Smart & Final: Old-Line Chain Battles New Warehouse Rivals

With corporate names like Allegis, Unisys and Primerica in vogue, it is unusual to encounter a homey-sounding handle that doesn’t smack of being invented by a consultant with a hyperactive computer.

On the other hand, the name Smart & Final Iris, like many of the new corporate titles, does not spell out what this old-line Los Angeles company does. Explicit--like Goodyear Tire & Rubber or Campbell Soup--it’s not.

Nevertheless, company President Robert J. Emmons sees some advantages to the funny-sounding name that probably were not lost on the founders--a man named Smart and a man named Final--when they started their wholesale grocery business in 1912.

“We feel that the name has some very interesting connotations from a marketing standpoint--the smart place to shop, the final destination for all your shopping needs,” Emmons said recently at the company’s Vernon warehouse. “I think it works very well for us.” (The “Iris” comes from the name of the company’s longstanding private-label brand of coffee, food products and cleaning supplies.)

Smart & Final Iris might not be familiar to many Southern California shoppers, even though individuals are permitted to shop there. But to hundreds of small businesses, restaurants and other organizations, the company’s cash-and-carry wholesale stores have long been the places to get dill pickle chips by the five-gallon tub, nine pounds of potato salad for the company picnic, brand-name soft drinks by the case or polystyrene fast-food plates in two-foot stacks. The stores also carry national and private-label brands of restaurant and cleaning supplies.

“I’ve shopped here for 25 years,” Irving Loew, a caterer, said recently in the company’s Venice store. “It’s conveniently located, and the price is right.”

“They usually have all the things that you use in a restaurant,” said Maurice Prince, a longtime Los Angeles restaurateur. She buys everything from napkins to seasonings to black-eyed peas at Smart & Final Iris--and has for 43 years. The tables at her Snack ‘n’ Chat restaurant on West Pico Boulevard feature Iris products.

Lately, though, the 94-store Smart & Final Iris chain has encountered stiff competition from booming membership warehouse operations such as Price Club, Pace and Costco, which also cater to restaurants, small businesses and company cafeterias by offering food and other products in institutional sizes.

Bolstering Marketing

Partly in response to that, Smart & Final--formerly part of Thriftimart until its 1984 acquisition by Casino, a $6-billion French company--has lately beefed up its marketing in an effort to enhance its image and build business. Radio ads refer to the company as “the store that’s in business to help your business.” The company recently started placing weekly newspaper ads in an effort to lure more individuals shopping for big families or special events.

From 1984 to 1986, the French parent company spent $33 million to renovate Smart & Final’s stores, warehouse and offices. A laboratory was added to the Vernon plant for testing the 2,500 private-label products the company markets under the Iris, Smart Buy and Table Queen names.

This year, the chain is also expanding into Northern California (where the stores will be known as Smart & Final, without the “Iris”), spreading beyond Southern California and Las Vegas for the first time.

And last March, the company opened its first Smart Party Rents store in Venice, offering party rental supplies, equipment and related items to caterers, restaurants and the public. In an early coup, the store supplied the gear for the season-ending “wrap” party in April for the “Moonlighting” television program.

Eventually, Emmons said, “we want to be able to fulfill party and food-service needs at one location.” Plans call for five more Smart Party Rents locations in the next three years, all to be neighbors of Smart & Final Iris stores.

Business Growing

With sales growing at a 17% rate this year, Smart & Final Iris expects total 1987 revenue of $375 million to $400 million. Since its acquisition by Casino, the company has had sales growth of 7% in 1984, 9% in 1985 and 10% in 1986, after increases of only about 4% a year before the acquisition, according to Emmons. (The company does not disclose profits, but Emmons said it is profitable and that net income has increased in each of the three years.)

The Southland-based company traces its origin to the 1871 founding of Hellman, Haas & Co., a distributor of grocery and tobacco products and manufacturer of coffee and spices under the Iris name, which was introduced in 1895.

In 1912, J. S. (Jim) Smart and H. P. (Phil) Final started Smart & Final Wholesale Grocers, selling primarily feed and grain. In 1953, they joined forces with Hellman, Haas and gave the company its present name.

Two years later, thanks to a merger with the Thriftimart supermarket chain, the company was poised for big growth. But intense supermarket competition diverted management attention from Smart & Final Iris, and the stores lost their luster, Emmons said.

In 1984, Casino USA (a unit of Etablissements Economiques du Casino Guichard-Perrachon et Cie, a leading French food concern) bought the company, and Emmons, a former Thriftimart director and consultant to Casino in France, was named president.

Forty-two Thriftimart stores were closed in 1984, and Casino took to aggressively modernizing Smart & Final Iris--closing or renovating outdated stores and building new ones. The company’s 1,200 employees found the reorganization productive, though somewhat painful, Emmons said.

Convenience Approach

“We’ve attempted to maintain the neighborhood convenience warehouse concept with improved signing, a broadened assortment and increased emphasis on deli and frozen foods and cleaning supplies,” he said.

The rapid growth has called for some creative space use at the company’s 1950s-vintage, 400,000-square-foot warehouse in the industrial Vernon section, where, Emmons said, the company is “bursting at the seams.”

However, because high real estate prices make building a new plant prohibitive, Smart & Final Iris is spending about $2 million on the warehouse to install a computer system and increase shelf capacity with “flow racks” that put merchandise on rollers.

Clearly, a bigger problem than space constraints could be the fierce new competition created by the fast-growing membership warehouse stores, along with new supermarket concepts such as Ralphs’ Giant stores. One-third of the space in many warehouse stores is devoted to food items--Smart & Final Iris’ main focus--and many such locations are expanding their deli and frozen foods sections.

Emmons contends that Smart & Final Iris has several advantages over the membership clubs, the most important being that it has no membership fee and that it consistently carries the same items. Most membership warehouse clubs, on the other hand, buy “opportunistically” and offer limited brand selection at a given time.

The company considers San Diego, home turf of Price Club, “one of our better markets,” Emmons said. “Frankly, the Price Club shops our stores, and we shop theirs on a regular basis, so prices are pretty comparable.”

Of the membership warehouse threat, Emmons said: “There is some concern, but to this point in time we’ve competed very well.”

Jim Sinegal, president of Seattle-based Costco Wholesale, a membership warehouse chain, noted that his five Los Angeles-area stores and others like it are capable of serving wholesale customers across a “much broader spectrum” than Smart & Final Iris.