A HISTORICAL LOOK AT ARIZONA'S FOOD INDUSTRY
By Jo-an Holstein and Debbie Roth
Looking back over time, Arizona’s food industry is much like a rich, vibrant, irreplaceable tapestry. Chain and independent retailers of all types and sizes along with vendors, manufacturers, organizations, events and social changes have been tightly woven together – each influencing and melding with the other.
The result is an amazing design. A depiction of an industry, and the state trade association that serves it – the Arizona Food Marketing Alliance (AFMA). Both are like no others. To trace this unique industry and association’s beginnings, start by following the tracks --- the railroad tracks.
The Early Days
As the mighty “Iron Horse” thundered west during the frontier days of the late 1880s, small territorial towns sprang up. The miners and pioneers who called these dusty communities home were served by general stores and trading posts – the seeds from which today’s food industry has grown. These early-day Arizona residents also were served by determined businesses that would become industry legends. Consider Edward Eisele, an immigrant from Bavaria who purchased a Phoenix bakery now led by his grandson and namesake and known as Holsum Bakery – the very bakery that was the first to use a horse-drawn bakery wagon in 1894 and an auto for delivery in 1910.
Another example is Shamrock Foods, launched in Tucson in 1922 by W. T. McClelland, who immigrated from Ireland and started the family business with a Model T truck and a couple of cows.
Just a few years earlier, in 1917, legendary J. B. Bayless had moved to the state, bringing his experience and food stores in Tennessee and Washington with him. During the following years, Bayless built a successful local chain of 18 stores that was eventually bought out by Mac Marr in 1929. A provision of the buy-out, wrote the late Gene Parker in memoirs dated August 1987, was that J. B. would not complete with them for a set number of years. A year after the buyout, his son, A. J., bought Butcher's stores and started his own chain.
"There was quite an uproar, as the Safeway people who bought out Mac Marr in 1931 insisted that A. J.'s father (J. B.) was the real owner. A lawsuit was filed, but after about five years, it was decided that a son of legal age was not bound by his father's agreement," Parker wrote. "Hard feelings showed up in a different way. Softball teams were sponsored by many businesses, among them Safeway and Bayless. Nothing gave the Safeway people greater pleasure than to beat the Bayless team."
As Arizona's oldest national chain, Safeway had moved into the state in 1928. That was the same year it purchased a chain of stores called Pay'N Takit, which debuted in Arizona in 1921. The Bayless stores "grew to become Safeway stores' biggest competitor," wrote legendary food broker Ken Sewell many years ago. "A. J. Bayless knew more about the products he purchased than the salesmen that sold them."
Just two years after the launch of A J Bayless' stores came the founding of Bashas' in 1932 by Ike and Eddie Basha, Sr. During those days stores didn't have air conditioning. Instead, they had open fronts and merchandise was displayed on the sidewalk and wheeled back into the store at closing time.
Also during this time, the marketing of frozen foods heated up - spurred after the Postum Co. purchased the "quick freezing" company founded by Clarence Birdseye. At long last, highways joined the railroad as a means for transporting foods. During the 1930s, radio advertising hit the airways, grocery carts were invented and Holsum Bakery - yet again displaying its penchant for innovation - introduced Arizonans to sliced bread. In 1942, food industry icon Noah Billings opened the doors of Food City - a banner that was pulled under the Bashas' umbrella in 1993. A. J.'s stores, whose heritage goes back to A. J. Bayless, also are part of the Bashas' family of stores.
An Association Is Born
As Word War II raged, Arizona’s food industry battled food shortages, government control and ration stamps. Industry leader Roger Hagel, who started in the grocery business at age 13, went on to own Hagel’s Markets, and later run El Rancho and eventually Bayless --- recalled those turbulent times in a recent interview.
Hagel noted that grocers all had problems getting fresh cattle meat, and the government’s Office of Price Administration (OPA) dictated “what we paid for items and what we sold them for.” Because of shortages, consumers used ration stamps to purchase many items, including gas, canned goods, meat and sugar. Hagel, who purchased one of his stores after the OPA shut down the previous owner for cheating on ration stamps, recalled times when his wife worked in the store while he went out to get merchandise. He often bought 10-pound bags of goods and repackaged them in smaller units to sell, and remembers when Van Buren would be blocked off as crowds gathered because they knew which days he’d have cigarettes available. When shortages eased and ration stamps disappeared, grocers battled briefly with the confusion of what to charge for items.
While some male store owners were called upon to fight for their country, many wives back home in Arizona took over the food businesses. One example is Earl Rutledge, who left his wife, Bertha, to run the store along with Dorothy, whom he later married after Bertha’s death. During this time, independents grappled with how to compete against chains. Interestingly, such independent stores often were owned by Chinese residents, many whose families arrived in the state while building the railroad. Now operating small Mom and Pop stores, such Chinese families often lived in the back of their small stores.
“It was a meager living,” said the late Walter Ong in a 1999 issue of “Arizona Grocer” (Now called the Arizona Food Industry Journal.) “Many of these people came to America to find wealth and happiness.
But once they got here, they learned that it wasn't that easy. The retail grocery business gave them opportunity; it was a business they could get into.”
Ong, who at one time operated five small stores, was among a group of independents who formed the Retail Grocers Association of Arizona (RGAA) in October 1943 --- 60 years ago. Now known as the Arizona Food Marketing Alliance, the organization was headed not only by Ong but also Clyde Killingsworth, Al Lesiner, Earl Rutledge, Leo Welnick and Paul West. Like today, one of the association’s key purposes was to represent the industry in the legislative or policymaking arena.
“I remember after the association was first formed, I went back and forth from town to town to get everyone involved. We didn't want the retailers in the rural communities to be left out,” said Vicki Sawaia, in a 1999 interview. Now living in a Valley nursing home, she recalled trips to Globe, San Carlos, Springerville, Payson and other small towns during days when there were no paved roads. Sawaia is the daughter of a merchant from Lebanon, who opened a store in Miami in 1916. He later moved to Superior, where he opened Sawaia's White Spot, a store Vicki eventually managed.
With just a year under his belt, the young RGAA began publishing "Arizona Grocer," now the Arizona Food Industry Journal. Among the first advertisers in the magazine were Holsum, Hayden Flour Mills, Rainbo, Borden, 7-Up and Barq's. Along with publishing the magazine, the RGAA also held the first of what would become an industry mainstay for decades to come - an annual convention.
While early conventions included a product showcase open to customers, later conventions focused on providing networking and social opportunities for food industry members. Great camaraderie, friendships and business relationships were spurred by these annual conventions, the last of which was held in 1999.
"It was always so nice to go. We'd send our help. It was something they looked forward to. They always had a good entertainer, speakers and seminars," recalled Hagel. "We'd see employees who never got to go out to a fancy hotel."
The Growth of Associated Grocers
As the RGAA continued to come into its own, another important industry organization developed -- the Associated Grocers, a retailer-owned buying group that became Arizona's largest wholesale grocery company. The AG worked to provide independent grocers with competitively priced goods. "Everyone bought from Associated Grocers," said Hagel, who was running El Rancho Markets at the time. "With AG, we could buy smaller amounts rather than big quantities and still get good prices. It saved our lives."
Associated Grocers was started in 1948 by Emery Nelson, who had worked with Safeway Pay 'N Takit and later General Sales Company. The co-op, lacking the dynamic leadership of its earlier days, was acquired by Fleming in 1984.
"When Associated Grocers started in 1948, there were about 30 wholesale grocers in the state. The wholesalers all had salesmen who called on the retail stores and restaurants. They took orders for delivery several days later. One salesman from Arizona Grocery would put his bicycle on the early morning train, get off in Chandler, call on the stores, take their orders, put the bike back on the train in the evening, and go home. All the orders were hand written and priced by the salesman the same time they wrote the order. The orders were given to the order desk in the office where they would be checked for prices and turned over to the warehouse to be filled for the next day delivery. After the orders were filled, they were returned to the office where they were figured by people using a comptometer (calculator)," wrote the late Gene Parker. Parker was the Associated Grocers' first employee, and was hired by Nelson who had also hired him at Safeway Pay 'N Takit. Parker started with AG as a buyer then progressed to assistant manager, vice president, executive vice president then president before retiring in 1977. He recalled the great opposition that AG had to initially overcome, with few manufacturers willing to sell to the group.
An Industry Continues to Evolve
Other events highlighted the late 1940's, including the founding of Kalil Bottling. Iceless refrigerator cars began to carry frozen foods, grocery warehouses welcomed steel racks and fork lifts. Television advertising made its way into Arizona households and supermarkets expanded across the state. In 1949, Arizona Grocer began publishing a page directed to the state's Chinese and Spanish-speaking merchants. The following year, the RGAA played a key role in the reduction of an inventory tax, and merchants sighed in relief as a tax on oleo was lifted.
With the 1950's came the unforgettable S&H Green Stamps. Parker called them a "good merchandising tool" which initially gave stores enough increases in volume to offset their costs, while Hagel recalled when "double stamp Wednesdays" accounted for up to one-third of his business. The stamps were ultimately discontinued by the mid-1970s.
Also during the 50s, stores began staying open on Sunday and warehouses began handling frozen foods and using printed order books. Early computers, although a far cry from what they are today, introduced new business efficiencies. As nifty as the 50s themselves, convenience stores began popping up across Arizona. Perhaps most notable among them was Circle K, which hit the market in 1959.
"In the late 1950s, the convenience stores came to Arizona. At first, not too much attention was paid to them but as they increased in number, the small mom and pop stores began to close," wrote Parker.
During this decade, Los Hospederos - which literally means "the hosts" - was formed to support the RGAA. Food broker Ken Sewell led a group of approximately 40 suppliers in creating Los Hospederos in 1950. The group was focused on supporting AFMA by hosting its annual convention, including a golf tournament that kicked off the annual event.
Los Hospederos first played a leading role in the RGAA two-day convention held in 1954 at the Biltmore. Over the years, the group donated and served truckloads of food, and provided numerous hospitality suites, games and prizes. Today, Los Hospederos has been replaced by a new group, the Arizona Food Council, which has not only a new name but also a new mission in serving Arizona's food industry.
Another active industry group at this time was the Food Industry Golfers, better known as FIG. The group held its first tournament in 1950 at Encanto. The event was sponsored by the Roadrunners, an organization of salesmen. According to Hagel, FIG included 40 retailers and 40 wholesalers who golfed once a month. Names were drawn to determine who played together, and anyone not playing with their selected person was not asked to play again. It was understood that every player paid their own way, with the exception, perhaps, of treating each other to refreshments. "It was the greatest thing to bring retailers and wholesalers together," Hagel said.
In the late '50s, retailers battled check cashing problems, prompting a meeting with the banking police and FBI officials. Shoplifting also was an issue and a milk pricing war was going full steam by the end of the decade.
With the 1960s, Arizona's bustling food industry welcomed such familiar names as Fry's and Smitty's, the latter which heralded the new concept of mixing both general department store merchandise with groceries. New on retailers' shelves were Brownulated Sugar from Spreckels Sugar and boneless turkey roasts from Armour. The RGAA also boasted new concepts during this time. Its coupon redemption service, still in operation, was created and its first food industry award was given to Emery Nelson, of course during the industry's leading event, the RGAA annual convention. While the convention is no longer held, food industry awards are still given at an annual banquet. One award honors the Retailer of the Year and another salutes the Supplier of the Year. Another award category, which began in 2000, is given to the Convenience Store Operator of the Year.
By the mid-1970s, Alpha Beta had entered the Arizona market and convenience foods became the rage in response to women entering the workforce in growing numbers. The industry, and its association, turned their thoughts to item price marking, unit price legislation, the energy crisis, high food costs and inflation. During the next decade, a scholarship program was created. Paul Bennewitz, who led the association from 1980 to 1996 and had a background in vocational education, recalled working with Dennis McGuire, a Bayless vice president in Tucson, to create the program. Evolving over time, the program eventually led to the creation of the non-profit Arizona Food & Drug Industry Education Foundation.
Also during the 1980s, the RGAA created its cart retrieval program. A hotline - still in operation - was created in 1984 for the public to use in reporting abandoned shopping carts. Three years later, the RGAA established its Hall of Fame with A. J. Bayless as its first honoree. To this day, one food industry leader is inducted annually. Budget-conscious consumers saw generic products arrive in stores along with technological advances including electronic tags and visible television monitors to fight shoplifting.
"Everything changed because of computers," said Hagel, recalling labor-intensive days of grease pencils and earlier times when every item in a store was marked or stickered. "Now everything is scanned in with the cash register. It's a tremendous benefit."
Times of Change and Consolidation
Change was the keyword of the day throughout much of the 1980s and beyond. Southwest Supermarkets - perhaps foreshadowing the Hispanic-oriented niche store to come -- was created and mergers and consolidations were becoming more commonplace in what was increasingly becoming known as one of the hottest and most competitive food markets in the nation.
For example, Smitty's was acquired, Dillon merged with Kroger, Fleming acquired Associated Grocers, and Alpha Beta was sold and renamed ABCO. El Rancho sold or closed its Arizona stores and MegaFoods began operations. Also during the late '80s, ABCO bought out Lucky stores, and Smith's and Albertson's entered the market. In the mid-1980s, Hagel recalled meetings at Bayless (which ranted #1 in the market in 1984 with 60 stores) where ads from 12 competitors were hung on the wall. As chains dominated the field, independents became increasingly scarce, explaining the debut of IGA - the Independent Grocers Alliance - in Arizona in 1989.
As part of the changing characteristics of the 1980s, the state's food industry association also underwent a sort of transformation, becoming dramatically more politically active. "Grocers typically didn't want to get involved with public policy because they were afraid they'd lose customers," explained former association leader Paul Bennewitz.
He recalled that when political involvement was desirable, the association and the food industry turned to Burton Barr, who operated Maverick Store Fixtures. He became majority leader in the House, and encouraged Roger Hagel, Wayne Manning and other food industry members to get involved. In 1985, the industry came together for the first time to support a political candidate from its ranks when Barr ran unsuccessfully for governor.
"There cannot be enough credit given to what Burton Barr did for the food industry," Bennewitz said.
Eventually, industry leaders such as Gene Parker and food broker Ken Sewell, who visited food industry members to gather funding to create the Food Industry Political Action Committee (FIPAC), helped bring the industry out of its political shyness.
"FIPAC was an important way to pull people out. Leaders like Gene Parker and Ken Sewell caused a number of grocers to say, 'maybe we should get involved,'" said Bennewitz. He noted that one of the goals when he was hired as association leader was to make the industry move involved in the political process.
Bennewitz recalled that the first big issue he faced was a potential tax on food items but not non-food items. Passage of the tax was unavoidable, and check-out debacles were feared as cash registers were far less sophisticated then. The association took action, and as a result, retailers were able to average their sales taxes, plus they were given an allowance for upgrading cash registers. Another issue during this time involved allowing underage cashiers to ring up liquor.
During the early 1980s, the RGAA also played a key role in defeating a bottle bill, which involved deposits on containers. Spurred by interest in cleaning up the environment, the bill would have caused space, bug and other problems for retailers. While initial surveys indicated 60 percent of voters were for the initiative, it ultimately was rejected with 58 percent voting it down.
"It was defeated rather soundly and never came back. But we didn't walk away from the environment issue," Bennewitz said. In fact, the RGAA joined with the beverage industry and others to help start Arizona Clean & Beautiful, an organization still in existence today. Importantly, the association also played a role in the formation of the Arizona Association of Food Banks in order to unify the efforts of individual food banks. And when it seemed possible that the state would get involved in training about alcohol sales, the association again got involved, leading to the creation of today's ABC for Alcohol Education and a reduction in fines if there were violations.
"These kinds of things are important because, as an industry, it's better to do it ourselves than have government take over. We don't necessarily want to see bigger government," Bennewitz said.
He recalled that a key issue in the mid-1980s was the passage of a sales tax to build freeways. "We spent a lot of time to get that passed. Freeways are how goods get to stores, and we got behind it so the costs of products wouldn't increase," Bennewitz said.
Other key political involvement during this time included fighting to increase retailers commissions on lottery tickets and defeat a tax on soft drinks. In the late 1980s, the association helped stop legislation that would have required policing of retail parking lots. It also facilitated a change that enabled retailers to keep a percentage of the sales tax they collected. "We were one of the few states without an allowance for collecting," Bennewitz said.
Perhaps one of the industry's biggest political battles came in the early 1990s when retails faced the threat of having to put a price on every item offered. "We got legislation passed so that wasn't required. When the governor signed, it was a victory for the food industry. It was one of the most important pieces of legislation. Chains, independents, Convenience stores ...everyone got in on it," Bennewitz said.
Not all issues were at the state level, however. For example, an ordinance in Douglas proposed that grocers pay a fee to get back their lost or abandoned carts. Bennewitz and others went to town and convinced officials that retailers would do a good job of retrieving their carts. "It was basically a ransom. They wanted to charge retailers to get their own property back. We killed it off fast because the idea could have expanded," he said.
And, not all battles were won. For example, Bennewitz noted that efforts to enable retailers to purchase alcoholic products on credit were unsuccessful.
Along with its heightened political involvement, the association was the first of its kind to conduct a statewide survey of grocery and convenience store operational practices. "We looked at things like how many sold liquor or had bakeries or pharmacies. It helped us politically because we could answer questions and justify when we got involved," Bennewitz said. As an example, when an issue related to fumigating plants for fire ants arose, the association knew it needed to get involved because of the number of its members with floral departments. "At the time, the largest florist in Arizona was ABCO," Bennewitz recalled.
With the 1990s came increased services, including pre-packaged meals, in-store banking, coupon wars and store cards. By the mid 90s, even the chains found themselves adjusting to the changing marketplace. Bashas' now boasts four formats - Bashas', Food City, AJ's and Dine - each designed to cater to a specific customer. Fry's, Safeway and Albertson's expanded their offerings to include gas station facilities.
While the retail scene was undergoing seemingly ongoing changes, so was the brokerage community. Here, the name of the game was consolidation, followed by going national. Names such as CBS, Collins, Benford & Gray and others have gone by the wayside as Advantage Sales & Marketing has risen to the forefront.
Change continued to be the theme for Arizona's food industry during the 1990s - and most would agree, even up to the present times. In 1995, the RGAA changed its name to the Arizona Food Marketing Alliance (AFMA) in order to better reflect its membership, which was no longer only independent retailers but also grocery and convenience store chains, suppliers, vendors and others. Just two years later, in 1997, AFMA's Education Committee formerly established the Arizona Food & Drug Industry Education Foundation, which to date has awarded more than $300,000 in scholarships and tuition reimbursement to launch and enhance food industry careers. By the end of the decade, familiar names such as Smitty's, MegaFoods and ABCO were no more. Fred Meyers Marketplace made a brief appearance only to be sold to Smith's which converted to the Fry's banner, and Albertson's acquired American Stores and Osco Drug Stores.
"We've had a lot of chains come into town," summarized Hagel.
By the time the millennium had drawn to a close the industry born out of general stores and trading posts had grown to include businesses of all sizes and scopes. Ever-evolving and always changing, it had chugged through the decades much like the railroad that heralded many of its earliest members.
Most importantly, the state's food industry had woven an intricate pattern through time - a pattern beautifully intertwined with the trade association that serves it, the Arizona Food Marketing Alliance.
© 2016 Arizona Food Marketing Alliance
120 E Pierce St.
Phoenix, AZ 85004
Tel: (602) 252-9761