Looking ahead – Oliver H. Delchamps, Jr.; business philosophy

Del Marth

Looking Ahead

Neighbors knew them as Alfred and Ollie, sons of European immigrants. They gambled their $1,000 savings on a grocery store, hoping to provide for their widowed mother and their three sisters.

Their small corner grocery would offer an inexpensive alternative to the better food stores in Mobile, Ala.–the ones that gave credit and delivered right to the back door. They called it a “cash and carry” store, a newfangled idea back in 1921.

For the Delchamps brothers, neither of whom completed grammar school, the venture proved foresighted. Most of those “better” stores came and went, but the Delchamps name now is on 94 store fronts in the South.

Today, Alfred’s son is president of the Delchamps grocery store chain, which has annual sales of $688 million.

And Ollie’s boy? He is, among other things, chairman of the executive committee of Delchamps, the U.S. Chamber of Commerce’s new board chairman and an occasional White House guest who discusses the nation’s economy with the President.

“I have a special interest in the free enterprise system,” says Oliver H. Delchamps, Jr., 54.

That “interest” stretches far beyond the family’s grocery chain, which operates today in four states–Alabama, Lousiana, Mississippi and Florida.

“I’ve been [involved in] a lot of things–from a director of the Mobile Opera Guild to president of America’s Junior Miss Pageant,” he says.

Although a nonsmoker and a trim 170 pounds, Delchamps suffered a mild heart attack two years ago. The setback, from which he has fully recovered, was due in part to a schedule full of baord meetings, brought on by his perceived responsibility to serve dozens of corporate and educational organizations not only in Mobile but also in the South and nationally.

“Sometimes I think I’ve done a poor planning job by serving on so many boards,” says Delchamps. “But it’s hard to turn one down, because it seems that the guy who calls you to serve always is a guy to whom you owe a favor.”

Delchamps explains: “My daddy always said that everything the family accomplished in business was a result of community support and the people who shopped at our stores. So he felt the Delchamps had to return in kind as much they could. That was his philosophy, and it is mine.”

Upon graduation from the University of Alabama in 1954, Ollie, Jr., enlisted in the Air Force. He was discharged in 1956 as a second Lieutenant. “I then began work at a desk right there in my daddy’s office,” he says. “Of course, I never really expected to do anything else but work for him.”

The senior Delchamps and his brother opened five stores between 1921 and 1926, and a Delchamps was made manager of each. (For the sixth store, and nearly every one since, the family has promoted valued employees to the managerial posts.)

In 1968, when the stores numbered nearly 40, Ollie, Jr., was named company president and CEO at age 35. Then, after serving as president for eight years, Delchamps was elected board chairman, a position he held from 1977 to 1983.

While at the helm, he held the company to seek professionals outside the chain, such as specialists in finance and accounting and professional managers in operations. “I got strongly involved with the American Management Association,” he says. Techniques learned with the association’s help “led us into more sophisticated planning.”

Among other results, Delchamps became one of the first in the industry to offer a self-service meat market. “We also were the first in the Southeast to offer generic-label products,” says Delchamps, “and the first to introduce automatic scanner checkout systems.”

The chain has continued to keep up with technological advances. A computerized distribution center in Hammond, La., was opened in 1985 to service all Delchamps locations. And automatic banking machines in the stores give customers, as management says, “still another reason to shop at Delchamps.”

There are nice benefits to working there, too.

Special training programs prepare employees to manage new Delchamps supermarkets. To make employees feel part of the Delchamps family, the company created a profit-sharing plan in the 1940s. “And in the ’70s, we set up an Employees’ Stock Ownership Plan,” Delchamps points out.

He assigns a good share of the credit for success of the Delchamps chain to the ESOP, because it helped create a motivated and profit-conscious work force that today numbers 5,700.

“Our workers have been approached by unions but without success,” he says. “We pay really good wages and are 100 percent nonunion. Not having unions lets us run the business without a lot of cumbersome rules” that limit management’s options for some of Delchamps’ competitors.

Delchamps also avoids the heavy capital expenditures that some competitors incur by not owning large parcels of real estate. “We did own some sites over the years,” says Delchamps, “but these days we lease, preferring to use our capital for merchandise and equipment.”

He says it now costs more than $1 million to open a Delchamps store. “That $1,000 that my father and uncle used to start the first store wouldn’t buy one of the doors” in a new Super Store–42,000 square feet of modern and spacious efficiency.

These large Super Stores offer customers everything from flowr arrangements and greeting cards to exotic fruits and vegetables for gourmet cooks. To keep its shoppers, Delchamps regularly renovates or replaces older stores. At the end of fiscal year 1986, 90 percent of its supermarkets were less than 10 years old.

The store practices a merchandising policy that its former board chairman says is “designed to keep us the most competitive food store in each of our markets.

“We explain to customers that the costs of weekly specials, double coupons, games and gimmicks are passed on to customers in food pricing,” he says. “So we don’t offer such enticements. Instead, two years ago we introduced a new merchandising program called Everyday Minimum Pricing. Our customers do not pay more even though they are shopping at what we consider the highest-quality food stores in town.”

The policy means big dividends–for customers, for stock-owning employees and for the Delchamps family. Although all three of his children have worked for the chain at one time, none have chosen to follow their father’s path. “Oliver III, 32, prefers a video business and running a steak house, my daughter recently married and is setting up housekeeping, and my youngest boy, who is 27, works in a college’s development office,” says Delchamps.

Although not yet in the same league as giant food chains such as Safeway and Winn-Dixie, Delchamps’ attractive stores and progressive practices have made it a coveted operation. Both A&P and Bruno’s, a large Southern grocery chain based in Birmingham, have made buyout offers.

“In both cases,” says Delchamps, “we did not think the prices offered were what the company was worth.”

In the last five years, sales have jumped from $501 million to $688 million. The company’s working capital has risen from $13 million in 1982 to $41 million in 1986, and its total assets have soared from $69 million in 1982 to $159 million last year. Net earnings in 1986 were $8 million.

Even in such a healthy growth company “there is a limit to how long a person can do an effective job,” Delchamps says. Thaths why he stepped down as board chairman in 1983 and became chairman of the firm’s executive committee.

“It gives me the time to do more civic work, to take on the U.S. Chamber board chairmanship and to stay active in politics,” he says. “And I love politics.”

Politics, adds Delchamps, “is little different than running a grocery chain. Both depend a great deal on marketing.” Fifteen years ago he tried marketing himself as a Republican candidate for Alabama’s State Board of Education, but lost. He does not foresee another run for office, but he does plan to remain politically active as a national GOP convention delegate and as finance chairman for various Alabama congressional candidates.

Planning “is an absolute necessity, not only in one’s business but also in one’s personal life,” he says. “Some folks just don’t look far enough ahead.” Despite his careful planning, Delchamps admits that for years he fell short when it came to taking time off from his business and civic commitments: “When you’re young, you think you can go, go, go. I used to brag that I never took a vacation. No more. Now I begin the year by marking on a calendar a week or two of vacation in spring, another in summer and another in fall.”

In another attempt to get his mind off business, Delchamps says he reads “half a dozen Sunday papers trying to keep up with what’s going on in the world and in business and, particularly, in politics.”

Staying abreast is part of Delchamps’ next 10-year plan. Another part, he says, is “planning which of the dozens of organizations I’m involved in I will get out of.

“I’m a born optimist,” he says. “I see myself cutting down on some of those board memberships … as long as some guy I owe a favor to doesn’t call.”

COPYRIGHT 1987 U.S. Chamber of Commerce

COPYRIGHT 2004 Gale Group

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