Michael, Gary G.

(1940-)
Albertson's

Overview

Gary Michael was the outgoing CEO and chairman of the board for Albertson's—the second largest grocery chain in the United States, with approximately 2,500 stores nationwide. Albertson's is considered by industry watchers to be one of the most progressive grocery chains in terms of branding its stores nationwide and trying innovative marketing to keep customers satisfied. Upon his retirement in June 2001, Michael left a legacy of innovation and dramatic growth, capped by the massive acquisition of the 780–store American Stores chain in 1999.

Personal Life

Gary G. Michael was born in 1940. He graduated from the University of Idaho in 1962 with a bachelor's degree in business. Upon graduation, he served as a First Lieutenant in the U.S. Army for two years (until 1964). When he returned from the military, Michael began his career as a staff accountant at Ernst & Ernst. Staying there only two years, Michael joined Albertson's as a staff accountant in 1966.

Michael was known for his "Team Albertson's" concept and "Service First" attitude toward customers. His tenure as CEO was characterized by first–hand involvement with store personnel and customers. Even a 1987 battle with cancer could not keep him away. He spent four days each week out in the field, visiting stores, and could recite average weekly sales volume of specific supermarkets. After biting into a $1.99 pizza at one of the stores (that allegedly tasted like cardboard) and an episode of cake frosting that stuck to the roof of his mouth, Michael began serving store deli foods to Albertson's board members for quality feedback. To monitor consumer trends and opinions, he employed the use of telephone surveys, focus interviews, and one–on–one interviews to assess performance.

In addition to his responsibilities as CEO, Michael also served on the board of directors for the Boise Cascade Corporation and for Questar Inc. Michael became part of the formation of Idaho's Continental Basketball Association (ICBA) in 1996, which brought professional basketball to Idaho with the establishment of the Idaho Stampede team. He is a former chairman of the Federal Reserve Bank of San Francisco and is a member of both the Financial Executive Institute and the Food Marketing Institute. After his announcement of retirement from Albertson's in 2001, he was appointed to serve on the Harrah's Entertainment Inc. Board of Directors. Still yet, in November 2001, Michael was elected to the board of directors for the Clorox Company. It was unknown whether these new responsibilities would help or hurt the 15.6 golf handicap he carried in 1998, according to Golf Digest's "Handicapping America's CEOs."

Career Details

With borrowed money, founder Joe Albertson opened his first grocery store in Boise, Idaho, in 1939. But it was no ordinary grocery store. From the beginning, Albertson's was penned "Idaho's largest and finest food store" and that first store was 10,000 square feet in size and space, nearly eight times larger than the typical store in 1939. On hand to greet the first customers were nearly 30 employees, "a scratch bakery filling the store with the aroma of fresh baked bread, an ice cream shop offering double–dipped cones called 'Big Joe's,' fresh roasted nuts and popcorn, and an automatic donut machine serving hot pastries," according to the corporate Web site. The intent was to overwhelm customers with a totally new shopping experience. Albertson's was an instant success, reporting a first–year profit of nearly $10,000 on sales of $179,000. In the 1950s, corporate headquarters were established next to the original Boise store and, in 1959, the company went public with its first stock offering to raise capital for operations and to establish a market value for the business.

By the time Michael joined Albertson's in 1966 as a staff accountant, the company was a booming success. In 1963, it had celebrated the opening of its 100th store in Seattle, Washington. The following year, continued the corporate Web site, Albertson's celebrated its silver anniversary by acquiring a 14–store chain of markets in the Los Angeles, California, area. The average size of each store had increased to 20,000 square feet. That growth continued through the end of the 1960s, by which time the company had 200 stores operating in 9 states. At that time, the publicly traded company had sales of $420 million, some 8,500 employees, and 7,200 stockholders. It was the 38th largest merchandising firm in the country.

Michael was promoted to an assistant comptroller position in 1968 and to controller in 1971. He became a company vice–president in 1972. Also during 1972, Albertson's purchased a wholesale company in Boise—a big step toward establishing its own distribution system. The following year, a full–line facility was constructed in Brea, California, followed by a fully integrated 346,000 square foot warehouse in Salt Lake City, Utah, in 1976.

In 1974, Michael was promoted to senior vice–president. There were other major management changes during those years that would greatly impact the future of Albertson's. In 1972, founder Joe Albertson moved from president to chairman and, in 1976, Warren McCain took over as chairman and CEO. Also in 1976, Michael was named executive vice–president of the company, a position he held until 1984.

Chronology: Gary G. Michael

1940: Born in Laurel, Montana.

1962: Received bachelor's degree from University of Idaho.

1964: Released from military and joins Ernst & Ernst.

1966: Joined Albertson's as staff accountant.

1972: Promoted to vice–president.

1974: Promoted to senior vice–president.

1976: Named executive vice–president.

1984: Named vice–chairman and CFO.

1991: Named CEO and chairman.

2001: Retired.

Michael was named vice–chairman and chief financial officer (CFO) of Albertson's in 1984. He also assumed the title and responsibilities of corporate development officer. As Albertson's continued to develop a name as a highly regarded supermarket chain, Michael also continued to develop a name for himself. Interviewed in 1991 by Corporate Board magazine, Michael promoted the advantages of having corporate headquarters for such a large company as Albertson's in such a remote location as Boise, Idaho. He told interviewers, "We like our remoteness. It allows us not to get caught up in nonproductive time where all companies follow each other closely. We're simply not influenced by surrounding companies." Later that year, Michael was named CEO of Albertson's. His total compensation package for the first full year as CEO was $2.44 million, including stock. He had been with the company 25 years at that time.

Within three years of becoming CEO, Michael was named a Bronze Award Winner on Financial World's 1994 CEO of the Year list. Michael had developed a "Service First" slogan and principle that served the company well. He also had implanted a Team Albertson's concept that had enhanced his reputation as a highly efficient leader. Albertson's continued its impressive growth pattern, and in 1997 the company began testing fuel centers at store sites. Its stores continued to meet the shopping needs of customers with a mix of merchandise and services, all contained in a theatrical presentation that would be both entertaining and functional. This approach paralleled the original vision of Joe Albertson in 1939 when he strove to give shoppers a unique experience upon visiting his Boise store.

In August 1998, Michael announced the company's pending $8.3 billion purchase of American Stores Company, which owned and operated stores under the names of Acme, Jewel, and Lucky stores. Although the acquisition/merger was delayed for ten months by federal regulatory complications, it served to displace the Kroger Company as the nation's leading supermarket chain. (The displacement proved to be short–lived; Albertson's was bumped back to second place in 2001.) In any event, the deal was historic for another reason. The original founder of the American Stores Company was Samuel Skaggs. Skaggs was the person who lent Joe Albertson the money to buy his first grocery store. In 1999, sixty years later, Albertson's was buying out the entire 780–store American Stores chain. The combined assets of the two companies gave Albertson's more than 2,470 stores in 37 states. Michael cited increased competitive pressure and cost efficiencies as reasons for the merger. Albertson's also announced its expectation of a one–time, though significant, reduction in profits following the merger. Another aspect of the merger related to retail expertise. Albertson's, under Michael's stewardship, had maintained its reputation for well–managed operation of food stores. American Stores had the most experience in running free–standing drug stores, operating under the Sav–on and Osco names. Although some analysts noted that drug store operation posed a whole different set of shopping patterns and other issues, Michael dismissed such notions, telling Associated Press interviewers that drug stores presented an opportunity to gain a significant foothold in the health care market. The merger was also projected to save Albertson's $300 million in overhead reduction, as well as enhanced buying and distribution efficiency.

Under Michael, Albertson's pursued aggressive growth with the development of their prototype store in Florida. It had a unique look that included colorful displays, specialized dairy and pharmacy departments, and large overhead signs.

At the May 1999 shareholders' meeting, Michael announced plans for 750 new combination food/drug stores, 500 stand–alone drugstores, and 600 fuel centers to open over the subsequent 5 years. The estimated cost was projected at $11 billion. Michael also announced plans to remodel another 730 stores.

The plans proved tenuous. Whereas Albertson's basked in an 18 percent annual growth in earnings per share in the early 1990s, the growth slowed to 12 percent by 1994 and continued at that rate or less for the remainder of the decade. After the acquisition/merger with American Stores went on for ten months in 1999, Albertson's was forced to sell off 145 stores. This became the largest grocery divestiture ever required by the Federal Trade Commission. Michael suffered severe stress during this time.

In December 2000, Michael announced that he would retire in June 2001, and he began assisting the company's executive search committee in the assessment process for his replacement. His salary throughout the years had grown, but his total compensation package had reflected only modest increases over the years. Michael's retirement came at a turbulent but hopeful time when Albertson's continued to struggle with the effort to integrate the American Stores chain with its own stores. The massive undertaking was expected to be ongoing for many months to come. In April 2001, Albertson's named Lawrence R. Johnston, a senior executive of General Electric Company, as its new chairman and CEO. Johnston was Albertson's first top executive to be named from outside the company's ranks.

Social and Economic Impact

Michael's ten–year post as CEO of Albertson's was one of innovation and growth. Because of his aggressive stance on expansion, Albertson's was able to acquire the huge American Stores drug store chain, making Albertson's one of the world's largest food and drug retailers.

Sources of Information

Bibliography

"1994 CEO of the Year Bronze Award Winners." Financial World, 29 March 1994.

Albertson's. Available at http://www.albertsons.com.

"Albertson's, Our Heritage." Available at http://www.albertsons.12.7.179.54/corporate/oc_heritage.asp.

Barron, Kelly. "Albertson's Gets a Makeover." Forbes, 6 September 1999.

Brown, Matthew. "Albertson's Bags American Stores, Moves Up to No. 1." Boulder News, 4 August 1998.

"Forbes Super 500 Paychecks." Forbes, 14 May 2001.

"Gary Michael, Albertson's Chief, to Retire." Drug Store News, 15 January 2001.

"Gary Michael and Jan Hurley Elected to Clorox Board of Directors." Business Wire, 28 November 2001.

"Gary Michael Joins Harrah's Entertainment Board of Directors." Business Wire, 13 November 2001.

Halkias, Maria. "Albertson's Names GE Executive to Top Post." The Dallas Morning News, 24 April 2001.

"Handicapping America's CEOs." Golf Digest, June 1998.

Heenan, David A. "The Small Town: Corporate USA's New Frontier." Corporate Board, July/August 1991.

Longo, Don. "Looking for a CEO with a Few Basic Instincts." Discount Store News, 3 April 1995.

Muret, Don. "Idaho Stampede Banks on Community Suppport." Amusement Business, 2 September 1996.

"What 800 Companies Paid Their Bosses." Forbes, 25 May 1992.

White–Sax, Barbara J. "Cross–channel Giant, Albertson's, is Big on Beverages." Beverage Aisle, 15 February 2001.