Supermarket Superheroes

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Associated Wholesale Grocers levels the playing field for independent grocers

There is a handful of places where people congregate that can bind small communities: the local high school and its sports teams, favorite restaurants and watering holes, places of worship, and the grocery store. As brick and mortar retail faces uncertain times, independent grocers also feel pressure from e-commerce giants and supermarket chains — threatening the community bond and personal connection offered by independently owned grocery stores.

A major challenge for independent retailers competing with larger companies is gaining access to an efficient and cost-effective supply chain. For grocers, this is where Associated Wholesale Grocers comes in.

Speaking to BOSS, David Smith, the cooperative food wholesaler’s President and CEO, explained AWG’s mission, “In the grocery industry, as with most businesses, there can be significant advantages to being large. There are operating efficiencies, synergies, and certain advantages from buying in greater scale. There has been a race between many of the players in our industry to maximize these advantages, and the largest unquestionably have strategic advantages in those areas.

“It was precisely for that reason we were organized 93 years ago, to help independent grocers compete. They banded together to improve their buying power and to benefit from combined marketing and operational efforts. That model worked, and over the past 50 years we’ve achieved over 9 percent compounded annual growth on sales, and over 10 percent on patronage returned to our members.”

Distributing Success

Nearly a century after its founding, AWG proudly serves 3,800 independent grocery stores in 36 states that are owned by more than 1,000 families and do around $22 billion in annual business. Perhaps more importantly, the stores sell vital goods to around 12 million customers and employ 140,000 people. This is just the tip of the iceberg in terms of the good such independent grocers do for the communities they serve.

Smith proudly adds, “In many small towns if it were not for AWG member stores, they (the residents) wouldn’t have a place to buy fresh and wholesome food. Our member companies are the ones that support the schools, the ball teams, and provide the first entry-level jobs for tens of thousands of our nation’s youth. This is where those young people learn about courtesy, professionalism, service, and working as a team.”

Providing valuable logistics support to an essential part of communities across the country is a big responsibility, and one that AWG does not take lightly. As such, the cooperative has developed a strategy that focuses on each link in the chain. Smith reveals, “Our company has three constituencies; we call it our three-legged stool of success. Those are our members, our teammates, and our vendor partners. Our members are the obvious ones as we are symbiotically attached. Our teammates, as we cannot serve our members without them. And our vendor partners because without them we have nothing to sell.

“We must continually provide our vendor partners with a valuable relationship because they do have options. We work to establish mutual goals, achieve successes, and deliver performance and results. Those results include providing them with frictionless and effective ways to market to consumers and deliver their products and goods with distinctive value to the end-consumer.”

Allowing member stores access to the best value, both in quality of product and price, is what creates a successful symbiotic relationship between AWG and its partners. The company accomplishes this thanks to well-established connections and a thorough understanding of its members’ markets.

Smith continues, “We do our best to ensure our members buy well, are priced competitively, and have quality food offerings that are highly customized for the consumers in their respective markets. These same objectives flow to our vendor-partners. They want and deserve a valuable relationship with the end-consumer, and we must provide it. To that end, we have many fascinating end-to-end solutions that offer those consumer touchpoints.”

A Time of Growth

As a result of its commitment to high-quality members and vendors as well as an established retailer-led board of directors and equally passionate team members, AWG has experienced historic highs in service levels and growth over the past few years. The cooperative has seen significant membership growth and store expansion, most notably in its Great Lakes, Nashville, and Gulf Coast divisions.

At times, rapid growth can be challenging but Smith credits AWG’s continued ability to thrive to good planning. “Falling on the heels of a major expansion year, our focus was placed on our four strategic pillars for success: accelerating profitable member growth; building, training, and retaining high performing teammates; strengthening our core support and services; and leveraging technology and organizational infrastructure to enable long-term, sustainable member success. We’ve achieved positive results on these strategic objectives, as has been reflected in our financial and member satisfaction score performance.”

Further elaborating on his company’s expansion, Smith notes, “Our past year service level was at a historic high, our employee turnover has improved 25 percent year-over-year, our quality and freshness performance metrics have improved, supplier partners have supported us to reduce the cost of goods to our members by another $10 million incrementally, our cooperative sales have grown, and we anticipate that 2019 patronage objectives will be met or exceeded.”

Beyond all that, AWG has found success thanks to adhering to its core values of humility, accountability, transparency, and service (H.A.T.S., as it’s known at the cooperative). Humility allows for teamwork, collaboration, and involvement at all levels. Accountability involves the establishment of an atmosphere in which every team member is responsible for one another as well as themselves and the performance of the team. Transparency refers to a culture of honesty and openness that allows all members, retailers, and vendors to know and understand business practices. Finally, serving is a true passion at the company which creates a widespread desire to constantly improve its level of support.

Being Prepared

The competition independent grocers face from e-commerce and bigger companies is only increasing, and AWG has to be just as nimble as its vendors and retailers are. As new disruptive technology enters the sector and changes consumer habits, AWG must adjust, something it is already doing.

Smith explains that recent leadership realignment was done “to ensure we identify, develop/procure, and implement the right technologies to help us achieve our objectives and those of our members. These changes will be predominantly in our Supply Chain and Retail-Facing functions, as supported by our highly efficient and effective central IT, procurement, and logistics platforms. Our goal is to help our member stores be the best place for consumers to get the quality food they want, at great prices — however, they want to get it whether that be in-store, pickup, or online.”

Changes also have to be made in the stores themselves — an area in which AWG is prepared to assist. Smith provides insight into the future, “There are very significant investments underway to improve the in-store experience as well as expand the high growth areas of prepared foods, fresh produce, fresh meats and seafood, and expanding natural, organic, and better for you products. Investments are also being made in technologies such as self-scanning, click and collect, home delivery, product replenishment to consumer, subscription-based services, and scan and go applications.”

In addition to assisting with technological disruption, AWG makes sure its members are ready to handle any economic upturn or downturn. Smith explains that during slow economic times, people become more frugal and are more likely to prepare food at home. On the other hand, in a strong economy consumers have more disposable income and are more willing to splurge on high quality products and specialty items.

From the supply chain to marketing, AWG aims to support its members. Discussing the cooperative’s strategy, Smith noted, “We must provide everything our members need to compete favorably regardless of the current economic reality. To accomplish that we are primarily aligned into two segments. This first being Supply Chain. This is the ongoing operation of our wholesale Divisions, Merchandising, Procurement, and Distribution/Logistics. The overarching mission of our supply chain function is to provide you what you need, when you need it, at the best possible cost. This team continues to accelerate sales, buy better, operate better with improved discipline, and continue to reduce the cost of goods to our members.

“Secondly, we have hundreds of retail-facing resources in a commonly aligned team called Sales and Support. This team is the indispensable resource for our member retailers and a reliable

and proven source for assistance on every line of a supermarket’s financial statement. They provide help with top-line sales growth, gross margin opportunities, and challenges with line item level expense control. They serve as the primary point of contact for AWG members and lead the communication as well as the retail execution of sales building strategies.”

The effort put forth in helping independent grocers succeed is a labor of love for the people at AWG who understand how important their work is. The humble attitude AWG has towards its duty is best summed up by Smith, “AWG is not a household name, and we plan to keep it that way. Our role is to serve, and in serving, we emphasize those we serve. Our independent grocer-members are the ones that are worthy of any admiration, respect, or recognition. They are family businesses that place their personal wealth on the line each and every day to continue to make a difference in the cities, towns, and communities they serve. We have the greatest admiration and respect for what they do and feel it is a privilege to serve them.”

With that mission statement, it’s easy to have great admiration and respect for AWG, as well.