August 6, 2013

N.H. billionaire grocer hauls fortune – in unmarked trucks

Richard B. Cohen, who also has a home in Maine, has transformed C&S Wholesale Grocers into the world's largest grocery wholesaler.

Bloomberg News

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Cohen's grandfather, Israel, co-founded C&S in Worcester, Mass., in 1918, according to the company's website. After a flood destroyed his inventory in 1929, he opened a new warehouse twice the size on higher ground, a few blocks further from the city's Blackstone River. His son, Lester, expanded the business into supplying military bases after a tour of duty as a bomber navigator in World War II.

Rick joined the company in 1974, after receiving an accounting degree at University of Pennsylvania's Wharton school. A three-week union strike almost shuttered the business a year later, leading Cohen to persuade his father to move the company to Brattleboro, Vt., where it could build larger warehouses and hire nonunion workers, according to Harvard's DeLong.

Cohen took over as CEO and chairman when his father retired. He moved the headquarters 18 miles east to Keene in 2003, after getting officials to relocate the county jail planned for the parcel he had his eye on, said Paul Miller, Executive Editor of the Keene Sentinel newspaper.

Grocery wholesaling is a small-margin business where economies of scale don't guarantee success, according to Burt Flickinger, managing director of Strategic Resource Group, a New York-based consulting company that specializes in the food business. In 2003, many assets of the then-largest wholesaler, Fleming Companies Inc., were liquidated in bankruptcy. Cohen bought some of Fleming's assets, which expanded his business into California and Hawaii.

Earlier this year, Supervalu Inc., an Eden Prairie, Minn.-based company that owns both supermarkets and its own distribution business, ceded the title of world's largest wholesaler to C&S after it sold off some assets to reverse a sales decline that has driven its stock to $8 from almost $49 since July 2007.

"It's a difficult market, but when run efficiently and effectively it can be profitable," said Flickinger.

Cohen has done just that. Less than 2 percent of the orders that are processed in the company's warehouses have errors or omissions, efficiency that's unheard of elsewhere in the wholesale grocery business, according to former C&S president Albertian.

At C&S warehouses, DeLong said, self-managed teams of workers are responsible for meeting customer orders â picking the items from shelves, collecting and wrapping them on pallets and loading them onto trucks â on time. In addition to hourly wages, teams earn extra money for every order filled and suffer a wage deduction for every error.

Cohen got the idea after C&S won the right to service A&P supermarkets' New England division in 1988. After decades of mostly servicing independent grocers, A&P was a boon to C&S, increasing annual sales 35 percent to $540 million at the time. It also created chaos in the Brattleboro warehouse, with workers having little time to fill orders and restock warehouse shelves, according to DeLong.

Cohen implemented the self-managed teams after attending an executive retreat hosted by author and management consultant Tom Peters.

"He was able to eliminate many supervisors because the line workers know their business best," said DeLong.

The structure has enabled C&S to double sales over the past decade, according to the company. In May, C&S won the right to supply 480 Winn-Dixie supermarkets, a contract that should add about $2 billion in revenue, according to Strategic Insight's Flickinger.

In some situations, Cohen has bought failing grocery store chains, such as Grand Union in the northeast and Bruno's in the south, Flickinger said. After restructuring and turning around the businesses, he sells them, making a profit and saving a portion of his customer base.

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