Red Circle & Gold Leaf

(See Cover)

As the world's largest grocer, the Great Atlantic & Pacific Tea Co. sells one out of every seven cups of coffee in the U.S., one out of every 14 pounds of butter, and one out of every 28 eggs. Of every dollar the U.S. spends on food, about 10-c- is passed over A & P counters--a massive yearly total of $2.9 billion. Next to General Motors, the A & P sells more goods than any other company in the world.

In 3,100 U.S. cities, the familiar red-front A & P store is the real melting pot of the community, patronized by the boss's wife and the baker's daughter, the priest and the policeman. To foreigners A & P's vast supermarkets are among the wonders of the age; to the U.S. middle class, they are one of the direct roads to solvency. "Going to the A & P" is almost an American tribal rite.

But despite this bigness and despite the familiarity which reaches down to almost everyone's dinner table, very few Americans know the A & P's masters. They are shadowy figures, who have wrapped themselves over the years in such deliberate obscurity that even some of A & P's 120,000 employees are not sure who they are. Recently, at an A & P supermarket one of the checkers whispered to a customer: "See that white-haired old gentleman over there? That's the owner of the company --John D. Rockefeller."

It wasn't John D. It was John A. (for Augustine) Hartford, 78, who with his 86-year-old brother, George L. (for Ludlum) Hartford, forged the links in the A & P's nation-girdling chain. The A & P is one of the great American family empires still bossed by the men who built it. The Hartfords and their kin still own 99.1% of the stock.

Mr. John & Mr. George. The Hartfords are more than millionaires, expansionists, bosses and experts on longevity. They are perhaps the most unusual business team in U.S. history--and a tribute to the thickness of blood. "If I were asked to name the two men who seemed least likely to agree on anything," said an A & P associate, "I'd pick John and George Hartford."

Both brothers are widowers; both live only for the A & P. But there the similarity ends. John is thin, George is plump. John is bold and expansive, George cautious and conservative. John is gregarious and full of quips, George shy and sobersided. John stands and talks; George sits and listens. Plain and unpretentious George, in his drab black suit, sedate tie and stiff collar, could easily be taken for a retired motorman dressed up for Sunday.

Nobody would make that mistake about John, who looks the merchant prince from the tip of his elegant shoes to the top of his wavy-maned, handsome head. He dresses as fastidiously as a latter-day Beau Nash. A symphony in greys, he orders as many as a dozen suits at a time from exclusive Manhattan Tailor James Bell (other customers: James Farley, Harry Truman). He always sports a deep red carnation in his buttonhole, tucks an expensive handspun, monogrammed linen handkerchief in the pocket beneath it. His silk and poplin shirts are custom-made (by Sulka) with a special high, soft collar. His oversized, flowing bow ties, supposedly copied from those worn by Elbert (Message to Garcia) Hubbard, give him a faintly poetic air.

Meat-fed Trout. The brothers live as differently as they dress. George dwells (with son-in-law Sheldon Stewart) in a spacious Georgian house in Montclair, N.J., where he lives a lonely life despite the ministrations of ten servants. He amuses himself watching television (his favorite: Arthur Godfrey), listening to an electric organ played with automatic rolls, working jigsaw puzzles and tinkering with radio and TV sets. In the summer, he allows himself a suite at the ocean-side Monmouth Hotel in Spring Lake, N.J., but commutes to the office every day. He has never taken a vacation.

John, who has no children, lives like a lord of the manor in a rambling Tudor stone mansion near Valhalla, N.Y., 22 miles north of Manhattan. He sometimes cruises the paths of his 365-rolling, wooded acres in a fringe-topped surrey drawn by one of his blooded road horses. He used to play golf on his private nine-hole course with his wife, Polly, but since her death last year has given up the game. Now he keeps fit raking leaves, laying stone walks to his favorite retreat, a cozy cabin overlooking a pond. His constant helpers in these weekend stints are A & P's President Ralph W. Burger and wife Margaret. After a brisk workout at raking and stone-setting, John and the

Burgers watch television (his favorite: Sid Caesar), or toss shreds of ground meat to fat trout in the pond. "When you catch one of those meat-fed trout," he says, winking, "it tastes like lamb chops."

Termites & Pecans. Unlike George, who shrinks from meeting people and hates to travel, John loves to do both. George seldom sets foot inside an A & P, though he occasionally peers in the windows. John has been in almost every store, dropped in on 3,000 in a single year. Once he candled all the eggs in a Chicago supermarket to test their freshness.

Last week John Hartford and the Burgers dropped into a busy A & P on Main Street in New Rochelle, N.Y. Mr. John, who insists that every single item in the A & P carry a price mark, poked around looking for the tags and crayon marks. He told Manager William Smith (27 years with the A & P) a joke to put him at ease. "A fellow was stamping on prices," said John, "and I asked him how he was coming. Says he: 'Well, I got 500 cans of beans and found 700 termites. I'm having a hard time stamping the price on the necks of those termites.' "

Mr. John moved on to the produce department, became engrossed in testing the hanging-type scales, decided they ought to be replaced with the counter type. Said he: "The others look better and they're not so apt to go out of whack with all that bouncing around."

On the way out, Mrs. Burger, who had bought an armful of groceries for their lunch, said: "Mr. John, I want to tell you what happened to me at the checkout counter." Mr. John raised his arm defensively. "Margaret," he said, "don't tell me you were shortchanged! I'll cry." She had not been cheated, but a bag of pecans was so poorly marked that the checker had to look up the price. John examined the bag and allowed he would have to jog someone about those markings.

In the Throne Room. John Hartford moves at a pace that would exhaust younger men. In good weather he walks the 18 blocks from his weekday suite at the Plaza Hotel to mid-Manhattan's Graybar Building, throne room of A & P's vast empire. At 9:30 sharp he strides through one of Ralph Burger's offices, turns right into his own thickly draped, richly paneled office. At 11:05 a.m., Mr. George arrives. Not till both are in can any important matter be settled. Since they share equal power in A & P's affairs, both must agree before any new policy is adopted.

They frequently disagree--at first. George, the self-taught expert on finance, usually holds back, raises the practical obstacles, demanding: "If we do this, where's the money to come from?" John, the bold empire builder, is always tugging ahead, might overreach himself but for George.

Sometimes they argue back & forth while other A & P executives sit in the room, patiently waiting for the brothers to agree. One of their biggest arguments was whether to cash checks. Mr. John said yes, shrewdly figuring that those who brought in checks would spend part of their cash for groceries. Mr. George answered: "No, we have no business in the banking business. Besides, some of the checks will bounce." Mr. John won and today A & P cashes $2 billion worth of checks a year. The losses are negligible, but Mr. George still shakes his head over the matter. Said he only last week: "He won that one, like he wins most of the arguments. But we still don't agree on it. We're a couple of strong characters."

John stands in obvious awe of his older brother, yet likes to needle him gently for his plodding, painstaking ways. "Remember the watermelons, George?" he likes to say. John goes on to explain: "George came in one morning and wanted to see our produce people. He said our prices were out of line on watermelons. He'd stopped off at the Washington Market on his way in and saw some melons cheaper than ours. The produce man answered, 'Those melons are smaller.' 'No, they're not,' said George, 'I measured them.' "

At exactly 2:30 p.m. every work day, Mr. George (who eats no lunch) goes through a 70-year-old ritual. He nibbles cookies and cake while he makes a "blind" test of five brands of coffee, including A & P's three blends (Eight O'Clock, Red Circle, Bokar) to make sure that the flavor of the company's coffee has not changed.

Knives & Limburger. Nothing that passes through A & P's headquarters is too small for John Hartford's eye. One morning his secretary found him throwing knives at a target in his office. A truck driver had sued A & P, charging he had been injured by a knife thrown by an A & P clerk. John made his tests to see if it was possible to hit a man at the distance claimed, proved it unlikely, won his case.

On the wall behind John's desk is a sign: ACHE & PAIN DEPT., which is a notice to any visiting supervisor, manager or checker that he can get John's ear with a problem. But when something has gone wrong, John wastes no time listening to alibis, merely points to his big bookstand dictionary labeled: "Compendium of Alibis Compiled by Members of the A & P." John solemnly tells employees: "Now just don't you alibi, because it's got every alibi you can think of in it."

Mr. John is acutely aware of the habit patterns ingrained in the whole U.S. food business. Its profit margins are so small, and competition so keen, that generations of storekeepers found survival required them to underpay and overwork their help, weigh their thumb with the sugar, and as John puts it, "cut their salaries out of the meat." To remind everyone constantly against "flipmagilders," his private word for chiselers, Mr. John long kept a giant "butcher's thumb" in his office.

His biggest worry is that A & P's size "prevents the heartbeats from reaching the extremities." To make the blood reach the fingertips, he holds a weekly meeting with a different group of supervisors, the men directly above the store managers.

His invariable ritual at these meetings is to put the nervous supervisors at ease by recalling nervous moments of his own. At last week's gathering he began: "You should have seen how scared I was at school when the principal sent for me. I'd put some limburger cheese at the bottom of the stairwell. Oh, the stench that went up!" Then he lessened their awe by lampooning A & P's "brass hats." "I've got mine on," he said, raising his hand to indicate a very tall imaginary top hat. Abruptly he asked: "What do you think George and I do all day, count our money?" He went through an imaginary bill-counting routine, saying: "Oops, George, there's a hundred you dropped."

Then he became serious. "Now you take this matter of overtime," he told the supervisors. "One day a girl, a checker, came into my office and told me she was cheated out of $450 in overtime. She got every penny. I had put time clocks in all the stores to stop this sort of thing. Then a fellow got up at one of these meetings and said, 'Mr. John, I'm cheating my help on the time clocks.' He thought he could make a better showing! Another checker came in, and I asked her if she knew why I put in those time clocks. 'Oh, yes,' she said, 'to keep us from cheating the management !' You see how hard it is to get a thing that plain and simple understood?"

Grey Horses & Red Wagons. John and George Hartford got their first lessons in merchandising from a master showman, George Huntington Hartford, their father. Born in Augusta, Me., George Huntington Hartford had drifted around the dry-goods business with indifferent success. He was 26 when he and a partner named George Gilman hit on an idea. Tea was bringing $1 a lb. By buying it off the ship and eliminating the middlemen, they thought they could trim the price to 30-c-.

In 1859, they opened their first store, The Great American Tea Co., on Manhattan's Vesey Street. They used all the glitter and tinsel of a circus. The store was painted a flaming red ("real Chinese vermilion") ; red, white & blue globes dangled resplendently in its windows, a huge gaslit "T" glowed above its door. Their first ads cried: "There's good news for the ladies." They had other come-ons: on Saturday nights they handed out dishpan premiums and lithographs of babies while a band played a song that was providentially popular at the time, "Oh, this is the day they give babies away, with a half a pound of tea." To spread the store's name, a team of eight dapple grey horses drew a big red wagon through New York streets, offered $20,000 to anyone who guessed the weight of team and wagon.

Soon the company spread. On the profits, the tea company opened new red-fronted stores in surrounding towns, started wagon routes to sell tea & spices to farm wives, changed the company's name to the Great Atlantic & Pacific Tea Co. Partner Gilman soon sold out and retired on his profits, but Hartford plugged on. By 1880, when his plump, 16-year-old son George quit school to become his cashier, he had 100 stores.

Hartford's youngest son, Edward, did not care for the grocery business. "One Hartford ought to be a gentleman," he said, and went to Stevens Institute, the only one of the three boys to go to college. (Edward, who died in 1922, made a fortune in his own right by manufacturing the Hartford shock absorber.) But John early proved his business sense. When his mother offered him 2-c- a dozen for every fly he killed in the house, he went outside and caught a whole jarful. At 16, John began cleaning inkwells and sweeping floors at Vesey Street for his father. He got $5 a week, but his frugal mother made him pay $1 board and put another $1 in the bank. Says John: "When I got a $2 raise, like a chump I told my mother. She raised my board $1."

Young George was just as frugal as his mother. It was he who started trimming costs by getting A & P to manufacture its own products. When George learned that baking powder consisted only of soda and a carbonate, he screened off part of the Vesey Street store and set a chemist to turning it out. But it was bold, adventurous John who gave A & P its biggest shove, and made it continent-spanning in fact as well as name.

Hobos & Hell-for-Leather. In 1912, John persuaded his father and brother George to make an experiment. Until then, A & P stores had had charge accounts and deliveries. John, spotting a new trend, proposed a cash & carry "economy store" run by one man, operating at the lowest possible profit and snooting for big volume. The Hartfords opened the first such store, without giving it any name, in a dingy building not far from A & P's most profitable store in Jersey City. In six months, the obscure little economy store drove the bigger one out of business.

John got the green light to start economy stores far & wide. He operated on a simple formula: $1,000 for equipment, $1,000 for groceries and $1,000 for working capital. In two years he opened 1,600, at the incredible rate of about three every working day. "We went so fast," grins Mr. John, "that hobos hopping off the trains got hired as managers." John laid out each store exactly alike so that people could find things in any store once they learned the layout. "I could walk blindfolded into any store and lay my hands on the pork & beans," he says. By 1916, A & P's sales had soared from $31 million to $76 million. Impressed, father Hartford in 1915 turned the company over to George and John to run as a trust for themselves, their brother and two sisters.* Two years later, at 84, he died.

A & P's growth was just beginning. Mindful of George's early success with the baking powder, the brothers decided they could sell even cheaper by making still more of their goods. They started "Quaker Maid" factories to make A & P's own "Ann Page" preserves, peanut butter, etc. They set up their own American Coffee Corp. to buy direct from the growers in Brazil and Colombia. Still trying to eliminate middlemen, they set up their own Atlantic Commission Co. to buy the stores' produce. They started their own bakeries, candy and pastry shops to turn out everything from a $1 birthday cake to a $500 frosted reproduction of the Staten Island Ferry slip. They started new "combination" stores handling meats as well as groceries.

Likes & Dislikes. They made a study of food likes & dislikes. They found that New Englanders ate most of the corned beef in the U.S., preferred their corn yellow, their eggs brown, and liked a wider, fatter bacon than most other Americans. They found that prim-mouthed Philadelphia was the nation's biggest market for dried prunes, and ate more ice cream per capita than any other city in the world. Richmond liked "triple succotash," a mixture of lima beans, corn and potatoes; Scranton, Pa. bought more butter per capita than any other city.

By 1925 they had 13,961 stores and sales of $437 million. By then John realized that the company had got too big for him to keep track of it all. "George," he said, "we've got to decentralize." "All right," said George. "But lookit here, you'll never decentralize all this cash." They split A & P into seven regional retail divisions, each run by its own president but with central directives from the Graybar sanctum.

But Mr. George did not decentralize the cash ; he kept it under his own control. He leased new stores instead of buying them, devising a one-year lease with nine yearly options for renewal. He kept such close watch on A & P's finances that he was able to batten down the hatches long before 1929's storm broke, lost not a penny of A & P's surplus in the crash.

"The grocery business must be a good one," one of A & P's top men likes to say, "there are so many stupid people in it." John himself insists that he and George were almost the stupidest of the lot; they almost let the self-service supermarket go by without recognizing it as the biggest revolution in the food business since John's economy store.

When supermarkets sprang up in the early '30s, Mr. George and Mr. John thought them mere Depression pan-flashes. Not until their own sales tumbled did they realize that supermarkets were putting their own "combination" stores out of business. But if the Hartfords started late, they moved fast, started opening supermarkets right & left, and added such wrinkles as pre-packaged meats & produce, weighed and pricetagged. They expanded by contracting. Each new supermarket closed some six of the old-type A & Ps so that the number of stores dwindled from 1930's peak of 15,737 to today's 4,682. Yet they built so much more volume that sales, payrolls and employees rose higher than ever.

Increased size inevitably brought severer headaches. Years earlier the Hartfords had set up teams of traveling auditors to check price tags and weights in all the stores and report back to them directly, thus keeping tabs on the empire. There was always the chance that a dishonest store manager would overcharge, short-change or underweigh. But honest managers also were squeezed. They got so little leeway in their allowances for breakage, spoilage and pilfering that some of them felt they had to cut honesty corners to make a good competitive showing.

In 1936 the reckoning came. John Hartford sat and squirmed in a Washington court while Bureau of Standards investigators recited how they had been short-weighed on 50 chickens bought at A & P stores. John stormed back to the Graybar Building determined to cull out all such flipmagilding. He sat down and personally signed letters to 40,000 men & women in his employ warning them, on penalty of discharge, that every A & P customer "must get 16 ounces to every pound." Moreover, John set up a big board at headquarters to mark every supermarket's quarterly showing, raised hob whenever one turned up the white card indicating a "stock gain," i.e., a dollar "take" exceeding the retail value of all goods sold, a sign of possible overcharging or short-weighing. Now, says Mr. John firmly, virtually all of the supermarkets consistently show stock losses.

How Big? The A & P's enormous size brought far greater problems. The Government's trustbusters brought the company to trial on charges of violating the Sherman Anti-Trust Act.

In convicting the A & P in a criminal suit (and fining it $250,000), Illinois Federal Judge Walter Lindley found there was evidence that the A & P had time & again sold below cost to beat down rivals in price wars or to gain volume by switching profits from its non-retail subsidiaries to stores that lost money. Moreover, he found that A & P's buying subsidiary, Atlantic Commission Co. (Acco), so dominated the produce market that it not only bought the best produce for A & P but sold what it did not want to A & P's competitors at a profit, thus making sure that their costs would be higher.

But Judge Lindley, himself an occasional A & P shopper, also paid tribute to the company: "to buy, sell and distribute to a substantial portion of 130 million people, one and three-quarter billion dollars worth of food annually [the gross at the time] at a profit of 1 1/2-c- on the dollar, is an achievement one may well be proud of." He granted that many of A & P's actions, "standing alone, are devoid of wrongful character." But he found that Acco was the "rotten thread" that gave A & P's other operations "a polluted colored light."

Since then, A & P says that it has abolished Acco's double role. It has also leaned so far backward to avoid selling below cost that even its fiercest rivals now concede that they can frequently undersell A & P. In New Orleans last week, Independent Grocer John Schwegmann, who runs a thriving supermarket, said: "I started on a shoestring right down the street from the A & P supermarket and I have done all right. I consider them the fairest competition I have."

Cocked Pistol. But the trustbusters have not relented in their war on A & P. They are now trying to force A & P to get rid of its non-retail subsidiaries and to sell its seven retail divisions to separate owners--trying, in short, to divest the Hartfords of their empire. Says Mr. John wryly: "We'd be too crooked to run it." The Hartford brothers have fought back, and fought hard. When they planned a series of full-page ads attacking the trustbusters, A & P's lawyers warned the Hartfords that they might be sent to jail for contempt of court. Said John Hartford: "How long would we have to go, a year or two?" The lawyer said probably no more than 30 days. "Well," said John, "I'm not busy these days. I guess I can spare 30 days. What about you, George?" George said he wouldn't mind going to jail if they would let him fix radios. The ads ran.

In its defense against the trustbusters, there was no doubt that A & P had substantial public support. Since A & P had been mightily effective in bringing down the price of food, the average U.S. housewife did not need to look any farther than her pocketbook to know where she stood. Even U.S. farmers, who once railed against chain stores, now supported A & P. By cutting the costs of food distribution to the barest minimum, A & P had given farmers a bigger share of the consumer's dollar. For years A & P had carefully cultivated their good will in other ways. It spent millions showing them how to get better prices by improving the quality of their products. It persuaded them to let peaches ripen on the trees before picking; to pick fresh corn before dawn and get it to A & P stores the same day; to crossbreed chickens in a way to produce more white meat (the "Chicken of Tomorrow" --a breed with a huge breast, tiny legs and wings). Many a labor union also supported A & P (many stores are unionized) because of its low prices, higher-than-union scales of pay, pensions, etc. Says Mr. John: "I'm a union man myself at heart. Whatever labor got it had to get with a gun."

The Hartfords hope that their empire will outlast themselves, and have set up a line of succession. They have put their own two-fifths of A & P stock in a foundation, and made A & P's President Ralph Burger one of its trustees.* Thus Burger, who started with A & P 40 years ago and drove one of the red tea wagons, will run the company providing the owners of the other 60% of stock agree. The chances are they will, unless the trustbusters succeed in breaking it up.

Low Profits. There was little doubt that if A & P were broken up, the price of food would rise in many places. A & P kept prices down only because the family-owned company had always been content with low profits. On last year's sales of $2.9 billion, the net profit was $33.3 million, only 1.1% of sales (v. 11.5% of sales for General Motors). Furthermore, seven smaller companies could not effect the savings made under A & P's mass buying and manufacturing methods.

Says Mr. John: "I don't know any grocer or anybody else who wants to stay small. They all dream about building something bigger. The whole country's growing--our cities, schools, labor unions, everything. I don't see how any businessman can limit his growth and stay healthy."

* Under the trust, all five children shared alike in A & P's profits. Total profits paid out to date have exceeded $300 million, and the property is now worth more than $250 million. Of this, John and George own 40%. The remaining 60% is owned by the children of Edward, Maria Josephine and Marie Louise (all deceased). Edward's two children, George Huntington Hartford II and Mrs. Josephine Bryce, own 10% each, as do Mrs. Joseph Mclntosh and Mrs. Marie Robinson, daughters of Marie Louise. Another 20% is owned by Maria Josephine's heirs. * The others: John Hartford, Frank McKelvey (John's brother-in-law), Sheldon Stewart and Herbert Ludlum (their first cousin).

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