Last updated on March 23rd, 2016 at 08:30 am
Ron Johnston, Shelby Publishing Co.’s president and publisher, sat down with Ralph Ketner, founder of Food Lion, on March 7 for a by-invitation interview in Ketner’s office at Catawba College in Salisbury, North Carolina, inside The Ralph W. Ketner School of Business, which Ketner endowed in 1989.
Johnston interviewed Ketner 19 years ago, about six years after Ketner had retired from Salisbury-based Food Lion and turned his attention to teaching classes at the college and various philanthropic endeavors. Today, at 95, Ketner continues to dispense his business wisdom—free of charge—at the college through both classes and one-on-one coaching for those who want it, including those whose businesses are on the brink of failure.
And Ketner understands how it feels to be in that position, believe it or not. For about a decade, between 1957 and 1967, he and his partners in Food Town—older brother Brown Ketner and their friend Wilson Smith—were struggling to keep their business going. They had grown their business to seven stores but were barely making enough profit to survive.
In November 1967, he read about a grocer in Ohio who had basically kept his store from going out of business by lowering prices. Ketner flew out to see him and after the visit decided to try that himself. Lowering prices on 3,000 items across the stores not only saved Food Town but put it on track to become one of the fastest growing supermarket chains in the country. That chain, which would become known as Food Lion in the early 1980s, benefited from Ketner’s innovative bent as well as his mathematical mind. Cutting costs on the operational end made it possible to keep prices low for customers—something that is still part of Food Lion’s DNA. Over the years, Ketner came up with ideas like BOGOs, customer loyalty cards, sending flowers from the company to hospital patients and selling gas to customers at cost. He also was into sustainability early on; Food Town began baling and recycling cardboard instead of burning it and saved operating costs.
Following are excerpts from Ketner’s interview with Johnston.
(Editor’s note: Less than two weeks after this interview, it was revealed that Mr. Ketner had been hospitalized and given a cancer diagnosis. He currently is in hospice care and has asked for no visitors. However, he welcomes cards and letters: Mr. Ralph Ketner, Kiser Hospice Residential House, 1229 Statesville Boulevard, Salisbury, NC 28144.)
Ketner: In 1923, our dad moved us to Salisbury (he purchased Taylors Meat Market on North Main Street). I used to be a bag boy, did bicycle delivery. So I had the privilege, so to speak, of being underprivileged. I grew up knowing everything about the grocery business.
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(Ketner has been honored as an entrepreneur and grocery industry visionary over the years.) Cash discount on gross amount—I originated that. Everybody gets it now, but years ago, if a product had 25-cent-off labels, I lost that amount of money from the discount. My argument was they should pay us (the full amount without the cents off). Everyone does it now, but can you imagine fighting that fight? But I won it…
Another thing I came up with was delayed dating (a 30-day delay in payment for shipments to warehouses). The reason we’ve got this new warehouse is for the supplier’s benefit—not for our benefit, it’s for them. So the least they can do is give us 30 days.
Johnston: I remember when you changed all the pricing, the LFPINC (Lowest Food Prices in North Carolina). You literally went into a hotel room and spent days with your adding machine and changed the prices. You’ve always had this mathematical acumen that has driven a lot of your success.
In November ’67, I was reading an article in a trade publication, Progressive Grocer, and this fellow in Dayton, Ohio, his sales had gone up tremendously because of an idea. I flew up there and talked to him. He had one store called Food Town, same as ours, and I said, “I’ve got to make some changes because we are just about bankrupt. What did you do?”
He said a lady told him that because he had just one store, he would miss every customer he lost. He asked her what she was talking about, and she said, “Your price is too high.”
“On what?” he asked.
She told him he was two cents higher than the competition on Zwieback teething biscuits, and he was about to lose a customer over it. (So he lowered his prices.)
I said to him, “I’ve got my own warehouse; I’m going to cut the prices on everything I sell in the warehouse just about.”
I took six months’ invoices and went to the Manger Hotel in Charlotte and cut 3,000 prices. If our sales had gone up 10 percent we would have been bankrupt; 20 percent bankrupt, 30 percent bankrupt. But we got to more than 50 percent up. The first year, sales went from $5 million to $9 million, that’s 80 percent. In four years we were doing 730 percent (more). We grew 144,000 percent in 25 years. Profits went up 500,000 percent.
We would not give a penny to anything—Girl Scouts, Boy Scouts, anything (when we went to the lower prices). When you need a 50 percent increase, you don’t think you have a penny. So you don’t give anything.
Sales started growing tremendously in ’83, 15 years later. Sales were $10 million a week, $5 billion a year.
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…I don’t believe in lawyers; they tell you what you can’t do. See, we were raising money to start Food Town, and the three of us didn’t have the money so we went through the phone book, name by name, and called 250 people. That’s how we raised the money.
(According to “Lessons in Leadership: The Story of Food Lion Co-Founder Ralph W. Ketner,” a documentary from Food Lion and Catawba College, the three founders had $62,500 among them and raised another $62,500 from 125 Salisbury residents for a total of $125,000 to build the store in Ketner Center, one of the first shopping centers in Rowan County, developed by Ketner’s brother Glenn. According to a 1988 article in Fortune magazine, the residents had the option to buy up to 100 shares at $10 each.)
• • •
I hired two schoolteachers, brothers…for the summer to knock on doors…I gave them $100 each to go to A&P and Winn-Dixie and Colonial—three competitors in Salisbury. I ran a full-page ad with their picture. I told them to buy anything they wanted—don’t let me have any influence. They did, and we were about $15 cheaper. So we ran a front-page ad.
• • •
I speak to a lot of classes. One of my topics is “Success Before Survival—Only in the Dictionary.” The hardest part of any startup, I tell my entrepreneurs and would-be entrepreneurs, is if you’re going to be a me-too, we don’t need you. For god’s sake, don’t mess up the water. Stay working for somebody else.
• • •
…if I had stayed with Food Lion, Food Lion today would be nationwide, and we’d have 4,000 stores. When I left we had 1,012. We opened 349 in the last three years I was with the company. That’s more than two a week for three years.
I was talking to Meg Ham the other day, president of Food Lion, and I said my biggest problem today, if I still ran Food Lion, would be what to do about credit cards. About 2.8 or 3 percent (interchange fees), based on how good a negotiator you are. If you make 2 percent profit, it is going to take more profit than you hope to make….It’s like a cancer, I guess. You can’t charge more for credit cards—that would be the kiss of death—but if I ran Food Lion today, I’d be giving a 3 percent cash discount for cash.
You mentioned Food Lion and if you’d stayed on and were running it, it would be a national chain today. Take us back…I know there were some conflicts in the boardroom. How did it all play out when you finally retired from Food Lion? Was that a bitter moment for you after what you had built and the tremendous exponential growth?
I got a letter in the mail from Delhaize one day in 1974 that said, “Would you be interested in selling part interest in your company?” I put on the bottom, “It all depends.”
I sent the letter back to the broker in Boston. He called me on the phone. We talked, and the stock market was down then like it was a couple of years ago. Food Lion was selling for $13 and split 4 to 1 in the meantime, so $13 grew to $52… We split the stock, but we didn’t pay dividends after we got the low price concept. We were growing so fast that I didn’t have the money, so I wasn’t paying dividends.
(The broker and I) discussed it, and I said I’ll take $26 (per share) and I will recommend it to my present stockholders; we had 125. So that’s what we did.
Eventually, everybody who invested at least $28 in the company…became a millionaire. Twenty-eight dollars became a million bucks.
Basically, the agreement was for Delhaize to own 30 percent. When the broker called, he said, “Ralph, did you know Delhaize is buying Food Lion stock on the open market?” I said, “No, but I don’t have an agreement they can’t, so…”
I called (Pierre-Olivier) Beckers, president of Delhaize, and said, “What are you doing?”
He said, “Well, Ralph, we have a problem over here. You don’t pay a dividend, and you told us in New York that you expect us to buy 30 percent. If we don’t own at least 50 percent of Food Lion, we can’t take any profits on our books for all the stock we own because we don’t have that voting control.”
I said, “We’ll split the stock again; I’ll split it with A voting; the new stock will be non-voting (B), so you can sell part of it to get some dividend money.” So that’s what we did. But the agreement with me, as long as I was with the company, was that they voted with me.
They invested a total of $28 million. When I left the company (in 1991) their 54 percent was 400 million shares worth $4 billion.
People ask me if I’m happy I sold to them. I said, my mother died when I was five, my dad died when I was 11, so I grew up selling newspapers and so forth to make money. I had a chance on this that they wanted to buy 30 percent and I could see a million bucks. I never thought I would see a million dollars in my life. So that’s the reason.
Where did your mathematical acumen come from? Anyone else in your family have that same knack for numbers?
(My father) was an entrepreneur because there were five kids and another one soon to be born. The story goes—not sure how true it is—that he slaughtered animals and put them in the butcher shop for them to be sold. One day he wanted to buy some steaks to take back home. It would be about half as much for the steaks as he would get for the whole carcass. He figured he was on the wrong end of the business….He moved the family to Salisbury and operated a little butcher shop. During the height of the Depression, he had five stores. He had a farm out here in Franklin, about three miles from here, that he raised 300 hogs on and he sold the meat at the store. The price was 30 cents a pound; he started off at 10 cents a pound…to get business.
I inherited the genes from my mother and father, obviously…and the older brother that sold Winn-Dixie those 25 stores? (Glenn) was 20 years old when my dad died, so he took over one store as his share of the estate.
(Ralph worked for Glenn before he went to Tri-State College in Angola, Indiana, and then when he decided to drop out of college he worked for him again for a short time before going to work at Cannon Mills, a textile company, in the accounts department. Ralph was working for Cannon Mills when he volunteered for the Army during World War II. He served in Africa and Italy.)
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(When Ketner returned from the war, he worked nine different jobs, including IRS agent, before becoming a buyer for Glenn at his supermarket company. In 1956, Glenn merged his 10 stores with John Milner’s 15 Piggly Wiggly stores to create a 25-store group. Shortly after, they sold the stores to Winn-Dixie, and Ralph and the other Ketner brothers who worked for Glenn became Winn-Dixie employees. Ralph resigned from Winn-Dixie in 1957 when Glenn was trying to fill the anchor spot at Ketner Center and Ralph wanted to try his hand at owning his own store.)
During the first 10 years of operating Food Town we starved to death. But we tried a lot of different things. I went to a service station guy and said, “You are the wholesale distributor; I’m going to buy gasoline from you for wholesale. You’re going to make a good profit because I will become the No. 1 pumper, selling it to everybody.”
I also went to a man whose drugstore was about to go out of business. I said, “Let me pay you so much a week and you fill all the prescriptions at cost for Food Town customers.” He scorned the idea, but I thought, I’m offering you an opportunity to stay in business and have a good life.
We tried it, and his sales went up 300 percent.
I’ve always come up with new ideas and a better way of doing things.
• • •
I tell buyers that the buyer has to be a better salesman than the salesman calling on him. I’ve got to convince you that what I want is in your best interest.
When I was doing the buying for my brother when he had 10 stores, I would make deals for all 10 stores; maybe buy 1,000 cases. And I would ask for cash discounts for big deals like that.
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Benefactors from Delhaize came in one day and said, what’s your inventory turn? I said, “Don’t know and don’t care.” That’s the kiss of death. I said, “I buy for the customer; I don’t buy for turns, I don’t buy to try to look good on paper.”
Let me shift gears a little bit, Mr. Ketner. At your age you have seen quite a few presidents and administrations…this current political season, the most bizarre in my lifetime, but what observations do you have about where we are and what impact it’s going to have on the businessman, let alone the food industry.
I go back to when I ran Food Lion. I did not permit myself nor any department manager and up to ever express an opinion, Republican or Democrat. A landslide is 45/55; why alienate 45 percent of your customers?
The thing that scares me more than who’s going to be president is the national debt, $18 trillion…This country is in one hell of a shape, quite truthfully.
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Another one of the questions Food Lion wanted me to answer (in a recent interview) was to look back over my life and see who some mentors were to me. I never thought about it…
How did you answer that question?
Nobody. But to a degree, I had a mentor in reverse. I saw things I didn’t think were right…My brother had 10 stores and owned 100 percent of the stock—no profit sharing. I and the other two (partners in Food Town) had profit sharing.
My brother, he was a teetotaler and didn’t sell beer and wine. So we started Food Town without beer and wine. After two or three months, I told Will and Brown, we’ve got to put it in. They said no, we don’t. I said there’s 122 others (investors) that have 50 percent. When they invested in our company, they didn’t see our peculiarities that said we didn’t believe in beer and wine, so they thought we would have sense enough to run a legitimate business. So we put it in.
We started off not opening on Sunday. Competition started to open on Sunday so we did, too.
• • •
Colonial once ran a full-page ad to tell customers they were going to close all their stores for three days to lower prices to meet Food Lion prices. A reporter called to ask me about it. I pretended like I didn’t know, said what are you talking about? He told me, and I said, “You mean they’re running ads admitting that they’ve been cheating and overcharging people and are going to lower their prices? That’s a miracle; I never thought I’d see one.”
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(On the name change to) Food Lion…in Tennessee there were already 100 Food Towns there. Our logo was the lion on private label. I said, we can change our whole name—canopies are what cost the money—if we buy an “L” and an “I” and move the other letters over. You have a new name just by buying two letters. That’s the logic behind it.
What’s been the most satisfying thing in the academic environment around young students and some of the lectures that you give?
I would say the opportunity to speak to them…I speak about once every two weeks. I let the president of the college know all the seniors that are thinking about going in the business can come up and bounce their idea off me.
You talk about new industries, but don’t forget about encouraging the existing industry to do better, help them do better. If businesses are going bankrupt, have them come to me and I’ll analyze the operation. Maybe I can save them; I have saved four or five.
I used to have LFPINC, Lowest Food Prices in North Carolina; now I am the LPCINC, Lowest Paid Consultant in North Carolina. I charge nothing.
(Ketner has a soft spot for Catawba College. The first Food Town was located by the campus, and he is confident that the patronage of students and faculty from Catawba is one of the big reasons that store was able to survive.)
Back when I gave the money for this (business) school, the president of the college said, “Ralph, do you know anybody who might have $750,000 that they would donate to the college to renovate the dorm over there?” I said, there’s a lady and her husband, both had $500 worth of Food Lion stock that’s worth $3 million now. They have no children, he’s dead; she probably would give.
So we called her to come in and see us, and after just a few minutes she said, “Ralph, I know you all have something on your mind. What is it?” I told her they wanted her to give $750,000 to Catawba College. She said, “Ralph, I don’t have any money.” She thought they just bought the stock because the Ketners needed it; she didn’t think any more about it. I told her that stock was worth over $3 million.
She gave $750,000 to the college, she built a fire department in another town and gave money to this and that. I would say 20 or 30 percent of the people that had Food Town stock (didn’t realize what it was worth).
That seven-story building as you come into town, it used to be rundown. Now I own it; I renovated it and gave it to the city. It has a homeless shelter.
I’ve built homes for low-income people, 25 of them, since I retired. I was looking for things to do to help other people.
When was your 95th birthday?
Sept. 20 last year. Truthfully…I told both my kids (daughter Linda and son Robert), if I get halfway (toward death), don’t pull me back, push me. Who in the hell would rather stay here as a 95-year-old than to be in heaven?
What’s your secret? Obviously you’re active with all your reading and engaging with the students here, but physically do you have a regimen you follow?
Well, I am going downhill, truthfully. About five months ago everything started tasting bad. Fifty years ago I lost my ability to taste, but there’s a difference between not tasting and tasting bad. The texture is the same, and you know you once liked it and you know that an apple is an apple, but all at once you take a bite of that apple and it’s bad. Barbecue, it’s bad; a bite of steak, it’s bad. So now I drink 90 percent of what I eat. Boost two meals a day; two for lunch, two for supper…But it doesn’t scare me; you have to face the facts of life.
I know this is a difficult question because you’ve had so many successes in your life, but looking back, what’s the greatest thing that ever happened to Ralph Ketner?
In 1986…sales were $10 million a week, and they were growing 35 percent. I think then I knew (we would be successful).
I’d give $1,000 for this letter this lady wrote me. It said, “Mr. Ketner, I went shopping with you last week. The cashier made me angry, the bagger made me angry. They loaded the groceries wrong. I went to the store manager, and he made me mad.”
I’m afraid to turn to page 2, wondering what in the world is on page 2.
But page 2, I love it, and it’s probably then that I knew we were home free: “Mr. Ketner, I wish I could afford not to trade with you.”
A lady also wrote me from Forrest City; she had lived in Charlotte. She said, “I went shopping last week. I spent $15 more for groceries because you don’t have a Food Town in Forrest City. What right do you have not to have a store there?”
We got a petition from Virginia; 3,000 names on it—a lieutenant colonel in the Army got the petition up—begging us to put a store there. That’s what I believe Delhaize wanted.
You get letters like that, you know you’re a success.
The last question: May I please return to interview you when you turn 100?
Truthfully, I hope I’m not here to be 100.
But, Ron, I can’t tell you how much of a pleasure this has been.
*Editor’s note: Find more in the April 2016 print edition of The Shelby Report of the Southeast.