Walk into any big-box grocery store today and you'll likely push your shopping cart past 30 varieties of condiments, 50 different cereals and a plethora of produce options. All of the items are clearly priced — and anything you might need for dinner, dessert or a snack is likely located in one of the aisles.
But this wasn't always the case. In the early 20th century, a typical corner grocery store fit into the size of a large living room. Canned goods lined the walls, while a small number of root vegetables may have been available behind the counter. Instead of putting groceries into your own cart, you'd ask the shopkeeper to retrieve them for you — and those items didn't include bread or meat, which would have required a separate trip to the baker and the butcher. Most kitchen staples — things like flour and sugar and wheat — were kept in large barrels and then measured out by the grocer himself.
"You'd ask for a certain weight of cheese, you'd ask for vinegar," says economic historian Marc Levinson. "The vinegar was not bottled; it was in a barrel and the shopkeeper would pump it out into a small jar for you. If you wanted some pickles, they'd be in a barrel, too. A lot of things would be in bulk, and the shopkeeper was responsible for giving you the quantity you wanted — or the quantity he'd feel like giving you. Because every store had a scale and the scale might or might not be accurate."
In a new book, Levinson explains how local mom-and-pop stores — with their limited selections, high prices and nonstandard packaging — paved the way for national chains like the A&P to swoop in and dominate the grocery industry. His book The Great A&P and the Struggle for Small Business in America chronicles the rise (and fall) of the discount grocery chain that was once one of the largest businesses in America. Levinson tells Fresh Air's Dave Davies that it was no coincidence that a national chain replaced the corner store.
"People get misty-eyed at the thought of the independent store — maybe it had some unique product, maybe we had more choices than we have today — but the truth was exactly the opposite," he says. "Most of these stores had a very limited selection. They had no unique products at all. ... [Shoppers] would have to go to two or three different grocery stories in their neighborhood if they wanted different type of goods, plus the butcher, the baker, and the fruit and vegetable store. ... The consumer's choices were pretty constrained."
The Rise Of The A&P
Enter the A&P. The company, which originally focused on the tea market, opened its first small grocery store in 1912. Unlike traditional mom-and-pop stores, the A&P had no telephone, no credit lines and no delivery options. They also had lower prices.
"People figured out they could save money by shopping there," says Levinson. "It stocked only items that were fast-sellers, so it wasn't stuck with an inventory of products no one was buying. It had limited hours. It had a single employee. ... They found a way to sell groceries cheaper. ... Within eight years, this approach turned their company into the largest retailer in the world."
By 1930, the Hartford family, which owned A&P, had opened up almost 16,000 more stores. The stores themselves also expanded in both size and selection.
"Some of them started carrying meat, some of the stores started carrying dairy products," he says. "And the Hartfords also decided to expand into manufacturing. This was a pretty dramatic idea. The idea was that the A&P could buy bakeries, could buy salmon canneries, could buy vegetable canning plants, dairy plants, and [the company] could run these to supply its stores."
Controlling both the retail store and the supply chain gave the A&P a huge advantage over corner grocery stores because the A&P could run the factories at a lower cost. In addition, the A&P started to bypass wholesalers and go directly to distributors for various products.
"Typically the manufacturers of food would go directly to the wholesalers because they didn't want to deal with hundreds of tiny grocery stores — and the wholesalers would sell it to the retailers, and they would take a cut," says Levinson. "The Hartfords said to the manufacturers, 'We want to buy from you directly. We want you to sell us huge quantities, we want them on these terms, and we want them delivered in this way.' "
A&P started getting its products at much lower costs than its competitors — and passing those savings onto customers. But those competitors were not happy. Efforts to limit chain stores grew in the 1920s, when states and localities began passing laws designed to help independent merchants.
"There was a lot of concern along the lines of 'What's a man to do?' " says Levinson. "In the past, young men who wanted to come up in the world have always been able to start businesses like grocery stores. But now, you've got these gigantic companies like A&P dominating retailing and wholesaling and not leaving a chance for the average guy. That was the basis of the complaint[s]."
State laws were passed to force manufacturers to sell to all stores at the same price and to tax merchants with multiple stores in a case. An antitrust suit was also filed against the A&P, claiming that it had become a food monopoly because it controlled all aspects of manufacturing, retailing and wholesaling. But the movement lost steam in the late 1930s, when the economy started to pick up.
"By late 1939, unemployment was starting to fall, prices were starting to rise," he says. "And you had full employment in World War II. The fate of mom-and-pop merchants was not the political issue that it had been during the Depression. After the war, you had huge changes in American society — and people liked the idea of shopping at a larger store ... and they didn't like being told that they were supposed to do business with a little independent grocer who didn't offer them many choices."
On supermarkets vs. grocery stores
"In [supermarkets], you needed workers who were specialized because the store was so large. So you had some workers who just handled boxes. You had some workers who just handled the cash register. So workers' lives in general became more specialized and more regimented. This was not a personal business like running a small grocery store. In a supermarket, you were likely not to know your customers, you had masses of people coming through, and you simply had an hourly job."
On A&P's personal brands
"A&P had very powerful brands. They had a brand called Jane Parker that it used on baked goods. A&P had 8 O'Clock Coffee. So it wasn't just the stores. It had a reputation for high-quality merchandise, much of which is manufactured. The supermarket really gave A&P a way to push those products through the system."
"Wal-Mart has received a great deal of criticism for many of its techniques, such as hard-bargaining with suppliers. Most of that was started by A&P back in the 1920s. Wal-Mart has learned a lot from A&P's experiences and has followed many of the same methods of reducing costs. ... Wal-Mart is a publicly traded company, whereas A&P didn't have to answer to anybody. A&P was a strongly anti-union company just as Wal-Mart has been. A&P was anti-union for many years and only accepted them during the Great Depression."
TERRY GROSS, host:
This is FRESH AIR. I'm Terry Gross.
Americans who go food shopping are used to a dizzying array of products and plenty of price competition, but our guest today takes us back to the early 20th century, when selections were few, and nobody ever heard the phrases two for 99 cents or buy one, get one free.
Marc Levinson's new book tells the story of how the A&P grocery store chain revolutionized food retailing in the United States. Run for decades by two brothers, George and John Hartford, the A&P used its market power to drive down prices and expand operations, eventually owning nearly 16,000 stores in 39 states.
A&P's success threatened thousands of smaller mom-and-pop stores and food wholesalers, who fought the chain store in Congress, the courts and state legislatures for more than 20 years.
Marc Levinson covered business for Time magazine and was a finance and economics editor of The Economist in London. He's the author of "The Box," a book about the impact of containerized shipping. His latest book is "The Great A&P and the Struggle for Small Business in America." He spoke with FRESH AIR contributor Dave Davies.
DAVE DAVIES, host:
Well, Marc Levinson, welcome to FRESH AIR. Let's start with the state of, you know, retail food shopping, say in the early 1920s. What was a typical grocery store like?
Mr. MARC LEVINSON (Author, "The Great A&P and the Struggle for Small Business in America"): A typical grocery store in the early '20s was perhaps 20 feet across, 30 feet deep; so a pretty small space. It held an array of canned goods, not a large array, a very small number of vegetables, mostly things that wouldn't spoil, potatoes and cabbages, perhaps a little cheese, maybe a slab of bacon. It was pretty sparse in terms of what was available to the average American consumer.
It was run typically by a shopkeeper and his wife. Sometimes they had family help. Once in a while, they had a hired person helping out. And the typical housewife would have to go grocery shopping just about every day to meet her family's needs.
DAVIES: And shoppers were used to walking into a store and finding prepackaged goods on the shelf. How did the shopper in a grocery store back then fetch their goods?
Mr. LEVINSON: For the most part, the shopkeeper got your goods for you back in those days. There was self-service, but self-service stores were few and far between. So the shopper might go into the grocery store, and the shopper was almost always a housewife in the food industry, and the shopper would say I need a box of soap powder.
The store clerk, who was often the owner, would reach up on a shelf and put the box on a counter, and the housewife would say I need a can of green beans, and the storekeeper would get a can of green beans.
So this was a pretty arduous process. The prices, by the way, weren't always very well-marked, either. So the shopper didn't necessarily know what the bill was going to be for all of these things.
DAVIES: And could they count on stuff being fresh and things being accurately measured?
Mr. LEVINSON: Many things were sold in bulk. So the shopkeeper would actually have to measure things out. You would ask for a certain weight of cheese, you'd ask for vinegar. The vinegar was not bottled. The vinegar was in a barrel, and the shopkeeper would pump it out into a small jar for you.
If you wanted some pickles, they'd be in a barrel, too. So a lot of things were in bulk, and the shopkeeper was responsible for giving you the quantity you wanted - or the quantity that he happened to feel like giving you, because every store had a scale and the scale might or might not be accurate. There was a lot of risk here.
DAVIES: You know, to a lot of Americans who are turned off by megastores with their, you know, shiny aisles and processed food, this might seem like an appealing image. I mean, lots and lots of small stores with food that was grown locally and delivered by hand by somebody. I mean, you paint kind of a different picture. This was a burdensomely inefficient way to grow food and get it to people, it seems.
What was the sort of bottom line for Americans' diets and their spending on food?
Mr. LEVINSON: Well, it was not only an inefficient system in an economic sense, but basically these stores had nothing special to offer. Today, people get kind of misty-eyed at the thought of the independent store: maybe it had some unique product, maybe we had more variety, maybe we had more choices than we've got today. The truth was exactly the opposite. Most of these stores had a very, very limited selection.
They had no unique products at all. The main thing that they had to offer for shoppers, aside from being located close by, was that they made credit available. So that's what the reality was. Shoppers could get a limited assortment of goods. So they would have to go perhaps to two or three different grocery stores in their neighborhood if they wanted different types of goods, plus the butcher, plus the baker if there was one.
Perhaps there was a fruit and vegetable store, because their local grocery store probably didn't sell fruits and vegetables to any great extent. It probably didn't have much by way of dairy products because it didn't have a refrigerator. So the consumer's choices were pretty constrained here.
What that meant was that while the average family could get plenty of food and plenty of calories, it wasn't getting much nutrition.
DAVIES: And spending a lot more of its income than we do typically now, right?
Mr. LEVINSON: The average urban family in the '20s was spending probably a third of its income on food. This is an enormous amount. By comparison, today the average urban family is probably spending five or six percent of its income on food.
So food was the largest single expenditure of the average household. And the reason for that was the very, very high costs in this distribution system at every stage. The manufacturers, the wholesalers, the retailers, they all had to extract their bit in order to survive, and the end consumer then had to pay a very, very high price for food.
DAVIES: A&P, of course, was shortened from the Great Atlantic and Pacific Tea Company. And the two brothers who really guided this company through this formative period, when it really revolutionized retailing, were George and John Hartford. Let's talk about how they did this. I mean, they managed to cut costs. Describe, if you will, some of the techniques they used to do this. I mean, one of them involved how they purchased, right, from wholesalers or even manufacturers.
Mr. LEVINSON: Well, A&P cut costs in a number of different ways at a number of different times. This first became a serious business for them right around 1912. At the time, food was a pretty hot political issue. The price of food had gone up a lot, and people looked around, and they blamed the food industry.
They said, you guys are inefficient. You're not running your business correctly. And at the time, there was a lot of talk in American business about scientific management.
John Hartford's idea was, hey, let's take scientific management and apply it to our business, grocery retailing. So they created a small store. It had a small number of items. It had a single employee. It had no telephone, so customers couldn't call in their orders, and it had lower prices than any other grocery store.
So without advertising, without promotion, this store, called The Economy Store, turned out to be an enormous hit. People figured out that they could save money by shopping there.
DAVIES: And why were its prices cheaper than the other places?
Mr. LEVINSON: Its prices were cheaper than other stores because it did away with many of the amenities, OK? It offered absolutely no credit. It offered no delivery. It would not give trading stamps like regular stores. It stocked only items that were fast-sellers, so it wasn't stuck with an inventory of products that no one was buying.
For all of those reasons it could keep costs down. It had limited hours. It had a single employee who would lock the door when he went to lunch. So you were not paying for unnecessary labor.
The Hartfords looked at this quite scientifically, and again we're talking in 1912, and they found a way to sell groceries cheaper. This went - this burgeoned. OK, they started this at a time when the Great Atlantic and Pacific had fewer than 500 stores, and within eight years, this approach turned their company into the largest retailer in the world.
DAVIES: Wow. And then at some point, they did actually expand the stores and expand their selections. Why?
Mr. LEVINSON: In the 1920s, times had changed. Customers wanted bigger stores. Customers wanted a different approach. So the Hartfords did a couple of things. They expanded their stores. Some of them started carrying meat. Electric refrigerators had been invented, so some of the stores started carrying dairy products.
But the other things is that the Hartfords decided to expand into manufacturing. This was a pretty dramatic idea for the 1920s. Their idea was that the Great Atlantic and Pacific could buy bakeries, could buy salmon canneries, could buy vegetable canning plants, could buy dairy plants, and it could run these to supply its stores.
So if it organized the stores' orders correctly, it could run its plants at full capacity. This gave the company a huge advantage. Most canning plants around the country, like most industries in general, had their ups and downs. So you had times when the plant was very busy, and you had to pay workers overtime, and then you had times where there wasn't enough business.
A&P, because it controlled both the retail end and the manufacturing end, was able to organize its business such that the plants operated at capacity and produced more cheaply than competitors' plants. And those savings then could be passed along to customers in the stores.
DAVIES: And that means they were going around the distributors, right?
Mr. LEVINSON: One of the things that the Hartfords figured out is that the wholesalers were a major cost in the system. Typically the manufacturers of food would sell it to the wholesalers. The manufacturers didn't want to deal with hundreds of thousands of little grocery stores.
And the wholesalers would then sell it on to the retailers, and of course the wholesalers would take a cut. The Hartfords said to the manufacturers: We want to buy from you directly. We want you to sell us freight-car loads, huge quantities. We want them on these terms, we want them delivered on this date, we want them in this way. And the manufacturers would offer A&P much better prices, first because they didn't need to pay the wholesalers a commission and second because A&P was buying in vast quantities. So the unit cost for the manufacturer was much lower.
So A&P was getting its goods to sell at a much lower price than most of its competitors. You can imagine that if you were running an independent grocery store in the 1920s, and you were seeing that A&P was selling canned corn at retail for less than you were paying at wholesale, you'd have been pretty unhappy, and that's what was going on. The small retailers simply could not compete because A&P's system had led to much lower costs.
DAVIES: And how rapidly did A&P expand in the 1920s? How much of the market did they get? How many stores did they have?
Mr. LEVINSON: By 1929, A&P had almost 16,000 stores in the United States. These were now not modern-style supermarkets; they were much smaller, but they were omnipresent in big cities. A&P at one point had more than 300 stores in Chicago, for example.
Many people in 1920s America grew up walking to the neighborhood A&P. A&P operated at the peak in 39 of the 48 states. It operated in almost every major city in the country. It was a behemoth, and people knew the name.
DAVIES: And since they were so aggressive at cutting costs, the question arises: How did they treat their employees?
Mr. LEVINSON: This was a very paternalistic company. The Hartfords, after all, controlled the company. John and George Hartford could do really whatever they pleased with this company because they had no outside stockholders to answer to.
They had a very strong commitment to their employees. On the one hand, they expected their employees to do what management asked them to do, and they were very big on rule books and rules and procedures and guidebooks and all of that sort of thing.
The A&P would send its experts out to your store and tell you how to arrange the store window, and as the store manager, you were supposed to listen to what the expert said, and in fact you would be graded on how well you listened and how well you did.
On the other hand, if you did what the Hartfords asked, they were extremely loyal. They avoided laying people off. They felt that after you'd worked for the company for a couple of years, the company had a responsibility to you.
If you were in a job that you were not capable of doing, that was management's fault for either not training you properly or for putting you into the wrong job, and they would find another job for you. So the Hartfords were exceedingly loyal to their employees, and the employees were quite loyal to A&P, a very traditional sort of patriarchal relationship between management and labor.
DAVIES: And how did their pay compare to competitors?
Mr. LEVINSON: Their pay in general was somewhat above competitors. For store managers, it was well above competitors, for the most part. Again, though, they expected performance. If a store manager didn't do what was asked, the manager wouldn't necessarily be fired but would be just returned to being a normal store clerk, and somebody else would be put in as manager. You were expected to perform.
DAVIES: A lot of your book deals with the reaction of mom-and-pop stores and independent grocers to A&P and other chains that were competing against them. What was their case? They obviously - they went to politicians to try and get restrictions. What was their point? I mean, consumers were benefiting, weren't they?
Mr. LEVINSON: Consumers were clearly benefiting. There was a lot of concern along the line of what's a man to do? OK, we've got young men, they want to come up in the world. In the past, young men have always been able to start businesses like grocery stores.
But now, you've got these gigantic companies like A&P. They're dominating retailing, they're dominating wholesaling, and they're not leaving a chance for the average guy. So that was really the basis of the complaint.
It had something to do with economics, but a lot of it had to do with small towns and local society. Remember, you had not only these grocery stores, you had 13,000-plus wholesalers spread all over the country, many of them in small towns, where the wholesaler was a substantial business.
It might employ 20 or 30 people, maybe the owner was on the city council or was an important person in town. And unlike the retailers, which came and went, the wholesalers tended to be established. Many of them had been around for years.
And so there was a sense that the underpinnings were being knocked out of society in this way. If the independent grocers went out of business, then who needed wholesalers? A&P didn't buy from wholesalers. And so the small towns would lose their economic base, and all of the money would go to some rich people off in New York. And that was really the argument that led to the massive campaign against chain stores and against the A&P.
DAVIES: So how did they fight back?
Mr. LEVINSON: There were efforts to limit chain stores going back as long as 1912. But it got serious in the mid-1920s. And states and localities started passing a series of laws that were designed to basically help independent merchants.
These took all sorts of different forms. There were taxes on chain stores. The idea was, for example, if you own one store in a state, you pay no tax, and if you own two stores, maybe you pay two dollars per store, and if you own 100 stores, maybe you pay five hundred dollars per store. So the chain merchants were put at a huge financial disadvantage. That was one approach.
Another approach was to require suppliers, food manufacturers, soap manufacturers, those kinds of businesses, to sell to merchants at the same price. The argument was that, gee, it's unfair when A&P can buy so cheaply. So let's prohibit this kind of price discrimination. If Procter & Gamble wants to sell soap powder, it should sell soap powder at the same price per box to every merchant who wants to buy soap powder.
Another idea that was used was to prohibit retailers from being in the wholesale business. A&P circumvented the wholesalers and basically collected the commission that a wholesaler would otherwise have received. And so some states tried laws that were effectively saying a retailer's not allowed to keep a wholesaler's commission. So you have to use a wholesaler, effectively, to distribute the goods because it's not going to be profitable for the retailer to work around it.
Those were some of the approaches that were used. Perhaps the biggest issue for many people in America in those days concerned what was called vertical integration. Vertical integration meant that A&P controlled the different parts of the production process. It controlled pieces of manufacturing, so, baking, canning, those sorts of things. It controlled wholesaling. It controlled retailing.
And many people said vertical integration is not fair. So let's force the company to break up. Let's just make it be a retailer, and it will have to buy its merchandise from other people, and it will have to make use of wholesalers. It gives it an unfair advantage if it is vertically integrated.
GROSS: Marc Levinson will talk more with FRESH AIR contributor Dave Davies in the second half of the show. Levinson is the author of the new book "The Great A&P and the Struggle for Small Business in America." I'm Terry Gross, and this is FRESH AIR.
(Soundbite of music)
GROSS: This is FRESH AIR. I'm Terry Gross.
Let's get back to the interview FRESH AIR contributor Dave Davies recorded with Marc Levinson, author of "The Great A&P and the Struggle for Small Business in America." It's about how the A&P grocery chain revolutionized the business by owning thousands of stores and dozens of warehouses and factories, enabling it to undersell the competition. It's also about how the people who were getting driven out of business organized a movement in the 1920s, attempting to limit the growth of chain stores and level the playing field by eliminating certain advantages chain stores had over small businesses.
DAVIES: To a modern sensibility, a lot of these notions just seem so brazeningly anticompetitive; the idea that you can tax stores differently depending upon their size or whether they're a chain or not, that you can dictate to suppliers that - the rules under which they can sell. But this had support from some serious minds including, you know, the Supreme Court Justice Louis Brandeis, right? What was his view?
Mr. LEVINSON: The attack on chain stores had a lot of support from a lot of different people. Louis Brandeis, who became a Supreme Court justice in 1916, was one of the early critics of chain stores. And his notion was basically, yes, granted, these chain stores are saving money for the consumer now. OK, but what they're going to do is they're going to put the small merchant out of business and then the chain store will have monopoly power. So it's saving the consumer money in the short run but it's going to monopolize the food trade in the long run and charge higher prices to everyone.
That was a pretty popular argument. No one really looked very closely at the fact that the food industry would be pretty difficult to monopolize. But there was a lot of sentiment that there were somehow these faraway companies that were in a position to exercise a monopoly over a product that people needed every day.
DAVIES: There was also a government suit to try and break up A&P. In the end, you know, the anti-chain movement lost steam. But why?
Mr. LEVINSON: The anti-chain movement lost steam about the time the economy was starting to get revved up for World War II. By late 1939, 1940, unemployment was starting to fall, prices were starting to rise and profits were starting to go up because the U.S. wasn't at war yet but Europe was at war and that was being felt here. And then, of course, you got to full employment during World War II. So the fate of mom-and-pop merchants was not the burning political issue that it had been during the Depression.
Then after the war, you had huge changes in American society and people liked the idea of shopping at a larger store; perhaps they were beginning to move to the suburbs, which really burgeoned after World War II. And they didn't like being told that they were supposed to do business with a little independent grocer who didn't offer them many choices.
DAVIES: In the late '30s, while the battle about chains raged in Congress and in the courts, and in, you know, the court of public opinion, retail was changing as well. I mean other companies had developed the idea of a supermarket -something that was bigger, you know, had a wider selection than the A&P stores. And eventually A&P came to embrace this and do it better than anybody else. But let's just talk about that change. How is a supermarket different from what A&P had done so successfully before?
Mr. LEVINSON: Well, the early supermarkets were set up typically not by existing grocery companies. They were set up by entrepreneurs who had some support from wholesalers. They were for the time pretty big spaces. They were pretty bare-boned. They would put a bushel basket of cans out on the floor and a sign saying three cents apiece, and shoppers would go through. It was entirely self-service. And so shoppers would go around to big stores collecting their own merchandise and pay for it. The supermarkets were typically not on the main street. They were someplace nearby where there was parking - very important in the 19, early 1930s. And A&P couldn't figure out how to respond to this.
Now there were not that many supermarkets, but it was clear that they were popular because they could offer lower prices. A&P had some issues in dealing with this though. One was that it had this existing store network. It had these 16,000 stores; it couldn't just shut them down. Another was that these early supermarkets often lost money for the owners, and they were one-off stores. Okay, remember, A&P was a huge company and if it was going to get into the supermarket business it needed something that it could replicate. It couldn't open one supermarket; it was going to need to open hundreds and thousands of them.
So the Hartfords spent a long time thinking about this. There was a lot of opposition within the company and it really wasn't until 1937 that they started seriously to open supermarkets - probably five years after supermarkets had started coming onto the scene in the United States. Once they did, they opened supermarkets quickly and within two years A&P became the biggest supermarket operator in the United States. So they were slow in getting into the supermarket concept, but once they did they made the shift really with amazing speed.
DAVIES: And how did supermarkets change for example, the role of people who worked in the supermarket, in grocery stores?
Mr. LEVINSON: Before the supermarket, grocery stores were pretty small. You might have two or three people; a store that had meat might have five or six people working in it. There was a store manager but the store manager worked alongside all the other workers - opening boxes, putting things on shelves, serving customers. A supermarket was an entirely different business. You needed a full-time manager. You needed workers who were specialized, because the store was so large so you had some workers who just handled boxes. You had some workers who just handled the cash register to deal with the stream of customers. So workers' lives in general became more specialized and more regimented. This was not a personal business as running a small grocery store was. In a supermarket you are likely not to know your customers. You had masses of people coming through and you simply had an hourly job.
DAVIES: And once they had these bigger stores, their manufacturing operations and distribution operations made it easier for them to put their stuff on the shelves in big quantities and at low prices - give them even more of a competitive advantage, right?
Mr. LEVINSON: Sure. And A&P had very powerful brands. A&P had a brand called Jane Parker, for example, that it used on baked goods, very well-known. A&P had Eight O'Clock Coffee. And so it wasn't just the stores. It had a reputation for high-quality merchandise, much of which it manufactured in its own factories. And the supermarket really gave A&P a way to push those products through the system - to take advantage of its vertical integration, to keep prices low and to pump more food out to customers.
John Hartford's belief above everything in all his years in the grocery business, his belief was what matters is volume. If you can keep up the volume you can keep the prices low and you can keep the customers coming in the door. And everything that he did in more than half a century at the A&P was designed to keep the volume up, keep the prices low, keep the volume high.
DAVIES: This raises an interesting point. When you look at the debates in the anti-chain movement, in Congress, in the courts that raged all through the '30s and '40s, they were making the case that, yeah, okay, maybe chains like A&P will reduce prices at times but that's only so that they can corner the market and then make huge super profits themselves. But at least as you describe it; it seems that John Hartford had a real, almost an aversion to growing profits.
Mr. LEVINSON: John Hartford was a long-term thinker, OK. He wanted his company to grow and he didn't need to worry about short-term profits because he didn't have any shareholders. So he could take a very long-term perspective on the grocery business. And he was concerned about his managers focusing too much on profits.
If they took short-term measures that would raise profits, that would drive customers away. A&P would get a reputation for not being the lowest cost grocer; customers would go elsewhere and would not come back. And while higher profits would be good in the short term, they would be bad for the company in the long term.
When you go through the company's records, you find again and again that John Hartford is actually having to persuade his regional managers and his district managers that they need to lower prices and make less profit in order to build a business. That's pretty extraordinary for an executive.
DAVIES: Marc Levinson's book is "The Great A&P and the Struggle for Small Business in America."
DAVIES: So the two longtime patriarchs of the company, George and John Hartford, died in the 1950s. What became of A&P after they left, after they died?
Mr. LEVINSON: After they died, the company was taken over by people who had been there for a century. A&P was basically run by people who had been there since before the Model T era and they had very, very old-fashioned ideas about retailing. They couldn't, for example, be bothered to expand in California which was the fastest growing state in the country. A&P stores were in the cities. Most of the growth in the '50s and '60s was in the suburbs. But the managers really were not interested in going into a market they didn't know. So they stayed in the cities.
The ownership of the company passed into the hands of George and John Hartford's nieces and nephews. And for the most part these people had no interest in the grocery business. They wanted cash. So the company had a public offering allowing them to sell shares. And from that point it was all downhill. Now there were stockholders. The stockholders were demanding dividends and A&P had to pay out a large proportion of its profit in dividends, which meant that there was no money to expand the stores, keep the stores up to date; the stores started to look dowdy, and there were social trends happening.
For example, in the year 1962, there were three important retailers established - companies that would later become known as Kmart, Target, Wal-Mart. A&P didn't know what to do with discount retailing, so it just gradually went downhill, its profits turned into losses. Finally in 1979 it was sold off to a German grocery operator who thought it could do a better job of running A&P. That wasn't such a great idea either. As of August 2011, the company still exists, but now it's a small regional retailer around the New York area. It's really no longer an important force in the grocery industry.
After the death of the Hartfords in the 1950s, A&P destroyed itself and it didn't take very long. What had been the biggest and most successful retailer in the world quickly became a basket case, quickly became an also-ran, which eventually ended up filing for bankruptcy in 2010.
DAVIES: So the company is still operating but it's in bankruptcy reorganization?
Mr. LEVINSON: The company is operating in bankruptcy reorganization and it's a regional grocer now in and around the New York area. It's a pretty steep fall for a company that used to operate stores in 39 states and had 100 warehouses and 70 factories.
DAVIES: You know, one of the themes of your book is that, you know, capitalism thrives on creative destruction. You know, old ways can't compete with new ways; in the end consumers are better served. And it's interesting when you look at food retailing then, because it really has dramatically changed. But there's a movement now that, you know, kind of is reacting to that. I mean that agriculture now is done on an industrial scale and is pouring all kinds of pollutants into our streams and that we're, you know, we're burning fossil fuels to transport food thousands of miles before it's sold. And there is this economic notion that the market does a lot of things well, but it doesn't particularly deal with environmental damage. You know, there is a, you can make a case that while the competition in the retail food trade did bring us a lot of cheap food, there are other ways in which it was harmful and we need to rethink it, do it differently. What's your take?
Mr. LEVINSON: There is an economic case and an environmental case but there's also a romantic case. And these things get mixed up a lot. There is a lot of fondness for the idea of a locally owned merchant, an independent unique merchant. Well, perhaps that's where we're going. But certainly, in the days of the great A&P, there was nothing unique about those independent merchants. They were simply selling the same goods everyone else was at a higher price. The ability to distribute food to consumers at a low price was an enormous achievement of huge importance to everyone in America.
There's no household in this country that spends a third of its income on food, as was the case in the 1920s and it's really hard to imagine going back to a system in which people are paying a lot more money for food because of the inefficiency of the system.
On the other hand, you do have people who want unique products that are not well served by a supermarket. You want people who have products produced close at hand, local farming, local ranching, whatever it is. If people would like to have that kind of thing, I think it's wonderful. It's something that I think is good for the world. But this can't be a solution that's forced upon everyone, because frankly, these local farmers and local ranchers are not going to be able to meet the demand for food at prices that the public can afford. There are real benefits to size. There are real benefits to economies of scale. And you can't just romanticize those away. I think any economic change has negative as well as positive effects, and that's definitely the case with the great A&P.
DAVIES: You know, when you look at modern retailing, you see how A&P, what A&P did in the 1920s and '30s, really aggressively changing the way food retailing is done - has Wal-Mart done the same thing to A&P and companies like it?
Mr. LEVINSON: Yes. Absolutely. Wal-Mart has received a great deal of criticism for many of its techniques, such as hard bargaining with suppliers. Well, most of that was started by A&P back in the 1920s. OK, Wal-Mart has learned a lot from A&P's experience and has followed many of the same methods of reducing costs. The one thing it hasn't done is manufacture. A&P decided to integrate into manufacturing and Wal-Mart decided deliberately not to integrate into manufacturing, so it purchases all the good it sells rather than making them. But it's learned a great deal from the experience of A&P.
DAVIES: You know, one difference that might be, that as you describe it, when A&P was in its heyday, it was cutting costs for consumers, but it was also paying its employees more. You know, Wal-Mart has a reputation for cutting costs to consumers while, eh, I don't know, being tougher on its employees -more part-time, fewer benefits, that kind of thing. Is that a difference? Is that sort of the inevitable direction of a competitive retail economy?
Mr. LEVINSON: It's a difference that I think is attributable to Wal-Mart being a publicly traded company, whereas A&P didn't have to answer to anyone. On the other hand, I would point out that A&P was a strongly anti-union company just as Wal-Mart has been. A&P really opposed unions for many, many years and only accepted them during the Great Depression. The Hartfords felt that this was their company. They were going to take good care of their employees the way they wanted to, and nobody needed to have a union. So in that sense A&P and Wal-Mart were fairly similar.
DAVIES: Well, Marc Levinson, thanks so much for speaking with us.
Mr. LEVINSON: Thank you.
GROSS: Marc Levinson spoke with FRESH AIR contributor Dave Davies. Levinson is the author of "The Great A&P and the Struggle for Small Business in America."
You can read an excerpt on our website, freshair.npr.org. Transcript provided by NPR, Copyright NPR.