The Great Atlantic and Pacific Tea Company – “the A&P” – was America’s first giant retail chain, with 200 stores by the year 1900, an amazing feat in an era without computers or rapid communications. In 1929 the New York-based A&P became the first retail firm in the world to generate $1 billion in sales in one year, operating more than 15,000 stores in the United States. The A&P was not the only big US grocery store chain – in 1930 Kroger of Cincinnati had 5,165 stores, American Stores of Philadelphia had 2,728, and Safeway of Oakland 2,675. These giants were followed by a number of large regional chains including Grand Union, National Tea, and First National Stores.
These massive chains were made up of small stores, located on virtually every street corner in our major cities. Think Seven-Eleven. But these stores were full service stores – that meant that all the products were behind the counter, and you had to ask an employee to get your can of beans for you. Since the world was full of independent bakeries and butchers, these chain grocery stores focused on “dry groceries” – canned goods, coffee and tea, things in bottles and jars. Prices were high, and the stores were tiny compared to the stores we know today.
In this environment, one man had a new idea. Michael Cullen was a veteran A&P employee who had joined Kroger as a store manager in Illinois. He wanted his employer Kroger to let him test his new idea in grocery retailing with five stores anywhere in the United States. In 1930, he wrote a long letter to the top management of Kroger, which included the following excerpts (in italics):
Monstrous in size – 40 feet wide by 130 to 160 feet deep. (No more than 6,400 square feet, one-tenth to one-fifth the size of new supermarkets today.)
The kind of stores I have in mind should do a grocery business of $10,000.00 a week and a meat business of $2,500.00 a week. (Compared to Kroger’s average weekly per-store sales of $988.62 in 1929.)
80% self-service. Plenty of parking.
On the grocery business, including fruit and vegetables, I can operate on a gross profit of 9%. (Far below gross margins then or today.)
I want to sell 300 items at cost.
I want to sell 200 items at 5% above cost.
Can you imagine how the public would respond to a store of this kind? To think of it – a man selling 300 items at cost and another 200 items at 5% above cost – nobody in the world ever did this before. Nobody ever flew the Atlantic, either, until Lindbergh did it.
The reason I know that this proposition can be put over is that I have already put over a similar proposition right here in Southern Illinois. I operated Bracy’s Warehouse store in West Frankfort…
I was never so confident in my life as I am at the present time; and in order to prove to you my sincerity and good faith, I am willing to invest $15,000.00 of my own money to prove this will be the biggest money maker you have ever interested yourself in.
Before you throw this letter in the wastebasket, read it again and then wire me to come to Cincinnati, so I can tell you more about this plan, and what it will do for you and your company.
The one thought always uppermost in mind – How can I undersell the other fellow? How can I beat the other fellow? How can I make my company more money? The answer is very simple – by keeping overhead down, and only by keeping overhead down can I beat the other fellow.
What is your verdict?
The verdict was “no.” Cullen was told that Kroger’s CEO had no time for him. He reportedly then offered his idea to the A&P, which also turned a deaf ear.
Michael Cullen had to give up on his present and former employers, but not on his idea. He returned to Jamaica, Queens, New York City, where he raised the money and opened the first King Kullen Grocery Company store in August, 1930 at 171st Street and Jamaica Avenue. Unprecedented bold newspaper ads and signs on the building read “King Kullen, the world’s greatest price wrecker – how does he do it?” Incredibly, his store was open evenings. The world’s first true supermarket was born. Customers mobbed the store while competitors dreaded seeing the prices he advertised. He built more stores, of larger sizes, reusing older buildings like former garages. By 1935 he had 15 stores. In 1936 he died at age 52 after an appendix operation, his friends saying he worked himself to death.
But Michael Cullen left his mark on the world. By 1937 the major chains had seen the light, and began closing up their little corner stores and replacing them with larger stores along the lines suggested by Cullen. By the start of World War II, A&P alone had opened 200 of the new concept stores. By 1946 A&P had entered new cities and doubled its sales, but only operated one-third as many stores as they had in 1930. Kroger went from a high of 5,575 stores in 1929 to 1,400 in the late 1950s, but total sales were almost six times as great. Smaller organizations like Ralph’s in Southern California and Weingarten’s in Houston also led the way in supermarket innovations, the latter having the first two-tier shopping basket on wheels. While the new concept carried more products and offered greater convenience than the grocery stores of old, the biggest benefit to consumers was in pricing. By lowering overhead and spending less on payroll and real estate relative to sales, the supermarket invention allowed food prices to drop between 8% and 15% across the nation. It was like putting money in people’s pockets, and it allowed everyone to eat better, to have more choice.
The invention of the modern supermarket spread to every nook of America and to other continents and countries. Today’s global hypermarkets operated by companies like Carrefour and TESCO, and the supercenters that cover America under the Wal-mart and Target banners are descendants of this invention. The size and product mix of the supermarket continues to evolve into the 21st century, but they are all children of the crazy idea of one man, King Kullen, one of America’s unsung entrepreneurial heroes.