One significant person with an expanding business during the predepression era of the twentieth century (1900-1929) was Bernard Henry Kroger. The fourth of eight children, Bernard, or Barney as he was frequently called, was born in Cincinnati, Ohio in 1860 to German immigrant parents.[1] In 1873, during an economic panic, his parents lost their dry goods business, and shortly thereafter, his father passed away.[2] Thus, Barney Kroger dropped out of school and went to work as a drug store clerk at the age of thirteen.[3] However, he left the job after nine months because it required him to work on Sundays, and he went to work on a farm instead.[4] Kroger earned $6 a month at the farm, but the work was hard, he contracted malaria, and the living conditions were poor, so after eighteen months he walked back to Cincinnati to find another job.[5]
The next job Kroger landed was preparatory for his later enterprise in the grocery business. At 16, the Great Northern and Pacific Tea Company hired him to sell coffee, tea, and sugar door-to-door.[6] On his first day, Kroger walked past several houses on the busy Cincinnati streets, with their dogs, cattle, carts, and saloons, stepped into a bakery, struck up a conversation with the owner, and made a sizable sale.[7] He earned $7 in commissions that first week and went on to build his commission to $9 a week.[8] Unfortunately, when the company changed hands, product quality went down and Kroger started losing sales; subsequently, he quit.[9] Yet, he learned several useful lessons from his first experience in grocery sales, such as the possibility of earning good money selling food, the necessity of asking for the sale, that people cannot be fooled about food, that people are willing to pay for good food but not inferior products, and that while customer service, price, and appearance influence initial purchase, future purchases are contingent on satisfaction.[10]
Kroger moved to one more job experience before becoming a business owner. After leaving the Great Northern and Pacific Tea Company, he worked for the Imperial Tea Company, where he became manager, controlling the daily operations and earning $12 a week plus a ten percent commission.[11] Although the company was not doing well when he took over, Kroger brought its profits to the unprecedented amount of $3,100 within a year by insisting on the highest quality and doing most of the work himself with just a delivery boy and cashier to help.[12] When the Imperial Tea Company would not let him buy a larger share of the company, Kroger left to start his own store.[13]
Since he did not have enough funds to start his store on his own, Kroger went into partnership with his friend B. A. Brannagan. They named their business Great Western Tea Company, rented a small building in downtown Cincinnati, painted it red, stocked it, bought a shiny red wagon and handsome horse with a gilded harness, and opened the store in 1883.[14] Trials soon followed, the wagon and horse were lost in an accident two weeks after opening, one of Kroger’s brothers died and left large funeral expenses, and the Ohio River flooded, destroying all of the stock.[15] Yet, by year’s end, the store was making a profit and Kroger was able to buy out his partner for $1,500.[16] Thus began his adventure as sole proprietor.
Kroger’s practices over the next few years prepared him to be the leading businessman he would become by the early 1900s. Initially, he worked from sunrise to midnight, hired relatives to help, and lived frugally.[17] To advance his business, Kroger took out full page ads, offered lower prices than his competitors, and emphasized quality.[18] As one reporter put it, he out-fussed “the fussiest housewives.”[19] Kroger also saved money by buying items in large quantities rather than just a case at a time as others did.
Kroger took even greater strides in the predepression, twentieth century. In 1901, he bought his own bakery and cut costs by becoming his own provider.[20] Later that year when sharing his plans for expanding to New York, Kroger reported that he was selling 25,000 loaves of bread daily in the Cincinnati area; he also explained how he was able to improve quality and reduce the cost of bread down to 2.5 cents per loaf with new methods that included cutting out the middle men and delivering fresh bread directly to the customers.[21] At the time, Kroger predicted New York bread sales would be 400,000 loaves daily.[22] The following year, with forty stores included in his chain, Kroger incorporated his business, renaming it Kroger Grocery and Baking Company.[23]
Kroger continued to be innovative. He added more food processing facilities over time and started manufacturing and marketing store brand products.[24] In 1904, he bought a meat company and became the first grocer to provide a meat department and butcher in the store.[25] Additionally, Kroger built a truck fleet to provide his own transportation.[26] By 1907, Kroger had increased the number of his stores to eighty-three.[27] He was not without trials, though. For instance, that same year, one of his Cincinnati wholesale and retail stores was burned in a block fire with a total loss to his business of $350,000, at least part of which was covered by insurance.[28]
Over the next couple decades, Kroger expanded his business rapidly, buying out entire distressed store chains and converting them into Kroger stores.[29] According to one published chart, the number of stores in his chain increased from eighty-three in 1907 to one hundred fifty-seven in 1912, to five hundred sixteen in 1917, to one thousand eight hundred in 1923, to three thousand, seven hundred and sixty-four in 1927.[30] Additionally, sales receipts climbed from $1,750,610 in 1907 to $161,299,604 in 1927.[31] Kroger had become the fifth largest retailer in the world.[32] Then, in 1928, Kroger retired, selling the majority interest in his business that had recently been added to the listing of the New York Stock Exchange for trade for the first time.[33] Bernard H. Kruger had become an influential, multimillionaire. As Chandler described businesses of the time, Kruger grew his business by becoming “multifunctional, multiregional, and multiproduct,” by “reducing overall costs of production and distribution,” and by “providing products that satisfied existing demand.”[34] He established a multiunit enterprise with units that could be individual businesses; however, Kroger stressed the importance of keeping overhead to a minimum, stating that it should not be more than four percent of gross profit.[35] He did not rely on commercial intermediaries but gathered his own sales force and product-specific facilities, building his business, as he said, through concentration and combination.[36] Kroger was a first-mover, an entrepreneur who invested in the three interrelated areas of production, distribution, and management.[37]
[1] David Gerard Hogan, “Kroger, Bernard Henry,” American National Biography, 2000, 1; “B. H. Kroger Dies; Chain Grocer, 78,” New York Times, July 22, 1938, ProQuest Historical Newspapers.
[2] Ibid.
[3] Ibid.
[4] Ibid.
[5] Ibid.
[6] Ibid; Anonymous, “Barney Kroger’s First Two Lessons,” R&FF Retailer 6, no. 4 (May 2008): 8.
[7] Hogan, “Kroger,” 1; Anonymous, “Barney,” 8.
[8] Hogan, “Kroger,” 1; “B.H. Kroger.”
[9] Ibid.
[10] Ibid; Anonymous, “Barney,” 8.
[11] Hogan, “Kroger,” 2.
[12] Ibid; “B.H. Kroger.”
[13] Ibid.
[14] Hogan, “Kroger,” 2; “B. H. Kroger”; Robert Lewis, asst. ed., “Kroger Co.,” Britannica Academic, accessed February 8, 2021.
[15] Hogan, “Kroger,” 2; “B. H. Kroger.”
[16] Ibid.
[17] Hogan, “Kroger,” 2.
[18] Ibid.
[19] “B.H. Kroger.”
[20] Lewis, “Kroger Co.”
[21] “Will Sell Bread at Half the Price: Baker Kroger of Cincinnati Tells How He Can Do It,” New York Times, November 14, 1901, ProQuest Historical Newspapers.
[22] Ibid.
[23] Lewis, “Kroger Co.”; Hogan, “Kroger,” 3.
[24] Ibid.
[25] Ibid.
[26] Hogan, “Kroger,” 3.
[27] “Kroger Grocery’s Growth,” New York Times, January 27, 1928, ProQuest Historical Newspapers.
[28] “Cincinnati Fire Loss $750,000: Big Block of Buildings Burned,” Baltimore Sun, August 24, 1907, ProQuest Historical Newspapers.
[29] Ibid; Lewis, “Kroger Co.”
[30] “Kroger Grocery’s Growth.”
[31] Ibid.
[32] Hogan, “Kroger,” 3.
[33] “Kroger Grocery’s Growth.”
[34] Alfred D. Chandler, Jr. Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge, MA: Harvard University Press, 1994) 15.
[35] Ibid, 14-15; Hogan, “Kroger,” 3.
[36] Chandler, Scale and Scope, 30-31; “Will Sell Bread.”
[37] Chandler, Scale and Scope, 34.