The Great A&P and the Struggle for Small Business in America (49 page)

2
. Woolworth’s sales came to $216 million in 1924, and those of Sears, Roebuck, the third-largest retailer, were $206 million. The companies’ fiscal years were not identical. John Hartford quotation is at Tr 20436. Adelman,
A&P
, 29, emphasizes the lack of strategic planning.

3
. John A. Hartford to Mr. Friele (title unknown), February 23, 1924, file 157, HFF.

4
. Hartford to John B. Edsall (manager), telegram, Newburgh, N.Y., February 11, 1924, file 157, “Correspondence from John A. Hartford,” HFF; Merle Crowell, “You Don’t Have to Be Brilliant,”
American Magazine
, February 1931, 21. Some of the reporting forms are in folder 150, HFF.

5
. U.S. Congress, Joint Commission on Agricultural Inquiry,
Marketing and Distribution
, 206. Operating expenses are given in Adelman,
A&P
, 436. A three-minute call from New York to Chicago could take hours to set up and cost $4.65; U.S. Bureau of the Census,
Historical Statistics of the United States
, 784, ser. R 14. Store clerks’ pay varied considerably by location. In San Francisco, where wages were probably well above the national average, clerks earned $30–$36 for a six-day, fifty-four-hour week, or $5–$6 per day; see David F. Selvin,
Union Profile: The Fifty Years of Grocery Clerks Union, Local 648
(San Francisco, 1960), 18;
Fortune
, July 1930.

6
. Comments of S. M. Flickinger in Russell, Lyons, and Flickinger, “Social and Economic Aspects of Chain Stores,” 35; Crowell, “You Don’t Have to Be Brilliant,” 21; “National Tea Stock Listed,”
NYT
, April 13, 1924. In November 1925, 1,657 stores owned by three companies were combined into the publicly traded First National Stores, and the following year 784 stores controlled by the Skaggs family were assembled into Safeway Stores; “1,657 Stores in Merger,”
NYT
, November 26, 1925; “Safeway Stores Offered,”
NYT
, November 24, 1926. Kroger Grocery and Baking Company, the second-largest food chain, would have a public issue in 1927; “To Float Big Block of Kroger Shares,”
NYT
, December 7, 1927.

7
. “Big Warehouses Sold,”
NYT
, January 23, 1925.

8
. “Great Atl. & Pac. Forms New Company,”
WSJ
, June 4, 1925; Gx 103 and “Brief for the United States,” 225, Danville trial.

9
. “Employees to Share Chain Store Profit,”
NYT
, June 5, 1925; “Great Atl. & Pac. Forms New Company”; “Increased Dividend and Extras Voted,”
NYT
, August 17, 1928; Great Atlantic & Pacific Tea Co. Certificate Book, HFF.

In February 1926, the U.S. Department of Justice brought an antitrust suit against National Food Products Corporation, claiming that it was attempting to set up a “food trust” by acquiring control of numerous grocery retailers and manufacturers, including Great Atlantic & Pacific. The suit implied that the purpose of A&P’s stock issuance was to enable it to participate in the trust. The allegations were rather far-fetched. National Food Products was an investment company, similar to a closed-end mutual fund, intending to invest in the food industry, in which many companies were issuing shares for the first time. As of the date of the lawsuit it had raised $1.8 million through stock sales, not enough to control any major grocery chain, much less the largest retailer in the world, which by its own estimate was worth $58 million at the time (Adelman,
A&P
, 438). It is improbable that the Hartford brothers would have been interested in joining in the sort of trust described by the government, as this would have required them to surrender absolute control of their company. John Hartford denied that A&P was controlled by National Food Products and emphasized that the only reason for issuing stock was to provide shares for employees. See “Government Sues to Stop $160,000,000 Food Store ‘Trust,’”
NYT
, February 14, 1926; “Lawyer Ridicules Suit on ‘Food Trust,’”
NYT
, February 15, 1926; “Halsey Quits Board of New Food Trust,”
NYT
, February 16, 1926.

10
. Gx 103. A&P’s annual data books, containing a standard set of tables and charts, are in RG 60, General Records of the U.S. Department of Justice, Antitrust Division, Litigation Case Files, Enclosures to Classified Subject Files, 1930–87, boxes 36 and 37, NARA-CP. Other data were distributed at the meetings of division presidents without inclusion in the annual book.

11
. Charts for Division Presidents’ Meetings, January 27–28, 1927, February 9, 1928, and February 20, 1929, box 67, Danville trial enclosures; Gx 103 and Dx 212. The most common measure of corporate profitability, return on equity, is not relevant for A&P during this period, as the company had no publicly traded stock and its privately held shares had only the nominal value assigned when they were issued. Adelman,
A&P
, 438, constructed estimates of the company’s equity investment, including retained surplus. His calculations show that return on equity in 1924 was 7.1 percent, the lowest of any year during the decade. The company’s stated investment was $25.3 million in the year ending February 1921; $62.6 million in the year ending February 1926; and $118.8 million in the year ending February 1930; see “A&P Growth Is Told at Hearing,”
WSJ
, October 25, 1930. However, these figures are not consistent with those reported by Adelman. On the meager return in 1925, see Green, “Vertical Integration” (B.A. thesis), 22.

12
. “Atlantic & Pacific Tea Sales About $450,000,000,”
NYT
, January 1, 1926.

13
. Hartford quotation, from the minutes of the division presidents’ meeting of February 3 and 4, 1926, is in Gx 105. Adelman,
A&P
, 445, estimates that cash flow was negative in 1923, 1924, and 1925.

14
. Dx 213, “Charts, Presidents’ Meeting, February 3rd and 4th, 1926,” box 67; “Brief for the United States,” 13, Danville trial.

15
. Adelman,
A&P
, 32, 257; “Brief for the United States,” 13, 74, 153, 317, Danville trial; Great Atlantic & Pacific Tea Co.,
Three Score Years and Ten
, 18.

16
. Adelman,
A&P
, 112, 120, 225.

17
. FTC,
Chain Stores: Final Report on the Chain-Store Investigation
(Washington, D.C., 1935), 90; Adelman,
A&P
, 237.

18
. “A&P Tea Co. Plans Increase in Advertising,”
Hartford Courant
, July 2, 1926; Crowell, “You Don’t Have to Be Brilliant,” 112.

19
. Gx 107 and 404; Green, “Vertical Integration,” 17. Alfred Chandler was bewildered by the apparently informal coordination between A&P’s central staff and its operating divisions, suggesting that it “may pose problems in maintaining effective central control.” He thought the Hartfords might have modeled their organization’s structure on that of Swift & Company, the largest meat packer, which published detailed information about its corporate structure in the 1920s and 1930s. See his “Management Decentralization,” 163–64.

20
. Adelman,
A&P
, 112.

21
. Baum, “Chain Store Methods,” 282; Adelman,
A&P
, 468; Avis H. Anderson,
A&P
, 85.

22
. Between 1914 and 1930, A&P acquired only 300 stores, representing 1.5 percent of the total number of stores it opened during that period. It closed 4,896 stores over the same period; FTC,
Chain Stores: Growth and Development of Chain Stores
, 36, 77; “A&P Price Action Credited in Growth,”
NYT
, August 10, 1930; “St. Louis A&P Building,”
NYT
, September 17, 1928; “Bond Flotations,”
NYT
, May 9, 1929; “Bond Flotation,”
NYT
, August 21, 1929; J. C. Furnas, “Mr. George & Mr. John,”
Saturday Evening Post
, December 31, 1938, 55.

23
. Charts, Division Presidents’ Meetings, January 27–28, 1927, February 9, 1928, and February 20, 1929, boxes 35 and 67, Danville trial.

24
. Gx 107.

25
. “A&P Cuts Bread Prices,”
WSJ
, February 7, 1927; “Great A&P Sales Up $100,000,000,”
WSJ
, January 7, 1928; “Cigarette Prices Are Slashed Here,”
NYT
, April 24, 1928; “Cut $4,000,000 Off United Cigar Net,”
NYT
, January 10, 1930; “Schulte Demands Cigarette War End,”
NYT
, April 17, 1929; “Retailers Aroused by Cigarette War,”
NYT
, May 21, 1929; “Schulte Minority Hits Management,”
NYT
, April 22, 1930.

26
. In February 1927, A&P’s balance sheet showed $15.6 million of cash and securities against $179,000 of debts; by February 1931, cash reached $41 million, and debts were only $458,000. Over the same period, even after generous dividend payouts, retained earnings climbed from $9 million to $57 million. Five years of balance-sheet data are shown in William Henry Smith, “A Billion-Dollar Cash Business,”
Barron’s
, November 25, 1929, 12. “A&P Expands in Houston,”
WSJ
, October 28, 1927; “‘A&P’ in Canada,”
WSJ
, June 27, 1927; “Atlantic & Pacific,”
WSJ
, May 8, 1930; “A&P Decides to Sell as Well as Buy in Northwest,”
Business Week
, April 8, 1931, 11.

27
. FTC,
Chain Stores: Sources of Chain-Store Merchandise
, 23–24, 29; Great Atlantic & Pacific Tea Co.,
Three Score Years and Ten
, 37.

28
. Among the critics was Fiorello La Guardia, then a congressman and soon to become New York City’s mayor, who warned in a March 1930 radio talk that shoppers needed to patronize independent stores to avoid “a gigantic food trust in this country.” See box 37(A), WPP. FTC,
Chain Store Manufacturing
, Senate doc. 13, 73rd Cong., 1st sess., April 5, 1933, 30; “Puts U.S. Meat Bill at $5,000,000,000 Yearly,”
WSJ
, November 8, 1930; “A&P Price Action Credited in Growth,” Adelman,
A&P
, 265; “Postum Company, Inc.,”
Barron’s
, August 13, 1928, 10; Rentz, “Death of Grandma,” MS, 54; William Henry Smith, “A Billion from ‘Cash and Carry,’”
Barron’s
, January 19, 1931, 22; A&P, “A&P, an Organization and Its Workers” (1930), 22, 29. The 1930 census counted 29.9 million “family households.” The number of nonfamily households was not reported, but the 1940 figure of 3.5 million suggests that the 1930 figure would have been between 2.5 and 3 million, yielding a total of approximately 32 million households.

29
. Rentz, “‘Death of Grandma,’” 9; “A&P Construction Plan Gets Underway,”
WSJ
, June 9, 1930; A&P, “A&P, an Organization and Its Workers,” 5.

30
. “Gives Outing to 200 at Mountain Retreat,”
NYT
, September 29, 1929; “Capital Rise Voted by New Haven Road,”
NYT
, April 17, 1930. John Hartford was elected a director of National Bank of Commerce on July 25, 1928. Board minutes give no indication that A&P did business with the bank prior to his election to replace a director who retired due to ill health. See National Bank of Commerce, Board of Directors minutes, 1927 and 1928, JPMC. When that institution merged with the larger and more prestigious Guaranty Trust Company in 1929, Hartford joined the merged institution’s board, serving alongside such notables as John T. Dorrance, head of Campbell Soup Company, an A&P supplier; the retailer Marshall Field; the 1924 presidential candidate John W. Davis; Richard B. Mellon, brother of Treasury Secretary Andrew Mellon and president of Mellon Bank; the investment banker W. Averell Harriman, who controlled a major stake in the Union Pacific Railroad; and several members of one of Guaranty Trust’s founding families, the Whitneys;
Guaranty News
, February 1929 and March 1929, JPMC.

11: MINUTE MEN AND TAX MEN

1
. Evans Clark, “Big Business Now Sweeps Retail Trade,”
NYT
, July 8, 1928. According to the article, the next seven chain operators, F. W. Woolworth, Kroger, J. C. Penney, S. S. Kresge, Gimbel Brothers, American Stores, and May Department Stores, had a combined 8,803 stores. A&P alone was said to have 17,500, although company records show a shorter number. The article estimated A&P’s annual sales to be $750 million, and those of Kroger, the next-largest grocer, to be $161 million. A&P’s reported sales were $761 million in the year ending February 1928.

2
. U.S. Bureau of the Census,
Fifteenth Census of the United States: 1930 Retail Distribution: Summary for the United States
(Washington, D.C., 1933), 45.

3
.
City of Danville v. Quaker Maid Inc.
, 211 Ky. 677. The Danville ordinance divided grocery stores, meat markets, and fish markets into three classes. “Regular service” establishments were to pay $12 per year plus $5 for each employee over two. “Cash and carry” grocers without self-service stores were to pay $50 per year plus $25 for each employee over two, while self-service grocers operating on a cash-and-carry basis were to pay $40 per year plus $30 for each employee over two. The Kentucky Court of Appeals ruled that the way a store did business was not a reasonable distinction for purposes of taxation.

4
. Lebhar,
Chain Stores in America
, 153; F. J. Harper, “‘A New Battle on Evolution’: The Anti–Chain Store Trade-at-Home Agitation of 1929–1930,”
Journal of American Studies
16 (1982), 412; Alfred G. Buehler, “Anti-Chain-Store Taxation,” 350. A&P’s average profit per store was $947 in the year ending February 1927, and $1,208 the following year. On the Pennsylvania law, see Richard C. Schragger, “The Anti–Chain Store Movement, Localist Ideology, and the Remnants of the Progressive Constitution, 1920–1940,” 1036.

5
. “A&P Attacked,”
Time
, April 23, 1928; Senate resolution 224, 70th Cong., 1st sess.; “Chain Head Can See No Basis for Probe,”
NYT
, May 13, 1928.