The Great A&P and the Struggle for Small Business in America

by Marc Levinson

  For all its modern methods, A&P remained as paternalistic as ever. When Clark Equipment Company, which sold A&P warehouse equipment, ran into financial problems, John Hartford proposed that the company pay its workers in scrip that A&P would redeem at face value. When the stock market crash of 1929 triggered higher unemployment, A&P accelerated planned construction work in order to provide jobs in ten different cities. Although his company now had eighty thousand employees, far more than he could ever hope to meet, John still emphasized his personal relationship with everyone who worked for A&P. “What the average man on the job wants is a good job and a feeling that as long as he does what is right he can keep it,” John wrote to his workers in 1930. “If a man is to have this feeling—and he cannot do good work without it—then the company must be loyal to him. As a matter of sound business policy, it is just as necessary that the company be loyal to the employee as it is that the employee be loyal to the company.”29

  A&P’s relentless growth turned a formerly obscure grocery chain into one of the country’s most prominent corporations, the object of endless curiosity and envy. Jersey City was no place for a company like this. In 1927, the Hartfords moved their headquarters into the Graybar Building, a prestigious new office tower adjacent to Grand Central Terminal in midtown Manhattan, where Mr. George and Mr. John shared an office suite on the twenty-second floor. In an indication of the business world’s newfound respect for their achievements, John was invited to join important boards: the Guaranty Trust Company, the New Haven Railroad, the Chrysler Corporation. When the president of the Pennsylvania Railroad Company invited two hundred prominent businessmen and government officials to his summer home in September 1929, John A. Hartford was among the guests who mingled with members of President Hoover’s cabinet. The scion of a self-made grocer, himself with little education save what he had learned on the job, was now among the nation’s business elite.30

  11

  MINUTE MEN AND TAX MEN

  “Big Business Now Sweeps Retail Trade,” The New York Times declared in a 1928 headline running the entire width of a page. “Huge Corporations, Serving the Nation Through Country-Wide Chains, Are Displacing the Neighborhood Store.” Across the United States, the newspaper reported, some thirty-eight hundred retail chains were operating 100,000 stores. “Out of every dollar spent in retail stores today 17 cents goes into the treasury of chain corporations.” Of course, most of those chains had only a handful of stores, but a few were quite large. Foremost among them was a single company operating twice as many stores as the next seven chains combined, with sales more than four times those of the next-largest food retailer. “By all odds the largest retail trade trust in the world is the Great Atlantic and Pacific Tea Company,” the Times affirmed.1

  The Times deemed A&P an “amazing concern,” but most of the 2.1 million Americans who earned their livings making and selling food had a decidedly different view. The company’s headlong growth and rampant price-cutting were a threat to every part of the food distribution system. A&P’s demands that suppliers slash prices and provide advertising allowances cut into grocery manufacturers’ profits. Its insistence that food processors, soap makers, and fruit and vegetable growers deal with it directly, without middlemen, endangered tens of thousands of agents, jobbers, and wholesalers whose purpose was to link food suppliers with individual grocers. A&P’s financial strength, giving it the ability to plant a store anywhere it chose, darkened the prospects not only of the 400,000 people who ran independent food stores and their families but of uncounted numbers of men who dreamed of someday becoming merchants and of the small-town bankers and insurance agents who counted local retailers among their clients.2

  The woes of small merchants were especially acute in the small towns of the South and Midwest, where farm-based economies reeled under sagging commodity prices even as the big cities prospered. Through the first half of the 1920s, wholesalers and independent shop owners in these regions pushed political leaders to act against the chains. The first success came in 1925, when the town of Danville, Kentucky, population five thousand, required an annual license fee of grocery stores, with “cash and carry” grocers—such as chain stores—required to pay several times as much as “regular service” grocers. The ordinance was quashed by a state court, but the reprieve for chain stores would prove temporary.3

  New fuel was added to the conflict when the two largest catalog retailers, Sears, Roebuck and Montgomery Ward, began opening retail stores in 1925 and 1926. With their vast selections and money-back guarantees, Sears and Montgomery Ward had long taken business from small-town retailers, but their appeal was constrained by the need for customers to order by mail and wait for their purchases to arrive. The prospect that Sears or Ward’s might open a store on the local Main Street encouraged hardware dealers and shoe-store owners to make common cause with grocers and druggists, who had been fighting the chains for years. In 1926, storekeepers in Petersburg, Virginia, organized a mass protest meeting. Similar groups formed to mount “trade at home” campaigns in one small town after another. State legislators responded. Four states enacted anti-chain laws in 1927. Maryland prohibited any chain from owning more than five stores in Allegany County and taxed each chain-owned store in the county $500—a tax that would have taken nearly half the profits of an average A&P store. Georgia slapped a $250 tax on each chain-owned store over five. North Carolina charged any company with more than five stores $50 per store. Pennsylvania provided that only registered pharmacists could own drugstores. These laws, as well as a $100-per-store tax enacted by South Carolina in 1928, were invalidated by courts, but their very passage demonstrated the growing political power of the forces opposed to chain retailing.4

  The political success of state-level anti-chain efforts reverberated around the country. In April 1928, the National Association of Retail Meat Dealers—influenced by A&P’s decision to begin opening meat departments—accused chain stores of misleading advertisements, short weights, and false sales. The Meat Dealers asked the Federal Trade Commission to investigate. A week later, J. H. McLaurin, president of the American Wholesale Grocers’ Association, told members that “the Atlantic & Pacific … as now conducted, possesses the potentiality of a control of retail food distribution to such an extent as to threaten the best interests of the American public.” Perhaps, McLaurin said, the Justice Department will look into things. The alarm was bipartisan. Smith Brookhart, a Republican senator from the farm state of Iowa, authored a congressional resolution directing the Federal Trade Commission to investigate whether chain retailing was creating monopoly or unfair competition. The commission also was to determine whether chain stores’ growth was based upon “actual savings in costs of management and operation.” The resolution led John A. Hartford to speak out on a matter of public policy for the first time in his long career. “We have nothing to fear from any such investigation,” he told reporters. “If sufficient reasons appear to justify an inquiry into the industry as a whole, our company would welcome it.”5

  A 1928 study supported by the Chamber of Commerce of the United States concluded that “the death knell has been sounded for one-third of all retail outlets in the country” due to the growth of chains. Spurred by such inflammatory reports, the FTC launched two investigations—one of chain stores in general, and one focused on A&P. In June 1928, an FTC attorney sent the company pages of questions about its purchasing, pricing, and advertising practices to find out why A&P was selling name-brand merchandise more cheaply than other grocers. A few months later, the attorney wrote to ask whether A&P “has partially abandoned cut price appeal in its advertising.” Finding no wrongdoing, the commission terminated the investigation in 1929, but the reprieve would prove temporary: A&P would be under federal investigation continuously for the next quarter century.6

  No factual investigation, however, could quell the growing concern about chain stores, for the worry had less to do with price competition than with the survival of small-town America. The c
hain store altered economic geography. Thousands of towns were home to grocery warehouses or the offices of small retail companies. A chain such as A&P, on the other hand, obtained economies of scale by centralizing its warehouses and offices in regional business centers. In small towns, it had only stores, with few employees and no highly paid executives. As local competitors fell by the wayside, jobs vanished with them, destroying the social fabric and leaving communities bereft of capital and civic leadership. “If businessmen become purely representatives of a large corporation without residence, property, or direct personal interest in the local community, the significance of such a change in community life is indeed apparent,” one of the earliest scholars of the chain store wrote in 1927. Agreed a Michigan newspaper, “The consumer who patronizes the chain store, instead of the regular merchant, is effectually destroying the value of any property he owns in the town in which he lives.”7

  Victories only fueled anti-chain agitation. “The chain store menace is growing, and unless an intelligent population can be made to see and understand, the independent merchant will soon be only a memory,” a rabble-rousing pamphlet warned in 1928. The anti-chain forces, however, understood the need for subtle changes to their message. Hundreds of independent merchants had created their own tiny chains, operating five or ten stores under common ownership; of 386 grocery and meat chains responding to a Federal Trade Commission survey, only 6 operated more than 1,000 stores in December 1928, and the vast majority owned just a few. Many other merchants had joined “voluntary” chains, in which a single wholesaler handled all distribution for stores that operated under a common banner but remained independently owned: the Federal Trade Commission counted 395 voluntary grocery chains with 53,400 stores in 1929. New terminology was needed to distinguish good chains from bad. Now the enemy was the “foreign” chain, based in a distant city, rather than the homegrown variety. In Springfield, Missouri, the chamber of commerce mounted an advertising campaign accusing chain-store managers of being “‘mechanical operators,’ controlled entirely by a set formula.” As the advertisements explained, “Their duties, boiled down, are to ‘get Springfield’s money’ and send it to the Home Office.”8

  * * *

  Independent merchants were a notoriously anarchic group. Only a tiny percentage of them belonged to state or national trade organizations; the largest of these, the National Association of Retail Grocers, claimed a scant fifteen thousand members nationwide. Political influence required leadership. It arrived in 1929 in the unlikely person of a middle-aged businessman named William Kennon Henderson.

  Born in the northeast Louisiana town of Bastrop in 1880, Henderson grew up in a prosperous family that owned an ironworks, a lumber company, and a garage. After graduating from St. Edward’s, a Catholic college in Austin, Texas, he went to work in the Henderson Iron Works in Shreveport, the biggest city in northern Louisiana. He took charge of the family businesses upon his father’s death in 1919 and added others, including a taxicab company and a printing company. Henderson became an influential civic leader. He acquired a thirty-five-hundred-acre estate eighteen miles north of Shreveport and called it, after his middle name, Kennonwood. Despite his subsequent reputation, Henderson was in no way an outcast or a crank. He was an educated man and a successful executive, a pillar of the local business establishment. In 1925, he was elected president of the Shreveport Chamber of Commerce.9

  Among Henderson’s acquaintances was an auto dealer named W. G. Patterson, who had established a 10-watt radio station in Shreveport in May 1922. Early radio equipment, often jerry-rigged, did a poor job of transmitting on a steady frequency, and Patterson’s tiny station was being drowned out as other broadcasters occupied nearby wavelengths. Needing money for a more powerful transmitter and a better antenna location, Patterson asked Henderson to invest in the station. Henderson discovered radio, and he liked it so much that he bought control of the station at the end of 1924 and moved the transmitter to Kennonwood. Henderson sought to rename the station WKH in honor of himself; when he was informed that call signs for stations west of the Mississippi River had to start with K, he chose KWKH instead. He built a studio at Kennonwood, from which he handled much of the broadcasting himself, and another at a downtown hotel. The government allowed him to increase his power from 50 to 250 watts on a frequency of 1100 kilohertz, which gave a clear signal in Shreveport. KWKH dominated the local airwaves with the slogan “KWKH on the air, Shreveport everywhere.”10

  Henderson’s ambitions ran well beyond dominating the airwaves in Shreveport. In 1927, KWKH shifted to a less congested frequency, 760 kilohertz, and was authorized to boost its power to 1,000 watts. The station was strong enough to be heard at night all over the region, especially when, as frequently occurred, Henderson directed his engineers to use more signal strength than authorized by the Federal Radio Commission. Henderson attacked his regulator on the air as a tool of the big-business interests behind the nascent broadcast networks. Nonetheless, the commission allowed KWKH to increase its power to 5,000 watts in early 1929. That June, KWKH was assigned a new frequency, 850 kilohertz, which was designated as a “clear channel.” KWKH had to share with the station WWL in New Orleans, which broadcast in the daytime, but no other stations in the United States could use the frequency. With a clear channel, KWKH, now beamed out with 10,000 watts of power every evening, could be heard by millions of new radio listeners, who carefully tuned their sets to enjoy the exotic experience of receiving broadcasts from afar. There was no reliable audience measurement in the late 1920s, but “Old Man Henderson,” booming out his familiar greeting, “Hello, World!” and playing blues and country recordings, was among the best-known radio personalities in the United States.11

  Henderson learned quickly that colorful language and outrageous stunts would draw an audience. In between records, he read real and invented letters and telegrams, issued retorts, and commented sarcastically on events of the day. “People don’t care about gentle modest talk,” he said in 1929. “They want it strong. They want to hear you ride somebody. If not, why do they spend their good money for telegrams?” During the 1928 presidential campaign, Henderson assailed Herbert Hoover, the Republican candidate, as “a harebrained ninny-com-poop,” “a Quaker skunk,” and “a cross between a jackass and a bulldog bitch.” When the Federal Radio Commission considered whether to renew his broadcast license, he presented 163,000 affidavits of support—evidence, admitted the commission’s chairman, “that KWKH is a station of considerable popularity.”12

  Radio advertising was scant in the early days, and KWKH carried none. But as more advertisers took to the airwaves, Henderson decided to get in on the action. One of his routine stunts at the microphone was to ask for a cup of coffee and then comment that it was “doggone good coffee.” Inevitably, listeners asked about the coffee. In 1928, he ordered some tins bearing his image, filled them with coffee beans, and sold them over the air for $1 per pound. At a time when a pound of coffee cost ten cents at the store, Hello World coffee was no bargain for consumers, but it made a profitable business. KWKH soon began touting Bibles, insurance policies, patent medicines, and whatever else Henderson felt like selling. In 1930, readers of Radio Digest would vote him “most popular broadcaster in the South.”

  Stations such as KWKH had considerable airtime to fill, and speeches were standard fare. One of the speakers in October 1929 was Philip Lieber. Like Henderson, Lieber was no dirt-poor Louisiana sharecropper; he was an important local businessman, president of the Shreveport Mutual Building Association, which provided home mortgages. Lieber was concerned that store owners among his borrowers were having trouble paying their mortgages because chain competition was hurting their businesses. He delivered a speech titled “The Menace of the Chain Store System” to the Shreveport Chamber of Commerce. Henderson was in attendance, and invited him to repeat the speech that night on KWKH. In a florid half-hour address, Lieber praised hometown merchants and warned of “a couple of hundred over-lords and all the
rest of us eternally consigned to a condition of peasantry.” The retail chains, he asserted, “are taking everything out and putting nothing back.”13

  Henderson’s prior interest in chains had been limited to the hated radio networks; he had never spoken about retail chains. Indeed, selling Hello World coffee by mail undercut local grocers everywhere. But Lieber’s talk inspired him. When the banker finished, Henderson returned to the microphone. “I am going to tell you what that address means,” he told his listeners. “It means that these dirty, sneaking chain stores are coming into your home town and taking your money and sending it out to a bunch of crooked, no-account loafers in Wall Street.” Letters and telegrams flooded into Kennonwood, and Henderson adopted the issue as his own. The wealthy, college-educated businessman made himself the spokesman for the mass of downtrodden commoners oppressed by forces beyond their control. “American people, wake up!” he proclaimed. “We can whip these chain stores … I’ll be your leader. I’ll whip the hell out of ’em if you will support me.”14

  Evening after evening, Henderson returned to the theme. He read out anguished letters from shopkeepers. His extended monologues found targets in Wall Street, “thieving chain-store scoundrels,” and “gold-bellied Hartford.” For variety, Henderson turned his microphone over to populist politicians such as Louisiana’s governor, Huey Long, and the Alabama attorney general, Charlie McCall, who also took after the chains. “There are 3,000 convicts in Alabama who contribute more to the upbuilding of the state than all the foreign chains in America,” McCall told KWKH listeners. Shopkeepers and their wives sent letters or came by for a tour of the station, and Henderson put them on the air, too. One was R. K. Calloway, owner of a corner grocery in Taylorville, Illinois, who spoke passionately about chains sucking the money out of his economically troubled coal-mining town. “What good is an education going to do your children, if the chain store method of distribution is to endure?” he asked the radio audience. “If all the thinking, planning, etc., is to be done in New York or Chicago, and all they need is a yes mam yes sir, wouldn’t it be cheaper to buy a phonograph and be done with it?”15