The Role of the Food Distribution Industry in Institutional and Service Foods A Supermarket t 8s Answer to the Challenge Discussion of Supermarket General 9s entry into the fast food business BACKGROUND 0 Supermarkets General Corporation is a diversified retailing organization with operations in the states of Massachusetts, New Hampshire, Connecticut, New York, New Jersey, Delaware, Pennsylvania and Maryland. Operations include department stores and specialty shops, supermarkets, drug stores, gas stations, fast food restaurants, home improvement centers, convenience stores, a discount store, liquor stores and a variety of transportation and distribution facilities that su~port the various retailing companies. The company, founded in 1958, is now approaching $800,000,000 in annual sales.
The rapid growth of the corporation and its relative success are in part attributable to a series of strategies that were developed prior to entry into any given segment of the marketplace. James T. Gow, Jr.
Supermarkets General Corporation Woodbridge, New Jersey was readilv a~~arent that in this segment ch~ins 9 were experiencing the most rapid growth. In addition, consumer acceptance of this type of service was well established. Further, the under-25 age group which particularly favors this type of restaurant would equal fully half the population in the early 1970 9s.
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final point of real significance was that the dollars spent for food away from home represented the fastest growing segment of the market for food. All of these factors, plus others, led us to the conclusion that offensively an exciting retailing market was clearly rapidly developing, and defensively it would be highly desirable to capture some of the dollar sales that were turning away from home preparation of family meals. SPECIFIC PLANS FOR ENTRY Earlier this year, your program director, Burt DeVries, and I were talking over Identity - The consumer acceptance of breakfast in Dayton, Ohio, and the the chains in this business led us to conversation turned to one particular conclude that identification with our strategy - specifically, the way we planned retailing name would be were entering the fast food service important, Our withdrawal from a industry.<br><br> The facts and concepts that retailer-owned cooperative caused us to we discussed that morninq and our reshape our retailing image and to present strategy will take the next rename our retail units. Lippincott & few minutes, and then I will be happy Margulies worked with us in establishing to respond to any questions that the this new identity. To quote from group may have.<br><br> cSense 62 d, their private publication, cAlthough deeply involved in supermarket OUR INITIAL LOOK AT THE INDUSTRY retailing SGC 9S in-store diversification via non-food items and departments made In 1967, we concluded that the fastest this no longer just a 8grocery growing segment of the consumer business. 9 Growth in drugs, gasoline services market was the limited menu, and softgoods was gaining impetus, or fast food type of establishment. It placing the company in many spheres of 87 re tailing. d Lippincotte f Nargulies conceived and executed a unique total identity concept that united the diversified retailinq activities of the company under one name. It is call PATHMARK.<br><br> cAs a name, it signified the path to quality, the mark of value. d The name was broad enouqh to include the fast food entry that we conceived. The style and performance that the consumers in our market had grown to expect in other company opertions were built into the service strategy of our fast food entry. The customer would find in the Pathmark Hut quality and value.<br><br> We, in turn, w=ld have a chain-like appearance on the day our first unit opened. This name was further reinforced by a unique building design. Locations - Idhile we had confidence in the business and a very real interest in entering, it was also Quite clear that the rapid growth of this industry segment was causing a proliferation of units in a way that would ultimately cause individual chain units and ~erhaps whole chains to fail.<br><br> We, therefore, spent the time to develop a site location strategy that would keep us in a favorable competitive position in the face of any foreseeable develo~ment. Operations - The planned nenu featured the popular items, plus additional variety which we felt (and now know) would help to differentiate us in this competitive market. The items are A) hamburgers; B) cheeseburgers; C) 3-D or double~deck hamburgers w~th cheese lettuce, onions, etc.; D) chicken in five portions for consumption on premises or take home; E) roast beef two forms, either sandwich or dinner; F) a fish item consisting of a shrimp patty in tempura sauce; G) natural french-fried Dotatoes: H) fried Die n dessert; and I) drinks, including soft drinks, milk shakes, coffee and hot chocolate.<br><br> All food pre~aration is done on the premises. Status - We now have one prototype unit operating as a test of concept and operational controls. In addition, we have acquired three units of a different type and are refining those operations.<br><br> Moderate expansion is planned for the near future. Our attitude is clearly one of cautious continued development. One final point, although not directly related to our entry, relates to franchising.<br><br> To the dearee that no I must say we have elected not to franchise in any of our retailing ventures to this point. SUMMARY The company 9s broad interest in retailing led to an investigation of the fast food service industry. The trends that were developing and had developed made it attractive to consider entering.<br><br> The factors of identity, location strategy, merchandising and operations were analyzed and resolved The dual path of developing a prototype entry internally and a small acquisition was chosen and executed. At this time. we are planning continued development of these entri~S.<br><br> q EDITOR 9S NOTE: The discussion followinq the PaPers brought forth these issues: 1. Evaluation of rate of return on investment as a management criterion. 2.<br><br> Problem of making long range planning viable. 3. How to stem the high failure rate in the food service industry?<br><br> 4. How to gain balance between full and Part time employees in food service? 5.<br><br> Legal issues in franchising. . .<br><br> mention might leave room for speculation, 88