December 6, 2023

Food City

The Best Darn Food City Uou Can Get

Home grown Food City among nation’s top retailers

ABINGDON, Va. — From the humble beginnings of a lone store serving an isolated coal community to one of central Appalachia’s largest employers and most visible brands, President and CEO Steve Smith sums up Food City’s success in five words.

“We’re in the people business.”

Based in the quaint, historic town of Abingdon, Virginia — population 8,300 — Food City has grown to become a national retail powerhouse. Its $3 billion in 2022 sales ranks among the top 50 retailers and wholesalers in the U.S., according to Supermarket News.

Food City currently employs over 18,000 people.

“We’ve been very fortunate over the years to recruit and grow some really talented, passionate people,” Smith said. “We’re in the people business. We sell groceries but that is a by-product of being in the people business. So much of life is how you treat people; not just financially but reward wise; expectation wise. And just being a good person, a good boss.”

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Seated in the café of the chain’s massive Abingdon showcase store, Smith reflected on the decades of growth that began with his father Jack and other family members pooling their resources to establish a single store in Grundy, Virginia in 1955.

Getting to that table involved a meandering walk — as Smith stopped to chat with some local attorneys and then shook hands with many of his store’s patrons — calling most by name. Retail can be grueling and relentless, but Smith wears success like a comfortable jacket.

“My dad was an electrical engineer — graduated from the Naval Academy and spent seven years active duty — got discharged and came back to Grundy to live … As the story goes, one day my grandmother sent him to the grocery store and he waited 30 minutes in line. He got frustrated with that and thought he could do it a little better,” Smith said, recounting a familiar tale for what may have been the thousandth time. “He’d lived in San Diego and saw some nice, modern stores in southern California and it tweaked his interest.”

Jack Smith, his father Curtis, a cousin Ernest Smith [father of author Lee Smith] and his uncle went in as equal partners to construct a new Piggly Wiggly grocery store. Their efforts were successful and, in a few years, they looked to expand. Since all of the Southwest Virginia Piggly Wiggly franchises were spoken for, that first growth occurred over the next dozen years in three other small towns in nearby eastern Kentucky.

Its corporate offices were established in Abingdon in 1970 and the company formally took on the Food City name in 1984.

Ongoing growth

Growth has been exponential — primarily in Tennessee and Virginia — as Food City opened its 100th grocery store in 2008 and now operates multiple stores in population centers like Knoxville and Chattanooga, Tennessee.

Today K-VA-T Foods/Food City owns 152 retail outlets, including 95 grocery stores in Tennessee, 25 in Virginia, 13 in Kentucky, 12 in Georgia and one in Alabama — with three more under construction.

Over 100 Food City locations include a full service pharmacy and nearly 90 offer a fuel center. Food City has also been adding Starbucks Coffee centers inside many of its stores.

In many of those markets they compete directly with national retail heavyweights Walmart, Sam’s Club, Kroger, Publix, Aldi, Ingles and Save-A-Lot for grocery dollars plus Walmart, Sam’s, Walgreen’s and CVS on the pharmacy side.

The company recently began establishing a series of Ace Hardware stores — primarily in the Tri-Cities — and some standalone wine and liquor stores in Kentucky.

“We’re not a perfect company and we’ll never be a perfect company but we have a nice mix of people who have grown up with our company and other folks we’ve recruited from outside,” Smith said. “A lot of people left Food Lion when they downsized around this area. We got some really good people from them when we bought the stores in Chattanooga and from BI-LO Foods. It’s been growth by acquisition and organic.”

Compensation & workforce

Many of those employees began as teenagers and Food City was their first job. The company has dealt with changes to minimum wage laws and held its own hiring and retaining competent workers.

“In Sevier County, all the retailers fight for help — whether it’s Dollywood, the go-kart tracks or mini-golf courses. You pay a higher wage there because there is a lot of competition,” Smith said. “We give a lot of 14-year-olds, 15-year-olds their first jobs. You want to pay people fair and competitive and you want them to have room to grow. In Virginia, when you put an arbitrary, high artificial wage in, you don’t have a lot of room for them to grow.”

While the federal minimum wage is $7.25 per hour, Virginia’s General Assembly modified the minimum wage law and mandated a series of increases for first-time workers. The present rate is $12 per hour and that will rise to $15 per hour in 2026. Tennessee is one of five states that don’t have a minimum wage.

Unlike many businesses in the post-pandemic economy, Smith said Food City has generally been able to hire enough workers and fill most of its open positions. The greatest needs are typically information technology, truck drivers and workers at its distribution center.

Food City employs about 1,700 people in its home county of Washington, between its four-story, 140,000 square foot corporate headquarters — called the “support center,” its 1.1-million square foot distribution center and multiple retail locations.

This region, he said, is a bonus to recruiting employees from outside.

“We’ve been very fortunate to recruit people to our geography because they love the area,” Smith said. “It’s relatively low cost of living, it’s a safe area; it’s a beautiful area. A lot of people love the outdoor recreation — the mountains; the hiking; the lakes. You’re close to Knoxville if you want to go to a larger community and you’re not that far from Atlanta or D.C.”

Name recognition & synergies

Food City’s growth has largely run parallel to its role as a long-time corporate partner and event sponsor of major NASCAR races at Bristol Motor Speedway. Its sponsorship of the spring premier series race at Bristol since 1992 is the second longest running in the sport, second only to the Coca-Cola 600 at Charlotte.

“Name recognition is very important. We’re opening new stores in Alabama and Georgia and you hear people talk about, ‘I’ve seen your stores in Sevier County’ or ‘I’ve seen your stores in Bristol because I come to the race.’ It opens doors for you. It helps to have that name recognition when you present yourself as you’ve got a reputation to back up what you say you’re going to do,” Smith said.

Long before Food City expanded into and past Knoxville, the company was a corporate partner of University of Tennessee athletics since 1996. Last month Food City signed a $20 million, 10-year deal for naming rights of the Thompson-Boling Arena at Food City Center — where the Tennessee men’s and women’s basketball teams play.

“I think people are loyal to NASCAR. People are loyal to UT sports,” Smith said. “I don’t think I can run a financial statement and say the investment has paid off in x, y, z, but we’ve been growing a lot ever since we’ve been associated with BMS and we’ve been associated with UT sports for 27 years.”

The company also remains a long-time partner with another major regional employer — Eastman Chemical — on a nearly 30-year recycling program that encourages fans to recycle their plastic cups and drink bottles.

There are other synergies with the Tennessee Beef Council and Bush’s Beans, a nationally distributed food brand based in East Tennessee.

Food City family

“One of the things we’re most proud of is we’re a partially employee-owned company,” Smith said. “About 12% of our company is owned by our rank and file associates, at no cost to them. When we make a profit, we give a contribution to the employee stock ownership plan that puts stock in our associate’s hands. When they meet the qualifications, part-time and full-time employees can become shareholders in the company.

“I’ve seen scores of people retire with six- and seven-figure retirements that they’ve made no [financial] investment in just because the company has grown and been successful,” he said. “When our company is successful, our people win as well. I think that is the secret sauce of why we have such loyal associates — people who make this a career.”

Experience has provided some valuable lessons.

“We’re not perfect. We make our fair share of mistakes. Sometimes we have a cleanup on aisle three and sometimes on the third floor. Not everything you do is going to be 100% correct. It’s OK to admit you made a mistake you’ll fix it. Not too many CEOs will say that but I’m big on that. If it doesn’t work, it’s OK to fix it and make it better,” Smith said.

Their philosophy is simple.

“We try and conduct business honorably and professionally — the way we’d want our family members to be treated,” Smith said. “We refer to ourselves as the Food City family.”

[email protected] — Twitter: @DMcGeeBHC

[email protected] | Twitter: @DMcGeeBHC