Lessons on growth & strategy from the ‘Disneyland’ of supermarkets | Business Casual

Lessons on growth & strategy from the ‘Disneyland’ of supermarkets | Business Casual

Show Video

Every great idea in the food business probably is happening around the New York City market right now. If you see a line of people waiting to get in somewhere go wait in line and figure out what to sell. OK. Mrs. Katz. So today we are talking to Stew Leonard Jr, who is the president and CEO of Stew Leonard's Supermarkets. Once dubbed the Disneyland of dairy stores by the New York Times, Stew Leonard's serves over 20 million visitors per year and has annual sales exceeding $500 million.

And Stu joins us today to discuss the role of show business in his company, reinventing the business model of an industry and the dynamics of family business. Stew, my my mother grew up in Norwalk, Connecticut, Norwalk High School graduate. My my grandma lived in Westport. So growing up, you know, I grew up in Westchester County, but my mom would take me across the border to Connecticut. We go shopping and still Leonard's always going to stews and we hit those aisles of the animatronic cows. I love the farm. Fresh five, the whole thing.

You put together quite the operation, especially for kids like myself. And for those listeners who don't know Stew Leonard's the man or the the operation, the retail operation, the grocery store, it is a very small regional operation. Right.

You want to explain to listeners where you located, how you got started? Just the background, the whole family business here. Yeah, sure. Well, first of all, my grandfather started delivering milk back in 1921. He literally had milk trucks and he had a dairy plant where he bottled all the own milk and, and that grew and grew and in the fifties my father took it over after he passed away.

He kept delivering milk. I grew up right there next to the dairy plant. As a little kid, I would go in and watch milk cans and climb through the bottle caps and just watch the big, big milk tanks out in the plant. And it just always was a great memory to be working in a dairy plant like that. And we bottled the milk and then we went deliver it to customers houses.

And in 1969 my father decided to, to change from the home delivery over to retail So he opened the small dairy store up with eight items in 1969 in Norwalk, Connecticut. Just to give you a little reference, we're one hour from New York City OK, along the Connecticut coast. And so we have a lot of roots in this community and we open that store up and the concept really then was bring the stuff fresh from the farm in and, and get it right to the customer as fast as you could. And so it was sort of a farm to table back in 1969. Well all of a sudden when the farmers started hearing about the success of the store because in the store one of the things my dad is very creative. He had a big glass window which you probably remember Scott they could look in and see the milk being bottled.

Right. Yeah. You know, right there. Yeah. How fresh, how fresh could it be. Yeah.

No, I'd never seen anything like it to you because you go to other grocery stores, you don't see that, that behind the glass looking into the operation itself. Right. Well, we call that Today Show and sell. OK, so show everybody making something and then sell it right there.

So so we want to build on that and keep it fresh. And so what we've done, all of a sudden the farmers around here started hearing about the success of like this farmer's market with a roof. And the next thing they said, could I bring my corn down and sell it? Could I bring my squash? Could I bring you know, my fresh fish? Yeah.

You know, could I bring then we started getting meat from the Midwest, and my sister came back from France and she studied French over there, but she worked with a family that baked. So she wanted croissants and baguettes in the store. So we started a little bakery, and then we started hiring chefs to do prepared food. And so what we ended up with is like a big fresh market. And it grew a lot in the eighties, you know, and we had one store that I got out of. I told you, I went to UCLA, I went to business school out there, came back, and I said, Gosh, this is so cool.

One store, I think we could build it. I think we could grow this concept. It's really cool. And so in 91, we opened our second store, 99, our third store in Yonkers, New York, and then we've expanded.

Now we have seven big food stores we've also due to the laws back here, we have eight wine and liquor stores. And, you know, we, we we have about a hundred thousand customers a week coming through. It's two letters and getting like a hundred trailer loads of product in every week. From all different local fresh farms and everything. And we've still kept the same concept, which is, you know, have good relations ships with all the local farms and chickens and eggs and, you know, and lobster bean and salmon producers and so forth and get it to the store as fast as we can every day, sell it fresh at a great price and that's been our sort of family mantra you know, for almost 100 years, though.

Yeah. And even beyond the quality of the products, there's obviously the entertainment factor at your stores as well. Let's get to some of the inspiration behind that. Your father was famously inspired by Walt Disney and the New York Times even called his original dairy market the Disneyland of dairy stores. What attracted him so much to Walt Disney and that ethos? You know, what I think happens is we look for excitement just around us all the time. And our family trips when we were younger and we didn't grow up with with a lot of money or anything, my father risked everything he had back in 1969, you know, to open up that store, borrowed 582,000 from the small business administration.

So we didn't do a lot, but but once we got a little bit older, we opened the store up. He started bringing us on trips to Disneyland OK, that was like a family trip to go there and we were like just sitting there. It's a small, small world of, you know, we're like looking at the people waiting in line to get in there. We're looking at how excited the people were.

Disney and we said, Let's try to create that magic that gets to Leonard's and that was really an inspiration for a lot of our animation shows that we have. We stayed in touch with Disney over the years. We even talked with the VP of Imagineering down there just to ask them how do they come up with new ideas and create excitement for their customers at Disneyland? And the second thing we did all the time, which is another excitement day, was another family trip was Las Vegas. We love to go to Las Vegas as a family. And those shows that they had out there were so impactful on our family.

Wow. Wow. You know, the it's like the same thing with going to Broadway in New York, which is so close. We'd go down to watch Alice in Wonderland or and it's magical. You walk in off of Times Square there, and the next thing you know, you're you're in a magical room for a couple hours and glued to your seat. So there was this this inspiration, I think, among the whole family to sort of be like sponges out there in the environment and look for things that excite people.

You mentioned the emphasis on farm fresh direct from the farm and the behind the scenes look into the operations that are probably drawing in the customers. But then you have the show business aspect as well. What what was most instrumental to your to your business there? Was it was it the show business approach? Was it, you know, a combination of all these things? I mean, was it was it was it basically trying to attract the children, the kids? Because if you can entertain the kids, you're going to get the parents to come.

Right. That's kind of an old a retail, a isn't it? Well, you know, it's got its good point. But, you know, one of the things that matters the most is you got to eat everything we sell, OK? So and I got to eat it. And if we're having Thanksgiving, everybody wants to sit around the table go, yum, that was a really good Thanksgiving. So I think the basis of our company is quality.

And you really have to produce good tasting product, you know, and and that's a goal for myself. Our management team, our whole family has is to try to go out there and find the best. Like a good example. You know, we opened up a Paramus, New Jersey, you know, right at the Paramus Park Mall.

Then we opened it up. We have a kitchen with a great chef from the Culinary Institute of America. And but we're noticing all our team members are leaving the store because we're attached to a mall and they're going up to Chick-Fil-A to buy their chicken sandwich. OK? And here we have these big buffets of food, but our team members are going up to like, hey, let's go figure what's going on up there.

Well, they have that knock out chicken sandwich, right? I mean, it's a home run. People are waiting in line to get into Chick-Fil-A. So you know what we did? We did what we call it Stew Leonard's, our D plus I. It's not research and development. It's retrieving duplicate and improve. So we got Chick-Fil-A sandwich.

We figured out how to, you know, make it exactly what we put a little extra sauce in an extra pickle. OK, and we're selling like a ton of those things. Every single week is a stew Leonard chicken sandwich.

So the basis of it, you can have all the information around that you want and all the fun and nice customer service and all of that. But if you don't have a great chicken sandwich that you sell in the store, everything else is for naught. That's such a great business lesson where maybe when people think about Stew Leonard, they do think of the animatronics, the fun experience. But if the quality of the food wasn't great, then people wouldn't come because then it's just not worth it. So I think that's great. How do you make sure that your employees are focused on this? And that does continue to be the core of the strategy is, is to provide quality products to your customers.

Well, you know, that's a good question, and I think it's something that I've wrestled with just growing up as the next generation in the business, because there's a lot of great values that owner entrepreneurs have have espoused when they started but they get diluted along the way. So like one of the things that you have to do, we call it source bang the culture when when you talk about quality, it's something I have to talk about all the time, OK? Our management team has to talk about it all the time. The our family has to talk about it all the time. I'll tell you one thing that's amazing about my dad is 92 years old right now. I'll still get a cold call from them all at that.

That chicken marsala that you're selling down there doesn't taste as good as the great Italian restaurant I go out to to get chicken myself. So there's, there's I think, a lesson there that that he's always talking about quality and trying to improve the product all the time. And I think anybody that has a business, you know, and it could even be a service business, it doesn't have to be a food business.

Try to improve all the time and want to be the best and have that core element that at the bottom is that you really want to be great at doing what you're doing, whether it's selling product or selling a service. But besides your dad, who are the taste testers? Who do you trust the most for the quality of well. I do have something called that I say to all of our taste testers at the store, Stu, who OK, because I don't want him to have a taste what I like because I happen after being out in L.A.

I like spicy food, OK? You guys taught me to love spicy food and to love garlic. OK, so so my wife's family, they were farmers out there were actually two from Bakersfield. They bring big things that garlic over they'd make this this pico to go. That was crazy good without Latinos and everything. I brought a pack killer, tried to sell it at the store, didn't sell that well because too spicy back on the East Coast.

So I don't want to make my palate the judge of everything. So we try to get, like, a dozen people together randomly and let them taste it. And you can always tell you can almost tell about what people say. You just see whose glass is the emptiest or or how many times that people go back for seconds. And even with all the wine tastings we do, it's the same thing.

A lot of people all talk dry but drink sweet. So if you're tasting certain wines, what you're looking for is which ones that people really go for and and say, you know, not intellectually what's the best, but what is the one they they enjoy drinking the most. You know, many aspects of Stu Leonard's business model strays from the typical approach that we see in the grocery industry.

In addition to your dedication to show business and I love as well the petting zoo out front the pumpkin patch for Halloween, really just attracting the kids is is what you do so well. But in addition to that, you have this approach to stocking products that is quite unusual when you first, like you said, you cut out the middleman. You're getting items direct from the manufacturers, from the farmers, from the suppliers. Why did you decide to do that? And how instrumental has that been to the store's success? Well, Scott, a couple of things lead to that. First of all, most grocery stores might have 80 to 100,000 items. So we have 3000, and they're mainly around the perimeter walls of the store.

If you go to a Whole Foods, even Costco, you go into Trader Joe's, most of the fresh products are out on the wall due to refrigeration and the back rooms that you need. So so we're mainly fresh, we're limited items, and we're able to buy in high volume with those limited items. There's a theory out there called the Parade of Principle which is 80% of your sales are going to come from 20% of your items. You know, sometimes even I'll walk into the store, we'll have 50 or 60 rosé wines. You don't need that many rosé wines. If you look at it, there's probably like about 15 of them that do most of your business that you want some from France and around the world, but different sizes, but you want to focus on fewer items and what your best sellers are so of, of we're able to do that at Stew Leonard's and it gives us an opportunity to build bigger displays buy better from our suppliers, cut out the middleman because we don't have to buy 20 cases of this and 20 cases that we can say to them, send us a trailer load or send us a straight job if it's a smaller local, you know, farmer or so forth.

So I think that's helped us with freshness. And you know what, it's also helped us during the pandemic. We were able to keep our shelves full at the store because we didn't have a supply chain disruption. We were able to go right to the farmer and talk to him. Now, the farmer had his own issues. Sometimes he had to drive the truck himself because he didn't have enough help.

But we got the product and the shelves were full. And so we like having that model where you go direct. Then you cut out the middleman.

And then if 80% of sales are coming from 20% of the items, you better get those 20% of items correct. And tastes are changing, preferences are changing. Maybe more focus on, say, healthful products, plant based products. How do you go about selecting the items that you stock and stay up with the times? Well. Naw, first of all, it's like if you want to get the Baseball Hall of Fame, you only have to get three hits out of ten, OK, and boom, you're a star, OK, so you fail.

You strike out seven times, OK, we're the same way. It's too Leonard's. We're bringing new stuff in and trying things all the time. We're giving it a shot in the store and seeing if it sells or not, then I think you have to also be looking around and have your eyes and ears open. We have this just object. It's called the idea cow, where the the cow is like eating all of these ideas and they come from like suppliers they come from our team members working here at the store.

We have 55% of our team member base of nearly 3000 employees are our minorities. From all different countries around the world. So there's different flavors and Jamaican jerk chicken that they can make and all sorts of cool things. So we look for ideas from them.

We also are lucky enough to have New York City just a stone's throw away. And I would say every great idea in the food business probably is happening around the New York City market right now. We just have groups regularly go down to New York and walk the streets a of red was Trader Joe's, you know, Gracie's market. There's a lot of great little bodegas down there with cool thoughts, chopped salads, are down there now.

All the new chains pretty much for sandwiches. So we're down there with our antennas up like this looking for new ideas all the time. And what we want to do is we call it find a line if you see a line of people waiting to get in.

So we're go wait in line and figure out what to sell. OK, Meg, no, Meg Magnolia Bakery down in the village, OK, there's a line of people waiting to buy cupcakes there all the time. OK, you know, that sort of sad went up and down, but you got to hit them hard when it's a fat. So, you know, we put that in. So you got to motivate everybody to keep looking for ideas and innovate all the time.

Stu, there's a lot of lines being formed now because of foods and restaurants that go viral on social media, on Tick-Tock especially. Is your team tracking social media as well? Yeah, we're probably not as good as we can be on that, although we've put a huge emphasis on social media. We have I guess I guess you could look it up but there's hundreds of thousands of followers that we have, and we've actually stopped doing all of our paper fliers at Stew Leonard's for a couple of reasons. One of them is that environmentally, you know, we're printing just millions of these fliers every week in paper and we figured, let's go all digital now. So we're all over Instagram, Facebook, tech, even tick tock they're doing all the little stuff that I don't even understand all the time. They got our costume characters, whatever, that.

It's perfect for a while. The cow. It's perfect for you. Yeah. Yeah, yeah. So the younger groups doing that, we call them the social media mafia. We let them sort of go loose in each one of the stores and do things we're constantly we have weekly meetings and we're measuring the views that we're getting and all these different ideas that we put out there. You know, you're trying to really get people to, to, to look at Stew Leonard's over social media, which is a big part.

I don't know how to measure it exactly because, you know, it's about ringing the register. You know, you want to, you want to do all this fun stuff and everything, and it's great. You can do some Q and get a lot of views, but does it really help ring the register? Not so. But social media is, I think, a, a big frontier for all businesses today. You don't want to be vanilla out there.

You got to do something a little edgy. You got to have some fun. You know, everything can't be about salmon at 1099 a pound people.

People get bored about that. But you could do something fun where the salmon farmer could take the his camera out on the boat and do a little quick hey, I just caught the blah blah blah blah, you know, water splashing on the camera or whatever. So you got to, you got to keep it fun and exciting. And, and and I think it's the future as far as promoting and advertising your businesses. Well, you're certainly ringing the register at your seven locations.

Do $500 million in sales? This is a winning formula. Yet another unusual business decision that you made is centered around the speed of your growth I mean, you already talked about how how long it took to go from that one store in 69 to the second one in 91 third and 99. And now you have a few more. But still, you know, most companies that are growing this doing most companies doing this much revenue and finding such success with customers are going to be approached by, you know, investors or, you know, VCs or something, say let's let's fuel this growth. Let's do 100 new stores, let's do a thousand new stores, let's just grow all across the country. You've pretty much turned that down.

Or I know if you've been offered that and you've turned it down, you decided to stick with your guns, keep it local, keep it to the family. Why haven't you continued expanding like you're Kroger's with thousands of locations? Why haven't you decided to become a national chain? Well, you know, Scott, that's a great question. That's almost philosophical in a way, because, you know, part of of a business has to be a core love and passion for what you're doing.

I think if you look at every entrepreneur, Steve Jobs, you go out and look at giving in on Musk right now. I mean, Disney, you look at all of the great leaders Frank Perdue, Norah, you mentioned earlier, you know, if you look at all of them, there was a passion to do something great with their business. And I think what our family wants to do is really make sure we deliver really good product and service to our communities that we're living in and and you know, it's not really about the money. You know, we've never our families never wanted to get a tremendous amount of hoard of my money, money. We're proud of the impact we make our communities.

You know, we want to help really help people. We I feel very proud. It's true. Leonard's over 80% of our people have been hired from within and and that we brought people who swept the parking lot couldn't speak English and they're now running a kitchen at two letters, you know and they sent their kids to high school and college and, you know, one of our guys from Haiti who started that way, his daughter's a lawyer for the Department of Justice. Now, how good does that make you feel in your life? OK, you get private equity in here. They want to fire all those people.

You know, and and get somebody in here who's less expensive maybe to to work here. They they don't understand the business. So I've seen a lot of XP mansion, rapid like that, crash and burn.

And we have a lot of pride in what we do. We're hoping we can continue that from Generation to generation. And and, you know, you know, so we have we're growing, you know, and we're growing, but not like super fast. We don't want the wheels to come off. I agree with it's like, you know, you hear about some of these companies with their ambitions and their scale. It's like, what's the point and how much how much is enough? One is enough enough. You know, you make a good amount of money.

You've got good team, you've hire good people. You see them grow. You can pay them well, right? You can redistribute to them. Just be happy with that. I totally agree with your philosophy, Stuart. I really appreciate that. Well, it's taking that bad.

Hey, you see my stomach here? I don't want I don't want to fill it any more, I guess. Wrinkle I can drink whatever once look like I could drink, I could drink whatever wines I want. I could. Yeah, steaks. But I got to like trim back right now. I can't even I can't even order what I want to order you.

So so but you know, on that note, Scott, I have a guy who lives down the street from me who buys bad debt, OK? He makes his money off of buying bad debt and kicking people out of their houses. And stuff like that. You know, I could never put my head on the pillow at night and and feel good about, you know, my my career.

You know, I feel good about this career of the men. We are helping America in our own little way right here. We're we have great wages, great benefits. We take care of our people. We're offering a great service for our customers with fresh food. We're helping as much as we can with the environment.

We're trying to help with nutrition by bringing that are organic foods non GMOs, you know, working on our packaging to reduce the amount of cardboard and plastic that we're using. So you know, I feel pretty good when I put my head on the pillow at night that that I'm producing something here, you know, in America and and I'm not kicking people out of their houses like that. So I don't know. It might be a little bloodied kind of version but I'm happy right now. Now, Stu, of course, Stu Leonards is a family business with you and your siblings, each catering to different arms of the company. What are some of the considerations that are at play when it comes to outsourcing talent versus hiring from within your family? And sort of keeping it within the family? But you know what? I'm putting a book together right now. I'm writing a book and I'm in the middle of it.

And one of the chapters is going to be on family business. And, you know, the title is going to be I Love It and I hate it. Because, look, you know, you have to blend together a family and you have to blend together a business. And we all look, I haven't met anybody whose family just runs harmoniously all the time. I mean, I'd be lying if I said we're always like, hugging and kissing each other around the dinner table every Sunday or something. OK, it doesn't happen.

But what I would say is that the family has to embrace the fact that it's a competitive world out there. OK, this is not about entitlement. You can't just assume because you have the last name Leonard or you know, we have to Velo and Hollis, the other other families know that you're going to automatically just be able to have a job here at the store. We've put in some pretty strict barriers.

You got to finish college. You've got to go work for a company for three years outside the business, so you can't come immediately in here. And the third one is once you join here, you have to be you will you have what we call the 360 degree performance review where you're being assessed every year and what the other people think of working with you here.

And if you if you have low ratings on that, I mean, you really are going to be called to the carpet. And we've already had, you know, one family member that didn't cut the grade. You know, it doesn't doesn't go well within the family. But, you know, we have to make sure that we have good talent here at Stew Leonard's. And if we can't find it, back to your question from within, you really have to go out and look externally to have the very best people you can.

What happens to that family member that they get banished to the cornfield, like in the twilight zone hey. Hey, you want to listen to this quick story? It's a two hat story. My brother one time was working here. He went to Florida and he wasn't supposed to for spring break, OK? And he he was told he couldn't because the store was busy. Well, he comes back and my father says, come over to the house. We're taking a Jacuzzi together.

So my brother's like, wow, they really missed me. You know, I'm probably going to get a promotion. Or so instead, my father said, to it says I'm going to put the hat on as your boss.

I said, you left when you were told not to. He said, I want to tell you you're fired. So he said, Let me take that ad off. I'm going to put the head of your father on. He said, Son, I'm scarred.

Sorry to hear that you just lost your job. So let's talk about the next steps so, you know, we've we've we've tried to keep the the the work ethic in place through the generations here at the store. What does that father hat look like? Is it like a fedora? And then the business that is more like a baseball cap? I want I want a picture of the hats.

That's a great that's a great story. And it really illustrates the difficulty. Like you mention, you said you love it and hate it when it comes to the family business because there is a personal side and a professional side and they can sometimes clash when it comes to the business and you have to manage it as well. So that's a story that your father had to manage with your brother.

Do you have stories and you now running the company having to manage it in a similar way? Yes. I have also, Scott. And, you know, I think the thing that I've learned in my role is you have to keep everything transparent and fair because one of the things I've seen among my my friends who have been in family businesses is that or the mom passes away and then all of a sudden a lot of past practices get uncovered. And one brother says, wait, I didn't know that mom were doing that for that sister.

And it creates they threw a little cherry bomb in the next generation. And so I think what's important is is for me right now is I try to be as transparent as I can with everybody. Everybody knows what salaries everybody makes and why, which compensation is usually a big issue among family members. Their value to the organization we actually have an outside group of of some people in and outside the business that, you know, will actually look at everybody's resumés and evaluate their contribution to the business and try to give them an outside perspective on what it's like. Like in the real world, and, you know, and I'm really trying to to to promote that as much as I can right now because it's important to have what they call in family business governance, which is where you develop I don't want to say policies, but but certain procedures, people have to go through that.

Everybody agrees on when the C has come so that the goal is really to keep the business running successfully from generation to generation. Still, grocery stores the grocery business runs deep in your blood, clearly. So Scott and I want to get your take on what you think the future of the grocery industry looks like. We had an episode for Business Casual recently where we talked about these new 15 minute grocery delivery companies that have been popping up left and right. What are your thoughts on some of these quick delivery companies and what are you most optimistic about when it comes to the future of grocery? You know what, Nora, right now I've been doing this for 50 years, and I would say right now, you know that nice little crystal ball I had. It's broken because there is so much happening in our space right now.

It's more than I've ever seen before. But you know, COVID threw all sorts of wrenches in it and, you know, home delivery, which used to be, you know, like 5% of our business with Instacart and curbside pickup jumped up to almost 25% during the pandemic. And now it's settled down to probably around ten ish percent right now. So the question is where's the delivery business going to go in the future? You have some people that that want it delivered to their house.

Other people like to come in and touch the product and smell the product and feel the product. So there's a little division today, I think, between how fast the home delivery business is going to grow versus a versus onsite retail. I don't think retail is dead, but I think boring retail's dead.

So I think you have to create a fun place. Like my daughter, who has two little kids, still wants to go out and do something fun with her gifts. You know, you're not going to have her go online and stay home and do zoom to go to an animal farm or something. You know, they'll want to come to the store. So so I think the delivery and so forth is big.

Another thing that, you know, the Zabar's did down in New York City was they've created an amazing online business you know, a dot com business where they're shipping a lot of their product out all over the country. People, I think today are a lot more used to delivery. I mean, every day I get home, there's a package, you know, I don't know about you guys, but yeah. So it's just more of a common thing where that's going and how much the pie is going to be eaten. And the question we have is how much you want invested. You want to do you want to put a lot of money into the dot com business today? It's expensive because you got to spend like 20% of your sales on advertising.

So you've got to be out there all over the Internet. That's a lot of money, you know, so you know, it's going to be interesting to see where that goes. But I think what's what I want to do is have a very agile, quick reacting organization so that if I see a little bright spot out there, we can quickly change and adapt and get into that business.

If you like what you saw and you like what you heard, you can listen to the entire episode of this podcast Business Casual, anywhere you get your podcasts and please go ahead and subscribe to the Morning Brew YouTube channel and go ahead and click on that alarm bell, that thing right there so you can be alerted any time there's a new video.

2022-05-08 02:54

Show Video

Other news