Hill and Wang

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Copyright © 2011 by Marc Levinson

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Distributed in Canada by D&M Publishers, Inc.
Printed in the United States of America
First edition, 2011

Library of Congress Cataloging-in-Publication Data

Levinson, Marc.
The great A&P and the struggle for small business in America / Marc
Levinson.
p. cm.
Includes bibliographical references and index.
ISBN 978- 0- 8090-9543- 8 (hardcover : alk. paper)
1. Great Atlantic & Pacific Tea Company. 2. Supermarkets—East
(U.S.)—History. 3. Grocery trade—United States—History. I. Title.
II. Title: Great A and P and the struggle for small business in America.
HD9321.9.G7L48 2011
381'.45641300973—dc22
2011003811

Designed by Jonathan D. Lippincott

www.fsgbooks.com

1 3 5 7 9 10 8 6 4 2

This is an independent work of scholarship and is not endorsed by

The Great Atlantic & Pacific Tea Company.
 1

THE VERDICT

J
udge Walter C. Lindley was no one’s idea of a flaming radical. Born
in 1880 in the village of Neoga, deep in the corn and soybean coun-
try of south-central Illinois, Lindley had a reputation as a scholar: at
a time when many learned the law as apprentices rather than as stu-
dents, he earned not only a law degree but also a doctorate in laws from
the University of Illinois. In Danville, a commercial hub 150 miles south
of Chicago, he became a man of prominence. He built a law practice,
won a seat on the city council, and became an attorney for Joseph Can-
non, who served eight years as the ironfisted Speaker of the U.S. House
of Representatives and represented Danville in Congress for almost half
a century.
Lindley was a Republican, and shortly after Warren G. Harding,
the great friend of business, became president in 1921, he named Lind-
ley to the federal bench. As a judge, he drew more than his share of high-
profile cases. In a 1929 jury trial that held Chicago rapt, Lindley’s court
convicted sixteen candy wholesalers of terrorizing storekeepers who re-
fused to buy their candy. Two years later, he upheld the near-dictatorial
powers of the commissioner of major-league baseball, Kenesaw Moun-
tain Landis. In the early 1930s, he oversaw the restructuring of the col-
lapsed utilities empire of the Chicago entrepreneur Samuel Insull and
survived an attempt by Insull’s henchmen to have him impeached by
Congress. Suggested as a possible nominee to the U.S. Supreme Court
in 1929, during Herbert Hoover’s presidency, Lindley was not beyond
criticizing that court and, by implication, the Democratic administra-
tion of Franklin Roosevelt. In 1939, he commented acidly that for some
new Supreme Court justices, “precedents may be of little avail and their
lack no bar.”1
4 THE GREAT A&P

On a sunny Saturday in September 1946—the federal courts worked

six days a week back then—Lindley issued what would be the most con-
troversial decision of his long judicial career. Before a crowded courtroom
on the second floor of Danville’s post office, he declared that George L.
Hartford, eighty-one; John A. Hartford, seventy-four; their company, the
Great Atlantic & Pacific Tea Company; and other company executives
had conspired to violate the Sherman Antitrust Act. The fact that the
secretive Hartford brothers, two of the wealthiest men in America,
were deemed criminals was startling, but their crime was truly remark-
able. Rather than being accused of acting like monopolists to keep
prices artificially high, the Hartfords were found to have done the op-
posite. They and their company, Lindley declared, had acted illegally in
restraint of trade by using A&P’s size and market power to keep prices
artificially low.2
The victims of this unorthodox conspiracy were not families that
purchased groceries. The evidence before Lindley’s court made clear
that prices at A&P were below those at the competition; as John A. Hart-
ford himself had testified nearly a year earlier, “We would rather sell
200 pounds of butter at 1 cent profit than 100 pounds at 2 cents profit.”
While selling food cheaply was good for consumers, it was bad for the
hundreds of thousands of retailers, wholesalers, and manufacturers who
needed high food prices in order to make a living. U.S. v. A&P was the
climax of decades of effort to cripple chain stores in order to protect
mom-and-pop retailers and the companies that supplied them. The
Hartfords’ real crime was to have endangered mom and pop.3
But it was the participants, not the legal issues, that made the Dan-
ville trial so notorious. The Great Atlantic & Pacific Tea Company was
not just another grocery chain. It was, by a wide margin, the largest re-
tailer in the world. Its footprint stretched from coast to coast, covering
thirty-nine of the forty-eight states and parts of Canada as well. It col-
lected more than ten cents of every dollar Americans spent at grocery
stores. It was an enterprise so familiar that millions of Americans knew
it as “Grandma,” so ubiquitous that when John Updike penned a short
story about the eternal boredom of teenage life a few years later, he
called it simply “A&P.” Its influence over America’s lunch boxes and
dinner tables was so overwhelming that when an ambitious young Flor-
ida grocer decided to lower prices at his tiny store, he received one piece
of advice: “Don’t make A&P mad.” 4
 THE VERDICT 5

A&P was at the center of a bitter political struggle that lasted for
nearly half a century—a struggle that went far beyond economics. At its
root were competing visions of society. One vision could be described
with such words as “modern” and “scientific,” favoring the rationalism
of cold corporate efficiency as a way to increase wealth and raise liv-
ing standards. The other vision could fairly be termed “traditional.”
Dating to Thomas Jefferson and his contemporaries, the traditional
vision harked back to a society of autonomous farmers, craftsmen,
and merchants in which personal independence was the source of
individual opportunity and collective prosperity. The words of Judge
Lindley’s ruling against the Hartfords and A&P embodied the conflict
between those two visions. “To buy, sell and distribute . . . one and
three- quarter billion dollars worth of food annually, at a profit of one
and one-half cents on each dollar, is an achievement one may well be
proud of,” he acknowledged, in a nod to the modern vision. Yet this
achievement, he decided, ran afoul of the Sherman Antitrust Act by
making it hard for smaller firms to compete with A&P. “The Sherman
Act,” he ruled, “was intended to secure equality of opportunity.” Equal-
ity of opportunity could not be secured if big firms were allowed to
pummel the small.5

There may never have been a more improbable pair of convicts than
the Hartfords. The elder of the brothers, George L. Hartford, was as
predictable as they come. He lived in the same house for half a century
and took rooms at the same New Jersey shore resort every summer. He
left home at 9:05 every morning, wore a black suit with stiff collar to
work every day, and made a point of tasting the company’s coffees at
2:00 each afternoon. His hobbies, when he was a younger man, were
repairing cars and building crystal radios, activities that required him to
utter hardly a word to anyone; in later years he did jigsaw puzzles. Few
employees ever laid eyes on the man known throughout the company as
Mr. George. The minutes of meetings of A&P’s top executives rarely
cite his words. One of the few journalists to meet him said he could be
taken “for a retired Polish general—bulky, stolid, rumpled, with a for-
eign air that his American drawl immediately belies.” No one who en-
countered him on the street would have imagined that he headed one
of the largest, most powerful enterprises in the world.6
6 THE GREAT A&P

John A. Hartford, his younger brother, had an entirely different per-

sonality. A dapper dresser who favored custom-tailored gray suits, Sulka
bow ties, and pocket squares, he enjoyed traveling, visiting stores, and
pressing the flesh. In his thirties and forties he had raised horses that
won prizes at the National Horse Show, a premier event of New York
society. He lived in an eight-room suite at the Plaza Hotel and lunched
alone on milk and crackers at the Biltmore. On weekends he commuted
to his suburban estate, a Tudor mansion with a nine-hole golf course,
stable, and polo field, and in the winter he went to The Breakers in
Palm Beach. He was married three times, twice to the same woman
and, in between, to a woman who came into his life modeling clothes
for his wife. It was Mr. John’s job to motivate employees, spreading the
company’s paternalistic management gospel through philosophical mis-
sives that often referred to “my brother and I.” In the 1930s, when A&P’s
political troubles became life-threatening, John A. Hartford reluctantly
became the company’s public face, sporadically meeting with the press,
putting his name to the occasional folksy article, and making end-of-
year pronouncements about the outlook for food prices in the months
ahead.7
The brothers’ distinct personalities were displayed in the way they
ran their company. Mr. George was cautious, favoring a rock-solid bal-
ance sheet, wanting each store and each product to pay its own way,
distrusting new ideas. Mr. John was more aggressive, more open to new
ideas, but always insisting that lower prices would make more money by
bringing more customers in the door. The brothers met each morning
to discuss the smallest details of their business, from the price of canned
tomatoes to the profitability of the stores in Pittsburgh. They made a
formidable team. It was Mr. John who engineered the company’s re-
markable expansion in the 1910s, its climb to be the first retailer to sell
$1 billion of merchandise in a single year in the 1920s, and its quick
conversion from grocery stores to supermarkets in the 1930s. It was
Mr. George who kept A&P solvent.
The Great Atlantic & Pacific lay at the center of both men’s lives.
Neither ever worked anywhere else. Neither attended a day of college;
in fact, neither finished high school. They learned business on the job,
from their father, who ran the company before them and gave them
meaningful responsibilities when they were still in their teens. They
 THE VERDICT 7

treated the company as their family, almost never dismissing employees,

creating one of the first company pension plans, and shortening working
hours simply because they could afford to do so. All managers had moved
up the ranks, and almost every executive had worked at A&P for de-
cades. Because they completely controlled the company, with no share-
holders to please and no creditors to satisfy, they could run A&P however
they wished, and they sometimes ran it in ways that drove their more
short-term-oriented managers to despair.

George and John Hartford were in the grocery trade at a time when sell-
ing food was an activity of enormous economic importance. There were
literally grocery stores on every corner: in 1926, Kansas City, by no
means the most densely populated of American cities, had 30 food mar-
kets per square mile. The first national survey, in 1929, found 585,980
food stores—one for every fifty-one American families. Richard Nixon,
a future president, grew up working in his family’s grocery in Whittier,
California, in the 1920s, and the family of Lady Bird Johnson, a future
first lady, sold groceries from a general store in Karnack, Texas. These
mom-and-pop stores were ser viced by a thick web of suppliers. The
United States boasted 13,618 wholesale distributors of groceries in 1929,
or one wholesaler for every forty-three food retailers. This wholesale
network, in turn, distributed the products of nearly sixty thousand can-
neries, sugar-beet mills, slaughterhouses, soap factories, and other plants
making everything from brooms to baking powder. Mom and pop ran
many of these operations, too. The typical food plant had fewer than
fifteen workers.8
In 1920s America, every town of any consequence had its grocers,
its food brokers and wholesalers, its bottling plants and flour mills.
These enterprises provided a tax base for their communities, a cadre of
owners and managers to serve as civic leaders, and a major source of
jobs. Just the retail side of the food business provided livelihoods for
1.2 million workers on the eve of the Great Depression, many of them
self-employed proprietors. Food retailers, wholesalers, and processors
together engaged one out of every eighteen nonfarm workers in the
entire country—more than apparel and textile factories, iron and steel
plants, coal mines, or even railroads.9
8 THE GREAT A&P

Americans paid a high price to support this balkanized system for

conveying food from farm to table. Food was hugely expensive, relative
to wages. The average working-class family in the 1920s devoted one-
third of its budget to groceries, the average farm family even more. Most
households spent more to put dinner on the table than for their rent
or  their mortgage. And for the average housewife, shopping for food
consumed a large part of the day. This money, time, and effort bought
plenty of calories, but only moderate amounts of nutrition. With neither
display space nor refrigeration, many neighborhood stores carried only
token stocks of fresh fruits and vegetables. Fresh fish and poultry were
rarities. The poorest third of American households consumed a sorely
inadequate daily intake of vitamins and minerals, because there was
little of either in the food that their neighborhood shops had for sale.10
The Great Atlantic & Pacific did much to destroy this world. The
Hartfords were among the most rigorous managers of their day. At a
time when many grocers consulted self-help books to figure out how to
price their goods, the brothers pored over data to fine-tune operations,
closing this store, relocating that one, dropping a product whose sales
languished, adding another that promised better margins. They totally
reshaped their business at least four times. At its peak, their company
owned nearly sixteen thousand grocery stores, seventy factories, and
more than a hundred warehouses. It was the country’s largest coffee
importer, the largest wholesale produce dealer and butter buyer, the
second-largest baker. Its sales were more than twice those of any other
retailer. Their basic strategy was so extraordinarily simple it could be
captured in a single word: volume. If the company kept its costs down
and its prices low, more shoppers would come through its doors, pro-
ducing more profit than if it kept prices high.
The Great A&P transformed the humble, archaic grocery trade into
a modern industry, but its relentless expansion posed a mortal threat to
a sector of the economy upon which so many families and communities
depended. Those mom-and-pop grocers, local wholesalers, and small
manufacturers understood the threat full well, and they fought back
with a vengeance. The Hartfords were in no sense robber barons, yet
they became the most controversial, and most reviled, American busi-
nessmen of the first half of the twentieth century. Had Mr. George tuned
his crystal radio to America’s most widely heard station in the 1920s, he
 THE VERDICT 9

would have heard diatribes against the “childless brothers” who mo-
nopolized food retailing. When Senator Huey Long warned in 1934
that “about ten men” have “chained the country from one end to the
other,” he was talking about Mr. George and Mr. John. When a lawyer
working for the administration of Franklin Roosevelt called the coun-
try’s largest retailer “a gigantic blood sucker,” there was no question he
had the Hartfords in mind: it was he who convinced Judge Lindley to
convict them.

A contemporary of the Hartfords, the economist Joseph Schumpeter,

coined the phrase “creative destruction” in 1942 to describe the painful
process by which innovation and technological advance make an indus-
try more efficient while leaving older, less adaptable businesses by the
wayside. For the economy as a whole, creative destruction is enormously
beneficial, permitting a shift of labor and capital from sectors where less
is required into areas where new products and ser vices are in demand. It
is precisely such shifts that make economies grow. For many individuals
and many communities, on the other hand, creative destruction is pain-
ful, entailing business restructuring, job elimination, and the disap-
pearance of companies and industries that have provided the economic
base for a particular town or an entire region. Whatever its advantages,
economic change inevitably leaves major losses in its wake.11
When creative destruction brings layoffs to autoworkers or closes
coal mines across an entire region, the world pays close attention. When
it means the closure of a family-run grocery store or the replacement of
a failing supermarket by another store down the street, though, creative
destruction does its work unremarked. This invisibility reflects the sheer
lack of drama in the retail trade: a shuttered store leaves no gargantuan
machinery standing idle, no angry workers milling around outside a pad-
locked gate. The building, torn down for parking or converted to some
other use, will quickly fade from memory. The workers will be expected
to find other jobs wherever they can. Displaced industrial workers,
tough, rugged, and usually male, are presumed to have had important
dreams and plans tragically destroyed by the vagaries of economic
change and to merit public sympathy. Displaced grocery clerks rarely get
such respect.
10 THE GREAT A&P

That neglect speaks to the prejudices of social thinkers of many

ideologies. Thomas Jefferson, along with his contemporaries in the En-
lightenment, saw special merit in the toil of the farmer, but very little in
the work of the merchants who dealt in the farmer’s produce. Karl Marx
and Friedrich Engels judged that the course of history would be shaped
in vast factories by workers engaged in physical production; the labor
of the merchant, they wrote, “is not labor that creates value.” Their near
contemporary William Graham Sumner, one of the most influential
American social thinkers of the late nineteenth century but decidedly
no Marxist, fully agreed with their point. “Wealth comes only from
production, and all that the wrangling grabbers, loafers, and jobbers
get to deal with comes from somebody’s toil and sacrifice,” Sumner
wrote.12
The effect of economic change on store owners occasions particu-
lar ideological confusion. After all, the independent grocers displaced
by the growth of the Great Atlantic & Pacific were capitalists, even if
their capital was only a few hundred dollars. Their wives, by extension,
were capitalists, too, even if being capitalists did not absolve them from
twelve-hour days totting up purchases and keeping the books. When
larger competitors undercut their prices and decimated their businesses,
these small-time capitalists received neither sympathy nor a mention in
the unemployment statistics. They simply vanished.
In the first half of the twentieth century, the Hartfords turned their
company into one of the greatest agents of creative destruction in the
United States. Although shifts in the way the world buys food are far less
heralded than innovations such as cars and computers, few economic
changes have mattered more to the average family. Thanks to the man-
agement techniques the Great A&P brought into widespread use, food
shopping, once a heavy burden, became a minor concern for all but the
poorest households as grocery operators increased productivity and
squeezed out costs. The proportion of workers involved in selling gro-
ceries plummeted, freeing up labor to help the economy grow. And the
company’s innovations are still evident in the supply chains that link the
business world together. Although the Hartfords died decades before
the invention of supercenters and hypermarkets, they employed many
of the strategies—fighting unions, demanding lower prices from suppli-
ers, cutting out middlemen, slashing inventories, lowering prices to build
 THE VERDICT 11

volume, using volume to gain yet more economies of scale—that Walmart’s

founder, Sam Walton, would later make famous.
The bitter political and legal battles surrounding the Great Atlantic
& Pacific Tea Company were limited to North America, but they pre-
saged similar conflicts around the globe. Under Japan’s “big store law,”
in force from the 1970s, anyone seeking to open even a modest super-
market had to gain local competitors’ approval by paying them com-
pensation. West Germany protected mom-and-pop retailers in 1956 by
allowing stores to open only from 7:00 a.m. to 6:30 p.m. Monday through
Friday and until 2:00 p.m. on Saturday; a worker with a daytime job was
essentially forced to patronize grocery stores and butcher shops near
home or workplace because there was no time to shop elsewhere. In
France, a 1973 law to aid artisans and small merchants restricted the
opening of large stores and prohibited manufacturers from selling more
cheaply to big merchants than to small ones. Everywhere, the com-
plaint was the same as it had been in America: the unchecked growth of
large retailers threatened the traditional role of local merchants and
destroyed opportunities for economic independence.13
Such restraints faded toward the end of the twentieth century, in
part because consumers demanded lower prices, in part because as
working hours grew more diverse, more people needed to shop at non-
traditional times. Yet the century-old battle between independent mer-
chants and large retailers was by no means over. In the United States
and Western Europe, critics of “industrial food” advised consumers to
avoid the processed goods at the supermarket and purchase locally
grown foods from farmers and independent retailers; the Hartfords’
great achievement, making food affordable, was now looked upon with
disdain. Merchants’ protests led Thailand’s government to halt expan-
sion by grocery chains in 2006. In 2010, the Czech Republic required
minimum price markups in order to keep chains from undercutting
mom-and-pop stores—precisely the same obstacle A&P confronted in
the United States in the 1930s.14
The Hartfords’ enterprise did not prosper without its founders.
Within a few years of their deaths, the once-mighty A&P was a basket
case, staggering from one failed strategy to another as better-run com-
panies passed it by. Soon enough, the company that had decimated
independent stores by the thousands became a victim of the creative
12 THE GREAT A&P

destruction it had once meted out. But while A&P’s fortunes waned,
the economic forces it helped unleash only grew stronger. It made the
process of moving goods from producer to consumer impersonal and
industrial, but also cheap and efficient, a job for the big, not for the
small.
 THE GREAT A&P AND THE
STRUGGLE FOR SMALL BUSINESS
IN AMERICA

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