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The Bully of Bentonville

Page 23

by Anthony Bianco


  Every week or two, one of Bonaminio’s floor managers calls up to his eagle’s nest of an office above the store to tell him that the Wal-Mart people are back. Usually, there are two or three of them, dressed in ties and jackets. They never identify themselves—much less ask permission—they just show up and start walking slowly through the store, jotting notes and talking into little tape recorders, like Sam Walton used to do. Not everyone appreciates Wal-Mart’s intrusive research methods, but Bonaminio does not mind at all. “I think it’s hilarious. They do more business in one second than I’ll do in a damn lifetime, and they’re over here checking me out,” he says. However, Bonaminio hasn’t returned the compliment in kind: He can’t remember ever setting foot in a Wal-Mart Supercenter. “I don’t pay attention to other stores,” he says. “I get lost.”

  Wal-Mart’s economies of scale put the independent at a great disadvantage in dealing with suppliers, Bonaminio says. “In the old days, the wholesalers would protect everybody. You had big grocery suppliers who came in and said, ‘We not only will sell you groceries; we’ll give you services. We’ll help you with your layout. If you have accounting problems, we have people who will come in and help.’ You’d call them up and, boom, they’d have five guys over here tomorrow. They wanted your store to be healthy, and they wanted you to do everything right because they want to sell you groceries. All that service wasn’t free; it was built into the price they charged you. But everybody had to pay it because all suppliers were working through the wholesalers. When a chain would come in and try to cut a special deal with Kraft or Procter & Gamble or someone, they’d say, ‘You got to buy through this guy.’

  “What happened was Wal-Mart got so big they could just bypass that chain. They could go right to the supplier and say, ‘Here’s the deal. We want so many truckloads of Miracle Whip. We don’t care about accounting service. We don’t want any of that other shit. We’ll buy so many trucks and it’s ours after we pick it up, whatever.’

  “So Wal-Mart cuts out the middleman while me, as an independent, I’m still living over here with a wholesaler tacking on 10 percent to 15 percent. Not only that, the big guys get a better price to start. When I’m talking to my suppliers in the grocery business, I’ll say, ‘How come Wal-Mart can sell it for $1.99 and your best price to me is $2.05?’ ‘Well, now, they buy from a different division,’ they say. Right then and there, I know.”

  Bonaminio only has one store, but at 280,000 square feet it is by far the largest supermarket in Cincinnati, bigger even than most Supercenters. “You’re big in your own right,” I say. “Can’t you get a price break, too?”

  “Yeah, but you got to be able to get to half a truck of what you’re buying, which is a lot of product,” he replies. “There’s no way an independent is going to get a supplier’s best deal. You have to rely on your niche—the thing that makes you different. That, and service. The thing is, Wal-Mart is definitely Wal-Mart; it’s all about price, price, price, OK? But because Wal-Mart is so definite on who they are, they open a wide field for the niche operator like me.”

  Like Walton, whom he admires, Bonaminio was a born entrepreneur. The son of a steelworker, he grew up in Lorain, about twenty miles west of Cleveland. A natural salesman, after he left Miami University in Oxford without a degree he struggled as a roadside produce vendor in Hamilton, the town next to Fairfield. Bonaminio couldn’t afford to buy his own land, so he had to keep moving; his little stand was a cork bobbing madly on the surface of a suburban real estate market roiled by speculation. It took Bonaminio four years to save the $10,000 that he put down in 1974 to buy the first few acres of the seventy-one-acre site that Jungle Jim’s now occupies.

  The first thing to understand about Jungle Jim’s International Farmer’s Market is that it has prospered not because of its location but despite it, defying the first commandment of retailing and of real estate. The store is a hugely inconvenient, four miles from the nearest major highway, Interstate 275, and a long stretch of traffic hell lies between it and Cincinnati’s most populous districts. Even so, Bonaminio has never seriously considered relocating and, for that matter, has yet to open a second Jungle Jim’s. From the time of his earliest success, Bonaminio was at least as interested in adding onto his building as in adding to his business; to him, it was one and the same. Rob Symjunas Jr., a Cincinnati shopping center developer, once tried to entice Bonaminio into a project by offering him a free building. “I was going to give it to Jungle, but he still wouldn’t do it,” Symjunas recalls. “Mentally, he is just so focused on that store. It’s his baby.” 26

  Bonaminio’s colossal supermarket is an amalgam of a dozen different buildings that were constructed one after another over three decades and that coexist today under one large and very complicated roof. It is an ingenious labyrinth of a store, constructed largely of recycled materials and filled with oddly angled walls and novel design features. During the two-hour store tour that Bonaminio gives me, he is so eager to point out his favorite props that he all but ignores the wares on his shelves. There is the antique fire truck atop the hot sauce case; the animatronic Robin Hood and Sherwood Forest display above the Great Britain section; the eight-foot-tall, Elvis-impersonating mechanical lion; the 600-pound cheese hanging from a rope inside a glass case; the life-size replica of an Amish buggy; the mint-condition 1919 Boar’s Head truck in the deli section; the genuine NASCAR race car wall-mounted outside the front entrance, and on and on.

  Bonaminio acquired most of this stuff on junking expeditions. For all the delight he takes in negotiating a bargain price, he will spare no expense in restoring or customizing a salvaged treasure for display in his store. In 1998, he paid $1 for eight, 150-foot-long monorail trains from Paramount’s King’s Island, an amusement park north of Cincinnati. The trains, which King’s Island had used in its African safari ride for two decades, would have fetched a rich price had not the amusement park scrapped the tracks they ran on. To house the trains, Bonaminio put up a pre-engineered metal building designed (by Jimmy Bonaminio, the eldest of Jungle’s three kids) to look like a giant snake. He hired General Dynamics to gut the trains and install new engines, brakes, and electrical systems. In 2003, workers began erecting steel pylons to support two miles of track. Bonaminio expects to have sunk about $2 million into the monorail by 2006, when it is expected to be ready to start ferrying shoppers among the store’s various entrances and the outer reaches of its huge parking lot.

  What sort of return does Bonaminio expect on his monorail investment? He couldn’t care less. It’s enough for him that Jungle Jim’s will be the only supermarket in America with a monorail. “I’m gonna drive that thing even if it kills me,” he vows as we peer up at a section of completed track in front of the store.

  “Here’s the deal. This is what I’m trying to do,” Bonaminio says as we walk past the refrigerated, glass-walled room displaying his store’s extensive inventory of high-priced cigars. “This is going to sound kind of crazy, all right? What do you hate to do—grocery shopping, right? Everybody hates it. So what’s America want to do? We’re always trying to find time to be together—husbands, wives, and family. I took a negative and turned it into a positive. I made shopping fun. I have more men shopping with their wives in this store than you can imagine.” 27

  Jungle Jim’s is not all fun and games; the other distinguishing feature of the niche Bonaminio has carved for himself is an enormous, finely variegated selection of specialty foods, many of them imported from India, Great Britain, Mexico, and seventy other countries around the world. Out of boredom as much as anything, Bonaminio began building a specialty line in the late 1980s, well before the vogue for culinary exotica spread out from America’s big cities into the heartland. An Asian section is no longer a supermarket novelty in much of the United States, but Jungle Jim’s has separate sections for China, Taiwan, and Hong Kong, not to mention Thailand, Vietnam, the Philippines, Korea, and Japan. About fifty feet of shelf space is devoted to Italian olive oils alone. T
he hot sauce section includes 1,200 selections ranging in price from $3.99 to a particularly incendiary brand that goes for $229.99. Jungle Jim’s carries tens of thousands of items not to be found at a Wal-Mart Supercenter or a Kroger supermarket.

  Bonaminio’s market draws 50,000 shoppers a week, including regular customers who drive from points as distant as Columbus, Indianapolis, Louisville, and Lexington—all of which are within 150 miles of Fairfield, give or take a dozen miles. (By contrast, the typical urban superstore draws from within a fifteen-mile radius.) Few stores of any kind in America can claim a clientele as ethnically diverse as Jungle Jim’s, which bills itself as a “United Nations” of food. “They jam the aisles on weekends in Indian saris and Muslim veils and Yoruba caps, forming a frenzy of international bumper cars,” one visitor recalled. “Some drive all day to get to the supermarket, carrying intricate lists of items that yesterday’s Ohioans couldn’t begin to spell, much less eat: Ghee and rambutan and longan, kimchi and napolitos and durian.” 28

  Although high-margin specialty foods generate about two-thirds of its profits, Jungle Jim’s relies on the same grocery staples sold by Wal-Mart, Kroger, and every other food retailer for the bulk of its revenues. “We basically use grocery as our loss leader,” says Ed Carroll, Bonaminio’s general manager. “With Wal-Mart coming in, we want to establish that we are just as low as a lot of the chain stores, which have been a lot sharper in their pricing over the last two years.” 29

  Despite its aggressive discounting of staples, Jungle Jim’s has seen its annual rate of revenue growth slow to 3.8 percent a year on average since 2002, compared with 11.4 percent from 1996 through 2001. 30 Stiffer competition for the grocery dollar is only partly to blame, Bonaminio says. “I made a lot of mistakes. What happened was I made the store so entertaining that I’m doing a lot more business from out of town. But now it’s so big and hard to shop that the local people don’t come in. I’m losing my local business.” The store’s diminishing appeal to the convenience-minded shopper undercuts the one advantageous aspect of its location: Fairfield and the townships that adjoin it rank among the fastest-growing residential areas in greater Cincinnati.

  And now along comes Wal-Mart. At the moment, the closest Supercenter to Jungle Jim’s lies twenty-eight miles due west in Aurora, Indiana, too far to pose much of a threat. In 2005, though, Wal-Mart is planning to open a Supercenter just five miles north of Jungle Jim’s and a second seven miles to the west. The prospect of becoming the meat in a Supercenter sandwich is rousing Bonaminio to bold action. He is wagering most of the profit he has accumulated over the years on what is essentially a double-or-nothing bet: a $12 million expansion designed to make Jungle Jim’s the centerpiece of “Foodie Land.” It sounds like a theme park (and the monorail certainly will give it the look of one), but Bonaminio prefers the word “campus” to characterize the concept that has been gestating in his overheated brain for more than a decade. “Food is becoming a sport, but nobody’s addressing it like that,” he says. “There are golf destinations all over America. You fly in and the whole town is golf courses. Nobody’s doing that in food. That’s what I’m trying to do with Foodie Land.” 31

  Bonaminio began putting the Foodie Land plan fitfully in motion a few years ago, and it is about one-third realized. A construction crew is putting the finishing touches on a capacious two-story “special events center” attached to the store. 32 Jungle Jim’s will use the events center to sponsor tastings, cooking demonstrations, and food-and-wine festivals. The center’s 600-seat auditorium is outfitted with a camera-ready kitchen set to entice the likes of Emeril Lagasse and Mario Batali into broadcasting from the Jungle. Within the events center is a large unfinished space that Bonaminio hopes to lease to a top-flight restaurant operator. He also is trying to interest a national hotel chain in building on his property. “My store has always been a golf course with no clubhouse,” he says. “The events center will be my clubhouse.”

  Even as Bonaminio tries to make Jungle Jim’s a more alluring destination for “foodies,” he also is making a play to win back the lost locals. In early 2004, he completed a 100,000-square-foot extension to the store to house an expanded beer and wine department and gourmet deli shop. This, in turn, freed the prime space at the store’s center for remodeling into what is essentially a compact conventional “American” supermarket within a sprawling specialty store. Here, Bonaminio has collected the everyday items that used to be scattered throughout the rear of the store like an afterthought. To further entice the convenience-minded shopper à la Wal-Mart, he recently added the garden center and flower shop just outside the main entrance and leased space right inside it to a pharmacy, a bank, a post office branch, and a Starbucks. Bonaminio seems sheepish about including the coffee chain. “People say to me, ‘Starbucks is not in your image,’” he says. “Hey, I can’t do everything in my ‘own image.’ I’m running a business, not an image.”

  On September 15, 2004, Wal-Mart fired its first fusillade in the great Cincinnati supermarket war with the opening of a Supercenter in Fort Wright, Kentucky, just five miles south of The Kroger Co.’s headquarters in downtown Cincinnati. Wal-Mart was a long time establishing this toehold in Kroger country. In 1999, the company signed on with a small local developer looking to build a shopping center on the site of a former junkyard. The Fort Wright city fathers were encouraging at first, but turned against the project after 400 people packed a public hearing to protest that a Supercenter would overburden the congested roads in the area. The developer, B&Z Development, worked out a compromise with the city only to be hit by a lawsuit brought by local residents. At Wal-Mart’s urging, Regency Centers, a big national developer specializing in supermarkets, bought out B&Z and completed the project. 33

  A few days after the Fort Wright store opened, I called on David Birdsall, Regency Centers’ development chief for the Midwest, who operates out of a nondescript building north of the city. At thirty-eight, Birdsall is a battle-hardened veteran of scores of development wars, but he wears his gravitas lightly. Today, he has extra reason to be cheery as he recalls his opening-day visit to the Fort Wright store. “It was insane,” he says. “People were camping out, waiting for the store to open.” 34

  Regency Centers is a huge company in its own right. Based in Jacksonville, Florida, it is a real estate investment trust, or REIT, that owns 290 shopping centers in twenty-three states. There are larger REITs out there, but Regency controls more grocery-anchored shopping centers than anyone else. It is landlord to sixty-three Kroger, sixty-one Publix, fifty-one Safeway, and twenty-four Albertsons stores. Of the twelve shopping centers that Regency owns in Cincinnati, nine feature a Kroger supermarket. One of its properties, Hyde Park Plaza, houses the highest-grossing Kroger outlet in the country.

  Regency Centers is well aware that the Krogers and Safeways of the world see Wal-Mart as their nemesis. So what is Dave Birdsall doing putting a Wal-Mart Supercenter within spitting distance of Kroger headquarters? His job. By the early 2000s, it was no longer possible for Regency Center to sustain its growth at an acceptable rate without doing deals with Wal-Mart, the most prolific builder in grocery retailing by far. “If you can’t go to Wal-Mart,” Birdsall says, “there’s no one else to go to.”

  Regency Centers’ management is convinced that they can have it both ways—grab onto the coattails of Wal-Mart’s superstore expansion while continuing to run thriving neighborhood centers anchored by leading supermarket chains. This view is grounded in research. Regency had tracked the performance of the supermarkets in thirty-three of its shopping centers located within three miles of a new Wal-Mart. Of the thirty-three, twenty-five were anchored by the number-one, -two, or -three grocer in the market. On average, these supermarkets had suffered a painful but decidedly non-fatal 2.5 percent decline in sales since the local Supercenter opened. Regency Centers essentially had wagered its future on the belief that this pattern would hold as the Wal-Mart juggernaut rolled on into such cities as San Diego, Tamp
a, Seattle, and Cincinnati.

  The Fort Wright Supercenter is the second Wal-Mart that Birdsall and company have put into greater Cincinnati. The first, a discount store a few miles north of Jungle Jim’s, was completed in 2003 and already is being converted into a Supercenter that was expected to open by the end of 2005. “We put a Wal-Mart in by Jungle Jim’s, but I can’t see the same shopper going to both,” says Birdsall, who shops Bonaminio’s store a couple of times a month with his wife. “Frankly, his produce is just so much better than anybody else’s. If I’m paying 25 cents a pound more for grapes, I don’t really care. We’re also buying a lot of wine, cheeses—a lot of high-margin stuff. We’ll go up there specifically to buy the Boar’s Head brand. Maybe we’re not the average shopper, but I think a lot of people go to Jungle Jim’s not only for the neat stuff, but for the experience.”

  Birdsall also has a Wal-Mart project underway in Indiana and another in Michigan and is angling to build more Supercenters in Cincinnati. Working with Wal-Mart means that Birdsall is working harder than he ever has before, and not just because Bentonville is meticulous and demanding. “You walk in and tell people you’re a Wal-Mart developer and you’re the Antichrist,” he says with a smile. “You say you’re doing a Target development and they’ll trip over themselves trying to help out. Nobody seems to get people as riled as Wal-Mart.” He thinks that the backlash against Wal-Mart is “patently unfair,” but suggests that the company is partly to blame because of its “legacy of leaving ugly-ass buildings all over the place.”

  Birdsall is an important player on the Cincinnati retail scene but is effectively neutral when it comes to the heavyweight matchup: Wal-Mart versus Kroger. Who better to handicap Cincinnati’s struggle for supermarket supremacy?

 

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