The Great A&P and the Struggle for Small Business in America (9 page)

Great Atlantic & Pacific was losing its edge in the tea and coffee business as well. It was still the nation’s largest tea dealer and still used the Great American Tea Company name to sell teas by mail. But Thea-Nectar, an unusual product when offered in the 1870s as the first packaged tea, was by now a tired brand. The English tea merchants Lipton and Tetley had set up shop in America, and their branded teas were widely available. In any event, tea drinking was not the fashion it once had been. Consumption was stagnant amid falling prices, and the imposition of a ten-cent-per-pound tariff in 1898 to finance the Spanish-American War did not help matters. In 1902, the United States imported less tea than it had two decades earlier at less than half the average price per pound. The Hartfords, who usually stood aloof from trade associations and lobbying groups, were so worried about the situation that Great Atlantic & Pacific helped form the National Tea Association, a group to promote tea consumption, in 1903.
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Coffee had become America’s beverage of choice by the early twentieth century, and when it came to coffee, Great Atlantic & Pacific was far from the market leader. The company claimed to be a “direct importer,” but the earliest evidence that it imported its own coffee dates to 1909. Between 1896 and 1904, Great Atlantic & Pacific did not rank among the dozens of firms importing more than ten thousand bags per year through the Port of New York, indicating that it bought coffee from importers rather than bringing in its own. The most important importer was Arbuckle Bros., which was established by Charles and John Arbuckle of Pittsburgh in the 1860s and became the world’s largest coffee dealer in the 1880s. Arbuckle’s Ariosa brand, glazed with sugar to keep it fresh, was America’s bestselling ground coffee. In 1896, Arbuckle Bros. announced plans to start refining sugar, and the powerful Havemeyer family, whose American Sugar Refining Company had a near monopoly in sugar production, struck back by purchasing and promoting the Lion coffee brand. In the ensuing battle, coffee consumption soared as prices tumbled. This five-year retail price war could not have been good for Great Atlantic & Pacific’s bottom line.
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In these mounting competitive battles, Great Atlantic & Pacific faced a serious disadvantage: it was poorly structured to be a grocery chain. Its 198 stores were strewn over twenty-eight states. In many towns it operated only one or two fixed locations, along with wagon routes. This was fine for a tea and coffee retailer, as tea stores did not require frequent resupply. The food business was different. Grocery stores needed new merchandise every day or two. A company with many stores in a single city could gain a big advantage by operating its own warehouse and using its own wagons to supply its stores. Having a warehouse allowed the retailer to obtain quantity discounts on the goods and to buy directly from suppliers to avoid the normal wholesaler markups.

Great Atlantic & Pacific, with few stores in any one city outside New York, would not have been able to supply its stores easily, so its costs were probably higher than those of large local grocers. Its stores carried inventory equal to two months’ sales, roughly twice as much as the most efficient grocery chains. Great Atlantic & Pacific’s widely dispersed stores also made local newspaper advertising more expensive on a per-store basis. And even if its prices were the lowest in town, Great Atlantic & Pacific might have had difficulty attracting customers to buy its groceries as they did its coffee and tea. Coffee and tea were infrequent purchases, and housewives thought nothing of buying a pound downtown and carrying it home on the trolley. Food shopping, on the other hand, was a daily chore and was almost always done within a few blocks of home.
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The historical record of this period is scant, but the available evidence suggests that once the Great Atlantic & Pacific was reorganized, in the summer of 1903, the Hartfords moved aggressively to rebuild a foundering enterprise. Over the next nine years, they opened an average of one store every two weeks, six times the pace of the 1890s. The network of wagon routes was expanded to over five thousand, and commissioned salespeople driving Great Atlantic & Pacific horse carts were to be seen all over the East, Midwest, and South. The Hartfords revamped the company’s advertising, too. In 1904, it began using full-page newspaper advertisements with large graphics, giving itself a distinctly modern cast.
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In 1907, the Hartfords boldly announced their ambitions by starting construction of a nine-story office and warehouse building on Bay Street in Jersey City, within walking distance of the new underground railroad to Manhattan. The office-warehouse building was the centerpiece of a complex designed to support a very large company. The site had room for several buildings, and over the next decade it sprouted four additional structures linked by tunnels. One was a power plant capable of bearing office floors above. Nearby was the coffee roasting and grinding plant. The bakery building included a plant to make chocolate and cocoa and another to manufacture macaroni. All of these imposing structures were built of reinforced concrete, then considered an advanced material for large-scale construction, and had sprinklers throughout to reduce the risk of fire—and fire-insurance premiums. The complex conveyed the unmistakable message that Great Atlantic & Pacific was a significant business, able to afford the best in modern construction and in need of room to grow.
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The year 1907, though, was a most inauspicious time to launch such a bold project. On October 14, an attempt to corner the copper market triggered a series of bank collapses, a sequence of events that would become known as the Panic of 1907. The company’s cash was deposited in a bank rumored to be failing. John A. Hartford, then thirty-five, was assigned the task of extricating the money. After spending the night queuing outside the bank’s doors, John walked up to the man who had spent the night at the head of the line. “How much have you got in here?” John asked.

“Four hundred and forty-seven dollars and ninety cents,” the man replied. “All I got in the world.”

“I’ll give you four fifty for your place,” Hartford said. “You get back in line and maybe you’ll get your deposit, too.” Hartford was first inside when the bank opened its doors and collected Great Atlantic & Pacific’s money in full, saving the company.
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At some point around 1907 or 1908, with their father now in his seventies, George L. and John Hartford appear to have divided up their responsibilities. George L. took charge of the financial affairs that had long been run by George H. It would have been his job to figure out how to generate enough cash to fund expansion without selling bonds or mortgaging assets, as either of these moves would have required approval by the Gilman heirs who controlled the preferred stock. John, the more outgoing of the pair, took responsibility for marketing and for relations with employees and suppliers, tasks that would have made his introverted brother uncomfortable. George L. and John would share management responsibilities in this way for the rest of their lives.

John started making major changes in the stores. The first was to create what would become one of the best-known retail names in America: A&P. While George Gilman had been alive, the firm had referred to itself uniformly as the Great Atlantic & Pacific Tea Company, a name evoking grandeur. To the extent that Great Atlantic & Pacific promoted its own brands, it sometimes used the company’s initials, as in A&P gelatin powder, but more often relied on distinct names such as Elgin Creamery Butter and Eight O’Clock Breakfast Coffee. A drawing of an old woman sipping tea made its appearance in advertisements and on some product labels in the 1880s, with the phony endorsement “The Great Atlantic & Pacific Tea Co.’s celebrated teas, coffees, baking powder, spices, condensed milk & extracts have been my solace throughout my life. Grandmother.” Most goods, however, were sold either in bulk or under manufacturers’ brand names, many of which did not resonate with consumers.
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John Hartford set about a systematic rebranding. Dozens of products, from canned corn to stove polish, were repackaged under the brand name “A&P.” The logo was displayed in a standard way for the first time, with the letters in gold within a solid red circle. With rebranding came market segmentation, drastically increasing the number of items available behind the counters of Great Atlantic & Pacific stores. Shoppers could choose between A&P lima beans for twelve and a half cents per can, Sultana lima beans for ten cents, and Iona lima beans at three cans for twenty-five cents. All three brands were exclusive to Great Atlantic & Pacific, but each catered to a different economic stratum. Canners and manufacturers, who wanted to use branding to increase their own profits rather than the retailer’s, were notably unenthusiastic about the expansion of store brands, and some tried to organize a boycott. For most, however, the prospect of selling full carloads of canned goods to a single retailer was too tempting to pass up.
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Thanks to rising incomes and more exposure to advertising, grocery shoppers had higher expectations than a few years earlier, and hundreds of new products were available to soak up workers’ increased purchasing power. Canned salmon, once a delicacy, became a routine purchase; U.S. production rose 123 percent from 1895 to 1905. Prepackaged cereals battled for shelf space, with several companies promoting their methods of toasting cornflakes as superior to the competition’s. The National Biscuit Company’s revolutionary Uneeda Biscuit, introduced in 1898, displaced the grocer’s ubiquitous barrel of stale, broken crackers; one awed admirer described it as “only a lot of perfectly made, perfectly baked biscuit, enclosed in a package that excludes all air, dust and moisture.” Even the coffee department, one of the most profitable parts of the average grocery store, underwent a remarkable change. Great Atlantic & Pacific customers could choose among El Ryad, the “most scientifically blended coffee in the market,” at thirty-five cents a pound; Plaza coffee, “No better value on the market,” for thirty cents; Sultana, the “Best 25¢ coffee in the city”; and the old standby, Eight O’Clock Breakfast Coffee.
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Shoppers also were demanding ever more lucrative premiums. In 1900, Great Atlantic & Pacific’s outlay for gifts to customers was $450,000, more than three times the year’s profits. The premiums not only were costly but also took up shelf space that could have displayed merchandise for sale. Many stores of the period looked more like gift shops than groceries. Photographs show deep, narrow spaces, lacking the crystal chandeliers and oriental elegance of an earlier day. A wooden counter stretched along one side of the room, the shelves of food behind it tended by store managers in dark vests, male store clerks in white aprons, and female clerks wearing long skirts and white blouses. Along the opposite wall were shelves groaning under displays of clocks, plates, pitchers, and cuspidors, available only in exchange for coupons. Each time she made a purchase, the customer would receive a red-printed coupon bearing the number of points she had earned. The clerk would validate the coupon with the store’s stamp. When she had collected the requisite number of points, the customer would bring her coupons to the store, where the clerk would hand her the desired prize and punch holes in the redeemed coupons.
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Doing away with premiums was impossible. Customers expected them, and they gave chains a big advantage over independent grocers, who could not afford to tie up money in glassware and crockery. Instead of ending premiums, the Hartfords tried to cut the cost by publishing a premium catalog, with drawings or photographs of the available merchandise; when a family had collected the 150 points needed for an oak clock or the 67 for a Daisy air rifle, it would send its coupons to a central office and receive the gift by return freight. This approach freed up selling space and had the added virtue of creating a promotional publication that customers would consult frequently as they considered what to acquire next. The premium business was gradually turned over to Sperry & Hutchinson (S&H), a company founded in 1896 that popularized the idea of pasting trading stamps into books. Great Atlantic & Pacific gave customers one S&H stamp for every ten cents of purchases. It paid S&H two-tenths of a cent per stamp, and S&H agreed to provide merchandise worth $0.0011 for each stamp redeemed, leaving it with a healthy profit. A customer who bought $99 of groceries would receive 990 stamps worth $1.18 in merchandise—assuming, of course, that the merchandise was worth as much as S&H claimed.
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The stamps were easily used for special promotions. Buyers of Silver Key tea could get ten extra stamps with a ten-cent package. A fifty-cent tin of baking powder might come with eighty stamps, for one week only. Newspaper advertisements were crowded with special offers. “The reader of the ad. might infer they were also selling groceries. But giving the stamps is the main thing,”
American Grocer
’s advertising columnist commented. Hard as they might try to equal Great Atlantic & Pacific’s prices, independent grocers were rarely able to match it stamp for stamp.
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Great Atlantic & Pacific’s revival, and the growth of competing chains, had political consequences. Independent grocers were being trampled in the price and premium wars. In the first decade of the twentieth century, they began to fight back.

Independent merchants were a notoriously difficult group to organize. They typically tended their stores from seven in the morning until eight or nine at night, often with no help, leaving little time for social life, much less politics. Given the industry’s high turnover, many stores were in business for only a year or two, and their owners had no commitment to political action. Money was always scarce, and in the cities many storekeepers spoke little English. The extent of most grocers’ collective activity was a local grocers’ association, whose main project was to arrange for all stores to close on the same summer day for the merchants’ annual outing.