Business Monday

The power of Publix: Market battles for dominance as it expands

Nicole Erdmann holds Arianna Ruz 3, sampling french toast at the newly remodeled Publix grand re-opening, at 9420 SW 56th Street in Miami on April 23.
Nicole Erdmann holds Arianna Ruz 3, sampling french toast at the newly remodeled Publix grand re-opening, at 9420 SW 56th Street in Miami on April 23. MIAMI HERALD STAFF

In the fiercely competitive fight for consumer dollars waged in Florida’s grocery store aisles, Publix Super Markets is widely seen as the champ, hanging tough as the market leader among the state’s chains.

Publix is in the arena with heavyweights, fending off competitors such as Whole Foods, Target, Sedano’s and Winn-Dixie in an industry where profit margins are razor-thin. It also takes hits from neighborhood food markets and even dollar stores. Walmart, the country’s largest food retailer, pummels Publix the hardest, especially when it comes to offering customers cut-rate prices.

Lakeland-based Publix, however, which was born during the Great Depression, has flourished as Florida’s population expanded and millions of people sought food for their tables. It has survived waves of retail challengers and fluctuating business cycles. And its six-state network, revenues and profits are driven by its customer service, quality products and constant investment in new stores, industry experts say.

“Publix is one of the few grocers to have gotten bigger and stronger in the Walmart era,” said David Livingston, a Wisconsin-based supermarket analyst and managing partner at DJL Research. Stores that lacked its financial strength, diverse network and customer appeal have not able to stand the price competition from Walmart.

Indeed, the company has grown steadily in Florida and the five other states where it operates, with 1,100 stores in six states today, up from 1,014 in five states at the beginning of 2010. Florida, its home state, has the largest number of stores. It also has stores in Georgia (its first foray outside Florida), Alabama, Tennessee and North and South Carolina. The company entered its newest market, North Carolina, last year.

Publix has posted solid financial results over the last several years, except for a sales slump in 2012. The company logged revenues of nearly $30.6 billion in fiscal 2014 (which ended Dec. 27, 2014), an increase of 5.7 percent over the previous year. (Comparable store sales rose 5.4 percent.) Its profits last year were more than $1.7 billion, also up 5.7 percent year over year. For the first quarter of 2015, Publix reported new gains, with both sales and profits higher than the same period last year.

And according to the Top 75 Rankings published by SN Supermarket News, a leading national trade magazine, Publix was in sixth place nationwide in dollar sales last year among grocery chains, following Walmart, Kroger, Costco, Loblaw and Safeway. (Safeway and ninth-ranked Albertsons recently merged, which will alter the rankings.)

“Price is part of the picture, but not all of it,” said Jon Springer, retail editor at SN Supermarket News. “Customers look for quality, value and service, and Publix does a great job at customer service. Publix employees have a stake in the business and that makes a difference. And Publix prices are good enough to keep people coming back.”

PUBLIX’ SUCCESS

Why has Publix prospered while so many other grocery chains disappeared?

One big strength: Its employees are invested, literally, in the business. It’s the country’s largest worker-owned grocery chain, with about 175,000 employees (the company calls them “associates”) compared to 148,000 in 2010. In South Florida, Publix employs 12,451 people in Miami-Dade County, 13,804 in Broward and 10,698 in Palm Beach County.

“Publix is committed to providing premier customer service and bringing consumers the best products available,” said CEO William E. (“Ed”) Crenshaw in response to questions emailed by the Herald. In his statement, he echoed the ideas of Publix founder George W. Jenkins Jr.

Jenkins opened his first grocery store in Winter Haven in 1930 and established Publix as a company the same year. He expounded some simple principles that have been applied throughout the company’s history — among them, a commitment to customer service. Jenkins, who died in 1996, also believed that if employees owned stock in the company and could share in its success, they would provide better customer service than workers at other stores.

The company formally instituted its current stock ownership plan in 1974. Today, employees own the largest bloc of shares — about 30 percent of the total. Publix shares (which are not publicly traded) have significantly increased in value, from just over $18/share in May of 2010 to about $42 today, and the company pays regular dividends.

“Since our inception, associate ownership has been the key to how we operate, and for 85 years we have never changed our course,” said Crenshaw, who held a variety of jobs at Publix before he became CEO. “Our associates have skin in the game and as owners, they take pride in taking care of the customers whose loyalty and dedication make our company successful. It is what differentiated us as a business and has continued to bring generation after generation of associates — and customers — through our doors.”

While employees own the largest bloc of shares, members of the Jenkins family control leadership positions on the Publix board of directors and in management. Crenshaw is the grandson of Publix’ founder. In 2007, Todd Jones, a Publix veteran, was named president. He is the first person outside the Jenkins family to hold that position.

Publix is also committed to sustainability and to community service. It advances company-wide programs to conserve energy and water and reduce its carbon footprint. For over 20 years, the company has sold and promoted reusable shopping bags, including bags made of cotton and recyclable material.

Publix and its employees also believe in giving time, money and resources to the communities across all six states where they work. They support a broad range of charitable and educational organizations, and in 2014 provided more than $54 million to the United Way. Over the years, Publix Super Market Charities and company employees have donated millions of dollars and many thousands of volunteer hours to these causes.

Last year, Publix also took a bold step to promote gender equality. At the end of 2014, before same-sex marriages became legal in Florida, Publix sent a memo to employees announcing that same-sex couples legally married in any state would be eligible for its benefit plans, including health insurance.

For the 18th consecutive year, Publix was ranked as one of Fortune magazine’s “100 Best Companies to Work For.” Moreover, it frequently receives high marks in surveys on customer service satisfaction.

Livingston, the industry analyst, also emphasizes the importance of the company’s ownership model to its culture and success. “Publix is an employee-owned cult, privately held, and can make decisions on what’s best for the company, not what’s best for Wall Street,” he said.

These days, the company’s prime challenger is Walmart, which is making a big push to expand in Florida. Currently it has 217 Supercenters (which sell groceries and other products) and 66 Neighborhood grocery markets. It opened more than 25 Neighborhood markets in Florida last year, and plans to open 11 more through August 2015. In South Florida, Walmart has 17 Neighborhood markets, 40 Supercenters and seven Sam’s Clubs, and employs over 14,000 in the tri-county area.

Another contender, Winn-Dixie, a subsidiary of Jacksonville-based Bi-Lo Holdings, has 377 grocery stores in Florida and has invested to upgrade its existing supermarkets. There are also four Harveys supermarkets in the state, another brand owned by Bi-Lo. In contrast, Albertsons — which formerly had more than 100 stores in Florida — has shrunk to three.

“Publix in Florida has destroyed Albertsons, Sweet Bay, Food Lion, and severely damaged Winn-Dixie,” Livingston said. “All other conventional stores are considered ineffectual operators. The only grocers to survive are the extreme stores such as low-price (Walmart, Aldi, Target) or high-quality and service (Fresh Market, Whole Foods, Trader Joe’s), along with ethnic Hispanic stores.”

STRATEGIES FOR GROWTH

In 1959, Publix opened its first store in Miami on Biscayne Boulevard, the spearhead of its expansion into South Florida. To compete with Latino markets and food chains as the Hispanic population grew, Publix provided sections for Hispanic food at many of its stores and later opened eight Publix Sabor markets (seven in Miami). During the 1990s, the company opened its first store outside Florida in Georgia.

The company continues to expand: It has recently opened seven stores in Florida as well as in North and South Carolina, for instance, and in its Miami Division alone (Key West to Sebastian), Publix plans to renovate or completely remodel 79 stores this year. Last year the company opened 32 supermarkets in its service area (including 14 replacement stores), remodeled 138 and closed 16. It invested over $1.6 billion in 2014, mostly to build, acquire and remodel stores.

To support its growing network of stores, Publix has eight primary distribution centers and six manufacturing sites in Florida and Georgia, as well as a fleet of about 1,300 trucks and other vehicles.

Another key element in the company’s strategy is placing new stores in growing or underserved markets, and renovating older Publix stores to provide modern and attractive shopping environments. The company consistently invests, building new stores in growth markets here and in other states, remodeling existing locations and acquiring stores formerly owned by other supermarket chains.

For example, in 2008 Publix bought 49 Albertsons stores throughout Florida, which were remodeled and added to their chain. It recently bought several stores in North Carolina from BI-LO.

And in April of this year, the company reopened its store at the Miller Road Shopping Center in Miami following more than nine months of renovations and new construction. The store now has more than 50,000 square feet of space, compared to about 42,000 before. Publix widened the aisles, added a liquor store and more ethnic foods, including sushi. The store was originally built in 1965 (22,000 square feet.) and was remodeled and expanded in 1990 and 2001. Its 170 employees were either new hires or had worked at the store before and were now returning after being assigned to other Publix outlets.

However, not all Publix initiatives over the years have been a success.

For example, in 2003 the company discontinued an online grocery business, which included home delivery, started about two years earlier. (Today, customers can order deli items online and pick them up.)

Publix in 2013 sold off 14 PIX convenience stores it operated in Florida, Georgia and Tennessee. Mostly built near shopping plazas anchored by a Publix store, PIX stores were meant to generate additional revenue from gasoline and convenience store sales. It also bought, and later sold, a fast casual food chain called Crispers.

Last year, Publix withdrew a proposed condo development to be built alongside a Publix market it planned to build in Miami Beach. Residents of Sunny Isles Beach protested a Publix proposal to develop a 26-story condo on Collins Ave. with 357 residential units.

Moreover, Publix has been dogged since 2009 by protests from a group representing farm workers who harvest tomatoes. The Coalition of Immokalee Workers (CIW) alleges that Publix buys tomatoes from growers who pay laborers unfair wages.

Last year, for instance, the CIW gathered about 100 people to protest outside a Coral Gables Publix. The CIW is asking Publix to pay a penny more per pound and participate in the Fair Food Program, which seeks to ensure humane wages and working conditions for laborers who harvest fruit and vegetables.

Publix has maintained it is willing to pay more for the tomatoes it buys, but asserts that the CIW is trying to involve the company in a labor dispute between growers and farm workers. This dispute should be settled by the U.S. Department of Labor, the company said. “We have always believed that our food should be brought to the market in a fair and sustainable way, and that farm workers should receive fair wages and be treated with dignity and respect,” Publix said in a statement.

The CIW’s campaign “makes it sound like Publix is unwilling to pay a penny or more per pound of tomatoes, which is not true,” the company said. The basic issue is that it is not appropriate for Publix to pay another company’s workers directly, Publix added. “At its core, this is a labor dispute” between farm workers and growers.

GROCERIES AND SHOPPERS

During its aggressive growth, Publix added bakeries, flower shops, delicatessens, pharmacies, ATMs, cooking schools and online ordering for deli products, and company executives say it still continues to experiment with retail innovations. The company makes its own dairy, bakery and deli products, plus other Public-branded foods. It contracts with national food processors to produce Publix canned and packaged goods.

Publix stores stock an average of 40,000 items and the company works with thousands of suppliers to keep its system well supplied and operating efficiently.

For example, Medley-based Quirch Foods, one of the largest food distributors in the Southeast and Latin America, has been working with Publix for more than 15 years and delivers to its distribution centers throughout the Southeast.

“We supply them with a variety of products, primarily frozen ethnic foods, like fruit pulp, tostones, yucca, empanadas, Jamaican patties, arepas and deli items,” said Frank Grande, Quirch’s president. They supply the chain with Quirch and Chiquita/Quirch brands, as well as private label items.

“Publix is an extremely professional outfit and has been very loyal to us, which is not always the case in this business,” Grande said. Over the years, Publix changed the product lines it bought from Quirch, continued to work with them and was interested in evaluating new product lines Quirch offered. “They are always open to different products that give them opportunities to attract new clients.”

Like all major grocery store chains, Publix has loyal customers. For many shoppers, however, the price of goods is most important.

Publix stresses it cannot be the low-price grocer and insists that quality products and customer service are paramount. Still, it competes on price with regular offers like BOGO (Buy one, get one free), two for the price of one, savings with coupons and other promotions. But Walmart, which began selling groceries nationwide in 1988, presents a special threat: offering prices that are almost always lower than those at Publix and investing heavily to expand its footprint in Florida and other states.

Despite frequent specials, shoppers find Publix’ products almost always more expensive than those sold by Walmart. Sometimes an item at Publix costs several dollars more than the same product at Walmart.

“Walmart is cheaper. It’s the same stuff you see at Publix, nothing is different,” said Jorge Risquez, a security supervisor who lives near Publix, Walmart and Winn-Dixie stores in Pompano Beach. “I know things are going to be more expensive in Publix. For vegetables, I go to the Festival Flea Market … they’re fresh and cheaper then Publix and Walmart.”

Price and quality are important for Evelyn Pardellas, who lives in Plantation and works in sales. “I like the prices at Walmart, but I prefer the quality at Publix,” she said. “The deli products and produce [at Publix] are better and fresher, and the customer service is very friendly.”

In response to criticism from some consumers, Amanda Henneburg, Walmart’s director of communications, said: “Fresh groceries are something our customers have come to expect when they walk into a Walmart and they know it’s an area where we can offer a broad assortment of products at an affordable price. We find that our ‘everyday low price’ promise is resonating in communities across Florida, and we’re always looking for opportunities to ensure our customers have access to the groceries they need for their families.”

At the Publix on Vineland Ave. in Orlando, Mike and Sally Leahey, who regularly travel to the city from their home in Vermont, said their time-share is near other stores but they prefer Publix. “It’s convenient, the prices are reasonable and we’re very fond of the tiramisu,” said Sally, a librarian, as she looked over the deli display. “We like the organization and presentation of the food, and the help are very friendly,” said Mike, an IT specialist and volunteer fireman. “When we’re here, we feel like part of the community.”

Publix Super Markets Inc.

Business: One of the country’s largest volume supermarket chains, Publix operates 1,100 retail food markets in Florida, Georgia, Alabama, South Carolina, Tennessee and North Carolina. It is also the largest employee-owned grocery chain in the United States. Publix was founded in Florida 85 years ago and today has 763 stores in the state. It also has eight primary distribution centers and six manufacturing centers (dairies, bakeries, deli products, etc.) in Florida and Georgia and operates a fleet of about 1,300 cars, trucks and vans, including 250 hybrids.

Founder: George W. Jenkins (1907-1996).

Founded: 1930 in Winter Haven, Florida.

Corporate headquarters: Lakeland, Florida.

CEO: William E. (“Ed”) Crenshaw (since 2008).

Employees: approximately 175,000, including 12,451 in Miami-Dade and 13,804 in Broward.

Ownership: The company is employee-owned but members of the Jenkins family hold a significant stake. Publix shares are not publicly traded.

Financial results: Sales of nearly $30.6 billion in fiscal 2014 (which ended Dec. 27, 2014) and a net profit of more than $1.7 billion.

Website: www.publix.com

Sources: Publix and company documents filed with the U.S. Securities and Exchange Commission.

Publix: a timeline

1907: George Washington Jenkins Jr. was born in Warm Springs, Georgia. As a youth, he worked at his father’s general store in nearby Harris City, Georgia.

1925: After holding a variety of jobs in Atlanta (including working as a clerk at a Piggly Wiggly grocery) and studying nights at Georgia Tech, Jenkins moved to Tampa, hoping to participate in the Florida real estate boom. There, he found a job at another Piggly Wiggly and soon was appointed manager at a Piggly Wiggly in St. Petersburg. He performed so well the company moved him to a larger store in Winter Haven, which he managed for four years.

1930: Using savings, Jenkins decided to open his own grocery in Winter Haven — the Publix Food Store — a year after the Great Depression started. The same year, he established Publix Food Stores Inc.

1935: Jenkins opened a second food market in Winter Haven across town.

1940: Using money from a loan, Jenkins opened the first Publix Super Market in Winter Haven on Nov. 8, 1940, and closed his other two stores. According to Publix, the first store was a “food palace” of marble, glass and stucco. It boasted what were, at the time, innovations like fluorescent lighting, air conditioning, doors operated by an electric eye, terrazzo floors and a paved parking lot. To finance this first supermarket, Jenkins mortgaged an orange grove he had bought during the Depression.

1945: The Publix founder bought a warehouse and 19 All American Food Stores from the Lakeland Grocery Co., giving him a group of small, operating markets that formed the backbone of his supermarket chain. He later replaced the All American stores with larger, modern, better stocked Publix Super Markets and moved the company’s headquarters to Lakeland.

1950s and onward: Jenkins traveled to learn about new products and innovative ways to improve his stores and attract customers. In the decades that followed, Publix expanded rapidly by building new stores and acquiring other supermarkets. It added bakeries, flower shops, delicatessens, pharmacies, automatic teller machines and cooking schools to its stores. In addition, it set up special sections offering healthy foods as well as Hispanic and other ethnic foods.

1956: Publix reportedly reached $50 million in sales.

1959: Publix was the dominant supermarket chain in central Florida and began expanding to southeast Florida. In May 1959, Publix opened its first store in Miami at 12850 Biscayne Blvd.

1974: Publix started what would became the Publix Employee Stock Ownership Plan, also known as the Publix PROFIT Plan. The company’s founder believed that employees (called “associates”) who owned shares in the business and could participate in its success would provide the best service to customers. Sales reportedly reached $1 billion.

1989: Sales reached over $5 billion.

1990s: Publix began to expand outside Florida, starting in Georgia.

2003: Publix discontinued an online grocery business it started about two years earlier.

2008: William E. (“Ed”) Crenshaw takes over as Publix CEO. Crenshaw started working for Publix in 1974 as a front-service clerk in Lake Wales and rose to be president of the company in 1996. He is a member of the family of founder George W. Jenkins, Jr. In a major expansion, Publix bought 49 Albertsons supermarkets located across Florida.

2009: Publix opened its 1,000th store in St. Augustine, making it one of a handful of U.S. supermarket chains operating that many outlets. The Coalition of Immokalee Workers (CIW) started protesting at Publix stores, saying that the company bought tomatoes from suppliers who pay unfair wages. Publix responded by stating that it pays tomato suppliers a fair market price and that the CIW was asking the company to come between its suppliers and their workers, which is a labor dispute.

2013: Publix gives up its foray into convenience stores. The company announced it was selling 14 Pix locations in Florida, Georgia and Tennessee. The stores, mostly built near Publix-anchored shopping centers, were meant to generate new business through sales of gasoline and convenience store goods.

2014: Publix opened its first store in North Carolina at the beginning of the year. Today, it has 12 and plans to open six more. Following opposition from local residents, the company withdrew a proposed condo development in Sunny Isles Beach that was to be built alongside a new Publix on Collins Avenue.

▪ The CIW protested in front of a Publix store in Coral Gables, repeating its demand for “one cent more per pound” for tomatoes the company buys from farm owners/operators. Publix reiterated its position that this is a labor dispute between the farm workers and their employers. Publix also said it is the “focus of a campaign” by the CIW to pressure the company into getting involved in what is a labor dispute between tomato growers and the workers who harvest their crops.

▪ For the 18th consecutive year, Publix was recognized as one of Fortune magazine’s “100 Best Companies to Work For.”

▪ At year-end, Publix ranked as one of the largest supermarket chains in the country, with 1,095 stores (1,100 today), 175,000 employees and annual sales of nearly $30.6 billion.

▪ Even before same-sex marriages became legal in Florida, Publix told employees that same-sex employee couples legally married in any state would be eligible for its benefit plans, including health insurance.

Sources: Publix, news reports and other documents

Publix stores, by the numbers

▪ Total stores in operation: 1,095 (currently 1,100).

▪ Under construction: 11.

▪ Opened in 2014: 32.

▪ Remodeled in 2014: 138.

▪ Closed in 2014: 16. (10 of the closed stores were replaced in 2014 and four will be replaced in the future.)

Stores by state:

▪ Florida: 760

▪ Georgia: 182

▪ Alabama: 58

▪ South Carolina: 51

▪ Tennessee: 38

▪ North Carolina: 6

Total employees in six states: approximately 175,000

Employees in South Florida:

▪ Miami-Dade County: 12,451

▪ Broward County: 13,804

▪ Palm Beach County: 10,698

All figures are as of 2014. Sources: Publix and the company’s annual report (10-K) for 2014

Grocery prices: How low can you go?

Prices at Walmart’s grocery stores generally are lower than those at Publix, but Publix offers customers competitive pricing through frequent “Buy one get one free (BOGO)” programs and “Two for the price of one” offers. And occasionally some products are cheaper at Publix than Walmart. Only one item on this list was the same at both stores, and none were less expensive at Publix.

Here are recent prices for random items at a Publix supermarket and a Walmart Neighborhood Market. When container sizes are slightly different, cost per ounce is used.

Product

Publix

Walmart

Hearts of Romaine

(10-oz. bag)

$3.09

(Publix brand)

$2.98

(Walmart Marketside brand)

Plum/Roma tomatoes

$1.99/lb. (plum)

$1.58 (Roma)

Bananas

69 cents/lb.

59 cents/lb.

Oscar Mayer beef franks (pkg. of 10)

$5.99

$3.98

2-percent milk, gallon

$3.69

(Publix brand)

$3.69

(Walmart Great Value brand)

Kraft finely shredded

mild cheddar

56.13 cents/oz.

37.3 cents/oz

Maxwell House-House Blend Coffee (28-oz

container)

$11.39

$7.98

Cheerios (18-oz box)

$5.15

$3.68

Generic toasted oat

cereal brands

17.07 cents/oz

15.2 cents/oz

Bush’s Original baked beans, 28-oz can

$2.49

$1.97

Kraft Zesty Italian

dressing, 24-oz

$4.29

$2.64

Bumblebee solid white albacore tuna (5-oz can/oil or water-packed)

$1.75

$1.50

Thomas Original English Muffins (box of six)

$4.29

$2.28

Birds Eye frozen cut green beans (10.8-oz pkg)

$1.99

$1

Bud Light-box of 18 cans, 12 fl. oz. each.

$16.29 (was $18.29)

$14.97

DiGiorno frozen pizzas (same size, different toppings, 22.1-31.5 oz.)

$7.19

$5.47

Tide liquid original 150 fluid oz. container

$22.79

$17.97

Tylenol extra strength 500 mg./225 caplets

$16.99

$13.95

Tostitos scoops, 10-oz bag

$4.29

$2.98

Duracell Coppertop AAA batteries

74.95 cents each (pkg. of 20)

68.56 cents each

(pkg. of 16)

—JOSEPH A. MANN JR.

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