Hy-Vee, Inc.

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Hy-Vee, Inc.

5820 Westown Parkway
West Des Moines, Iowa 50266
U.S.A.
Telephone: (515) 267-2800
Fax: (515) 267-2817
Web site: http://www.hy-vee.com

Private Company
Incorporated: 1938 as Hyde & Vredenburg
Employees: 42,000
Sales: $3.5 billion (1999 est.)
NAIC: 44511 Supermarkets and Other (Except Convenience) Stores; 44611 Pharmacies and Drug Stores

One of the 15 largest supermarket chains in the United States, Hy-Vee, Inc. operates over 200 retail stores in Iowa, Illinois, Missouri, Kansas, Nebraska, South Dakota, and Minnesota. That number also includes Drug Town drugstores in Nebraska and Iowa. Like other large supermarket chains, Hy-Vee sells mostly groceries but also offers a wide variety of other goods and services, from photo developing, flowers, banking, and postal services to food for takeout or in-store consumption. It operates huge stores designed for busy customers who can save time with one-stop shopping. As an additional convenience, Hy-Vee also provides online shopping options. With over 42,000 employees, Hy-Vee is Iowa’s largest employer, and it has remained an employee-owned business since its incorporation. To highlight its years of service to the Midwest, Hy-Vee operates a $1 million History Center in West Des Moines.

Origins During the Great Depression

In 1930 two Iowa businessmen formed a grocery store partnership. Charles Hyde and David Vredenburg already had separately owned or managed several stores in Iowa and Missouri before starting their partnership’s first store, a general retail store in Beaconsfield, Iowa, that sold groceries and dry goods such as clothing.

For a few years both founders continued to run separate stores and stores with other partners, while also running some stores together. However, in 1934 these general stores with such names as The Supply Stores, Hyde Service Store, and Vredenburg Grocery began selling only groceries.

In 1938 the original partnership was dissolved when Hyde & Vredenburg was incorporated. The new operation, with 15 stores in Iowa and Missouri, was owned by 16 store managers who traded ownership in local stores for corporate stock. Thus began the company’s heritage of being an employee-owned organization. The new corporation headquartered in Lamoni, Iowa, chose Dwight Vredenburg, a son of the cofounder, as its president. Its 1938 annual sales were about $1.5 million.

In 1940 Hy-Vee found its customers were reluctant to start using “baskets on wheels,” or grocery carts, said Dwight Vredenburg in the February 20, 2000 Des Moines Register. First introduced in its Centerville, Iowa store, the carts reminded women of baby buggies, and men felt the carts were “for sissies whose arms weren’t strong enough to carry a few groceries.” But free candy bars in each new cart soon persuaded customers to try the new contraptions.

Early Expansion in the Post-World War II Era

After World War II ended, many in the military returned to civilian life, and the postwar economy saw increased demands for housing and food as a large segment of younger families began having children. To help meet these demands, Hy-Vee expanded mainly in Iowa for several years. In 1945 it moved from Lamoni to Chariton, Iowa, after purchasing the Chariton Wholesale Grocery Company. In 1948 it built its first warehouse/office complex, a 72,000-square-foot facility in Chariton. At the end of 1949 the growing company owned 29 stores that brought in $9.2 million in annual sales.

In the 1950s the company added new warehouse facilities, retail stores, and a new name. In 1952 an employee contest resulted in three employees suggesting that the stores be re-named “Hy-Vee” by combining the last names of the two founders. Although the company’s name remained Hyde & Vredenburg, in 1953 the Fairfield, Iowa store was the first to bear the new name of Hy-Vee. Ten years later, in 1963, the corporate name became Hy-Vee Food Stores, Inc.

Company “firsts” in the 1950s included the 1956 introduction of Hy-Vee’s first private label brand and the 1959 opening of a store in the Des Moines suburb of Johnson, the first Hy-Vee in a major urban area. The company in the 1950s also started its data processing department and added 28,000 feet to its Chariton warehouse for storing produce and frozen foods. At the end of fiscal year 1959 the company’s annual sales stood at almost $36 million from its chain of 37 stores that employed 1,186.

The 1960s brought even more rapid growth in Hy-Vee’s operations. The firm built up its headquarters in Chariton, including a 107,000-square-foot addition to its grocery ware-house in 1960; a new corporate headquarters finished in 1963; a 1965 addition of 93,000 square feet to the warehouse; a 12,000-square-foot addition to the warehouse for its Regal Stamp program started in 1956; and a new addition to its warehouse for truck maintenance and cleaning.

The Hy-Vee Employees Trust Fund in 1963 purchased the locally based National Bank & Trust Company of Chariton, and the same year the company broadcast its first television commercial. It opened its first Minnesota store in 1969, one of the 12 gained from a merger with Swanson Stores based in Cherokee, Iowa.

Hy-Vee owned 66 stores, including its Drug Town stores acquired in the 1960s, at the end of fiscal 1969, when annual sales stood at $130 million. With the company doing so well, it decided to start the Hy-Vee Foundation in 1968 to provide college scholarships.

Developments in the 1970s and 1980s

In the 1970s Hy-Vee continued to grow by opening new stores, building more warehouse space, and adding new technology. A 1971 addition of 78,000 square feet brought the total capacity of the Chariton warehouse up to 430,000 square feet. In addition, in 1976 the company built a secondary warehouse/ office complex in Cherokee, Iowa. Hy-Vee started stores in three additional states during the decade: South Dakota in 1975, Nebraska in 1977, and Illinois in 1979. Other company land-marks for the decade included the opening of the 100th store, in Keokuk, Iowa (also the first store in the chain to use electronic cash registers), and surpassing the $500 million annual sales mark, in 1978, for the first time.

Hy-Vee in the 1980s added acquisitions, new stores, and new leadership. In 1982 it purchased 12 former Safeway stores in western Iowa and eastern Nebraska. That included seven stores in Omaha and two in the state capital of Lincoln. In 1988 Hy-Vee opened its Overland Park, Kansas Number 1 store, the company’s first store in Kansas. To meet the needs of its growing chain, Hy-Vee in 1982 organized Perishable Distributors of Iowa (PDI), an affiliated firm that later became a subsidiary.

In 1983 Ron Pearson replaced Dwight Vredenburg as Hy-Vee’s president, while Vredenburg remained the chairman and CEO. However, in 1989 Pearson became the CEO and chairman when Vredenburg finally retired.

At the end of fiscal 1989, Hy-Vee employed 22,778 individuals at 172 stores, up from its 9,591 employees at 124 stores in fiscal 1979. Its annual sales increased from $680.3 million in 1979 to $1.823 billion in 1989. Even greater growth was coming in the decade ahead.

The 1990s and Beyond

The decade began with several acquisitions. Hy-Vee purchased Lomar Distributing in 1990, Sunrise Dairy in 1991, D&D Salads and Florist Distributing in 1992, and the Meyocks & Priebe advertising firm in 1994. In 1995 the firm moved its corporate headquarters to West Des Moines and changed its name to Hy-Vee, Inc.

When Hy-Vee celebrated its 65th anniversary in 1995, President/CEO/Chairman Ron Pearson realized the company should do something to preserve and use its history. Inspired by the Coca-Cola History Center in Atlanta, Pearson persuaded the board of directors to spend $1 million on a 4,000-square-foot History Center located next to the company’s headquarters in West Des Moines. Marilyn C. Gahm, a professional librarian with about 20 years experience in corporate libraries, served as the History Center Coordinator.

Meanwhile, the trend of larger grocery stores replacing smaller ones continued. For example, Tait’s Foods in Des Moines, a former Safeway supermarket, in 2000 sold its store to Hy-Vee, which planned to convert it to a Drug Town with an attached Regal liquor store. Owner Bob Tait said his sales had been hurt by larger stores with more resources. In the April 1, 2000 Des Moines Register Tait said supermarkets had to re-model every seven to ten years to remain competitive, so he decided to sell his business. Thus more Mom and Pop grocery stores died as the supermarket industry consolidated. Of course, this centralization, at least in production, had started about 200 years ago when the first textile factories began replacing home and small shop production.

Company Perspectives

Throughout our territory, the name Hy-Vee is synonymous with quality products, low prices and superior customer service. Our slogan, “A Helpful Smile In Every Aisle,” expresses the foundation of our corporate philosophy.

With a low unemployment rate in a booming economy, most stores, including Hy-Vee, scrambled to gain and keep good employees. Hy-Vee was a good example of a business that made a concerted effort to hire senior citizens. Vice-President Steve Meyer in the April 13, 2000 Journal Star said at Hy-Vee, “recruitment and retention of older workers becomes an imperative as well as a desire and goal.” Hy-Vee used flexible scheduling to attract older workers, offering jobs for three sea-sons so seniors could spend winters in warmer climates. This kind of flexibility and other experimental practices were used to attract older workers by 16 percent of 500 large companies surveyed in 1999.

Hy-Vee, like numerous other supermarkets, began offering more vitamins and natural foods as more consumers tried to improve their health through supplements and organic foods. Hy-Vee called its in-store sections with such products Health Marts, which competed with such huge natural food stores as Wild Oats and numerous multilevel marketing companies that sold supplements.

In the 1990s Hy-Vee began offering more ethnic foods. Chinese Express was introduced in the Independence, Missouri store in 1992, and in 1994 the Des Moines Store Number 3 became the first one in the chain to offer Mexican Express takeout items.

Meanwhile, Hy-Vee ended some of its operations. On January 22, 1999 it sold Heartland Pantry, its chain of 42 Iowa convenience stores, to Kraus Gentle Corporation, which by April 1999 converted all those stores to the Kum & Go name. In February 1999 Hy-Vee sold its partnership in Iowa Beverage Manufacturers, Inc.

Another challenge for all retail industries was the booming electronic commerce trend, sometimes called the New Economy. Shoppers in the 1990s gained the option to buy thousands of items, including food, on the Internet by using a credit card. Although still in its early stages, Internet shopping offered customers a way to save time as they ordered from the convenience of their home.

Hy-Vee’s Rochester Number 3 store in 1998 was the first in the chain to offer optional telephone or Internet shopping. In June 2000 Hy-Vee organized its newest subsidiary called electricfood.com, which began offering gourmet foods for purchase. In a related move, Hy-Vee in 2000 responded to customer requests by adding two new ways to get discount coupons from its web site at www.hy-vee.com. Hy-Vee also was part of ICS Food One, run by Internet Commerce Systems of Norcross, Georgia, which focused on exchanging information on brands and promotions among farmers, food manufacturers and distributors, and retailers.

In the late 1990s several entities recognized or honored Hy-Vee’s achievements and growth. In 1997 Consumer Reports ranked the Iowa-based company as the fifth best U.S. supermarket chain. The Better Business Bureau in 1998 honored Hy-Vee with its “Integrity Award.” Finally, in 1999, Forbes ranked Hy-Vee as the nation’s 32nd largest private company. Hy-Vee’s annual sales reached an all-time high of $3.5 billion at the end of fiscal 1999. At that time it employed 42,776 persons at 208 stores.

At the start of the new millennium, Hy-Vee and other supermarkets faced competition from the growing strength of Wal-Mart and such warehouse clubs as Sam’s Club and Costco. However, strong regional chains including Hy-Vee were praised by retail analysts in the April 15, 2000 Supermarket Business, which ranked the nation’s leading supermarkets. Consolidation of the grocery industry was expected to continue, and one expert predicted that only two Internet grocers would survive by combining online operations with actual stores. In any case, tough competition, along with changing technology and consumer expectations, gave Hy-Vee plenty of challenges to meet in the future.

Principal Subsidiaries

Perishable Distributors of Iowa; Lomar Distributing, Inc.; D&D Salads, Inc.; Florist Distributing, Inc.; Midwest Heritage Bank, FSB; Hy-Vee/Weitz Construction; Drug Town; Meyocks & Priebe Advertising; electricfood.com.

Principal Competitors

Wal-Mart Stores, Inc.; Albertson’s Inc.; Fareway; Dahl’s.

Key Dates

1930:: Charles Hyde and David Vredenburg open a small store in Beaconsfield, Iowa.
1938:: Hyde & Vredenburg, Inc. is incorporated.
1945:: Company moves from Lamoni to Chariton, Iowa.
1948:: Company builds its first office/warehouse complex in Chariton.
1963:: Company changes its name to Hy-Vee Food Stores, Inc.
1969:: Firm merges with Swanson Stores of Cherokee, Iowa.
1975:: First South Dakota store is opened at Brookings.
1977:: First Nebraska store is opened in Norfolk.
1979:: First Illinois store is opened in Macomb.
1982:: Twelve former Safeway stores in Iowa and Nebraska are acquired.
1986:: Hy-Vee purchases Midwest Heritage Bank.
1988:: First Kansas store is opened in Overland Park.
1989:: Ron Pearson becomes Hy-Vee’s chairman and CEO.
1991:: Hy-Vee becomes Iowa’s largest private employer.
1995:: Firm moves its corporate headquarters to West Des Moines, Iowa; Hy-Vee, Inc. becomes the new corporate name.
1999:: Hy-Vee, Inc. sells Heartland Pantry convenience stores to Kraus Gentle Corporation.
2000:: Subsidiary electricfood.com starts offering Internet shopping for specialty foods.