They wanted fresh-baked bread, flowers, health foods, cold medicines, fresh produce, forty-five choices of cereal, and ten types of milk.
They wanted offbeat items, like five different types of expensive sprouts and various concoctions of protein powder and Chinese healing herbs. Oh, and they wanted to be able to do their banking and get their annual flu shots while shopping. In short, they no longer wanted grocery stores. They wanted Superstores, with a big block "Son the chest-offering almost everything under one roof, with lots of parking, cheap prices,
clean floors, and a gazillion checkout lines. Now, right off the bat, you might bethinking "Okay, so the story of AP is one of an aging company that had a strategy that was right for the times, but the times changed and the world passed it by as younger, better- attuned companies gave customers more of what they wanted. What's so interesting about that"
Here's what's interesting Both Kroger and AP were old companies Kroger at
82 years, AP at
11 1 years) heading into the s both companies had nearly all their assets invested in traditional grocery stores both companies had strongholds outside the major growth areas of the United States and both companies had knowledge of how the world around them was changing. Yet one of these two companies confronted the brutal facts of reality head-on and completely changed its entire system in response the other stuck its head in the sand. In
1958, Forbes magazine described
A&P as "the Hermit Kingdom" run as an absolute monarchy
by an aging Ralph Burger, the successor to the Hartford brothers who had built the AP dynasty, sought to preserve two things above all else cash dividends for the family foundation and the past glory of the Hartford brothers. According to one AP director, Burger "considered himself the reincarnation of old John Hartford, even to the point of wearing a flower in his lapel everyday from
Hartford's greenhouse. He tried to carryout,
against all opposition, what he thought Mr. John Hartford would have Burger instilled a "what would Mr. Hartford do" approach to decisions, living by the motto "You can't argue with a hundred years of Indeed, through