A PORTFOLIO FOR SUCCESS T H E S T O RY O F H O U C H E N S I N D U S T R I E S
A PORTFOLIO FOR SUCCESS THE STORY OF HOUCHENS INDUSTRIES
Ervin Houchens once rejected the
idea that his hardscrabble Kentucky
childhood was difficult. “I think it was
a wonderful life,” he said. “I am proud
of growing up unafraid to get my hands dirty, to respect and enjoy the work.” And for decades he did just that,
launching his first store in a one-room
shack and shepherding its growth until his retirement sixty-six years later.
Today, Bowling Green-based Houchens Industries is comprised of people like Ervin “Tut” Houchens—loyal and respectful of the work.
A Portfolio for Success—The Story of
Houchens Industries is a behind-thescenes journey of the challenges,
records and already helmed by highly competent managers. The decades of
success since that time illustrates what transpires when preparedness meets opportunity.
The book also provides an account of
the company’s storied Employee Stock Ownership Plan (ESOP), a relatively
new American business concept when the current Houchens Industries
leadership showed the vision and
courage to pursue that path for the
company. The ESOP has gained the
loyalty of the employees, it has kept
resources in the local communities over the years, and it continues to provide a secure retirement for participants
throughout the Houchens Industries family of companies. The success is undeniable.
strategies, and successes that have made Houchens Industries or its
multiple holdings a household name
with a worldwide footprint. Houchens Industries’ rapid growth blossomed beginning in the 1990s, much of it
through acquisition deals that ranged from shrewd to inspired, but they all
involved businesses with proven track
Houchens Industries 700 Church Street Bowling Green, Kentucky 42101 www.houchensindustries.com
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Ervin Houchens’ first store, located in Barren County, Kentucky.
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A PORTFOLIO FOR SUCCESS THE STORY OF HOUCHENS INDUSTRIES Copyright ® 2019 All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying or recording, or by any information storage and retrieval system, without permission in writing from Houchens Industries.
Houchens Industries 700 Church Street Bowling Green, Kentucky 42101 www.houchensindustries.com Writers Donna Brooks and Martha Hohmann Editor Rob Levin Archivist Renée Peyton Designer Rick Korab Index Shoshana Hurwitz
Book Development www.bookhouse.net IV
C O N T E N T S
FOREWORD VII
CHAPTER ONE
The Foundational Years— Respecting and Enjoying the Work 1
CHAPTER TWO
Building the Houchens Family 13
CHAPTER THREE
Houchens Industries Diversifies 33
INDEX 49
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he following pages tell one hundred years of history at Houchens Industries Inc. as best as limited words and pictures on these pages can. What cannot be achieved to the fullest is an appreciation of the influence that every associate, past, present and future, have on these pages. Woven into the fabric of our history are the lives and efforts of the people everywhere that have contributed to the company’s success in every imaginable way. These pages aren’t written about them, they are written by them. You will find many of them here in pictures and quotes. As a participant in the company, you might even personally be taken back to a memory and a moment in time when you knew your individual efforts were directly a part of our success story. For us, it isn’t about how we arrived here, it’s that we are here! To the casual reader we hope you enjoy learning our story. It is our pleasure to be able to present it here for you. To those of you that participated in writing the current history of the company, it has been a privilege to be here with you. As we build on the work of those that came before us and cultivate the successes of those that are here today, we can perhaps craft another one hundred years for those that will follow. May God bless you all.
Jimmie Gipson CEO & Chairman of the Board Houchens Industries Inc. VII
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The early years, Store #18 in Auburn, Kentucky.
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The Foundational Years— Respecting and Enjoying the Work “Some folks would say my boyhood was hard. But looking back on it I think it was a wonderful life. I don’t regret it at all. For one thing, I am proud of growing up unafraid of dirtying my hands, to respect and enjoy work.” —Ervin Houchens, founder, in his book, They Called Me TUT Ervin Houchens’ father didn’t expect his son’s idea of starting a general store to work. In fact, he had already made plans to use the twelve- by twenty-foot building for storing crops. But a young Ervin Houchens was not afraid of hard work, and he looked for ways to make his business prosper during years of feast and famine, war and peace. Though he was not in school for more than two years his entire life, Houchens did manage to earn an eighth-grade education. That, gumption, a common-sense approach to business, and dedication to the customer and his employees would unerringly guide him
and his company for decades to come. It enabled him to weather a changing economy, an evolution in the grocery industry from full- to self-service, and the introduction of technology to the business. From his first general store to the birth of Houchens Markets, Ervin Houchens fine-tuned the customary ways of doing business while not hesitating to pioneer new approaches, including moving his company to become a leader in the profit-sharing model of business. With the employee always in focus, Houchens Industries has reaped a bounty from sowing seeds into the lives of its personnel.
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Mrs. Solomon Jordan was Ervin Houchens’ first customer, 1917.
Today, Houchens Industries has more than 18,000 employees who have participation in its vast portfolio of companies under its corporate umbrella, making it one of the largest and most successful 100 percent ESOP-owned companies in North America. A Young Entrepreneur To nineteen-year-old Ervin Houchens, opening a general store on his father’s farm in Barren County, Kentucky, just made sense. The nearest store was an eleven-mile journey by horse and wagon into Glasgow, not very convenient if one needed a sack of flour or sugar. He figured his neighbors would like having a store close by where they could purchase the basics for their homes. Gathering $300 of inventory, a cash drawer, scales, and a knife for cutting cheese, Ervin Houchens opened his store in nothing more than a wooden shed on New Year’s Day, 1917. He stocked everyday items, such as soda, salt, sugar, coffee, and canned fruits and vegetables, as well as other household goods such as cookware, shoe laces, carpet tacks, and thread. “Dad didn’t want me to open the store,” recalled Houchens in his autobiography, They Called Me TUT. “He thought I would go into debt to somebody and not be able to pay them. He thought a man who wouldn’t pay his debts was nothing, a no account.” Houchens promised his father he would have a plan on how he was going to pay a debt before he went into debt. It was a promise he would keep for the rest of his life.“Possibly because of that promise, I have been very
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Houchens #12, Bowling Green, Kentucky, 1945.
CHAPTER ONE THE FOUNDATIONAL YEARS—RESPECTING AND ENJOYING THE WORK
“Dad didn’t want me to open the store. He thought I’d be in debt to somebody and not be able to pay them.” — Ervin Houchens
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Houchens Store #1, Bowling Green, Kentucky, 1946. Ervin Houchens center.
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conservative, and I haven’t done too badly,” he said.“I never would go deeply in debt because I remembered what my father told me.” For the next few months, Houchens farmed while his sister, Bertha, kept an eye on the store.“It was a small operation, but it made money,” said Houchens.“The profit margins were better than they are now, and the people were willing to pay for the convenience.” Everything would soon change, however. Europe was immersed in war, and on April 2, 1917, President Woodrow Wilson went before Congress to ask for a declaration of war against Germany. Houchens closed his store and registered for the draft. In June, he volunteered for the navy but was told he had to wait to be called up by the army. Disappointed, Houchens returned to the farm and waited, but the notice never came. In November 1918, World War I ended, leaving Houchens undecided about his options. He went to Louisville to look for work, but with no offers, returned home to re-open his general store.
Ervin Houchens
The Beginnings of a Grocery Empire Back at work, Houchens increased the store’s offerings, including fresh fish, beef, and eggs, and soon realized he was going to need to expand. In September 1919, he bought two acres of land at Allen’s Cross Roads, about three miles from his original store, and built a forty-foot by twenty-four-foot store with a room in the back large enough for his bed. 5
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The new store allowed Houchens to increase not only his inventory, but to include services such as a blacksmith shop and grist mill. He sold roofing as well, often installing it himself.“ I was in just about every kind of business imaginable at Cross Roads,”recalled Houchens.“I learned how to take care of customers. And I learned a lesson that I never forgot. If you take care of your customers right, they will always take care of you.”
The Founder—Ervin Houchens “I think maybe the key to my success can be summed up in one word—Loyalty. I couldn’t have made it without the loyalty of my customers, many of whom have been buying their groceries from me all their lives. And I know that I couldn’t have done it without the loyalty of my employees, many of whom have never really worked for anyone else. I’m very fortunate in this regard.” —They Called Me TUT Ervin Houchens in front of his original store in Barren County, Kentucky, in the late 1960s.
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They called him Tut, the man who opened a general store on a farm in rural Kentucky and turned it into an empire. It was a nickname given to
In September 1920, Houchens married Eloise Bradshaw, and a year later, their daughter, Covella, was born. Ervin and Eloise ran the store until 1928, when he left the grocery business to become a full-time farmer.“Henry Ford had a lot to do with my decision to give up the Cross Roads store,”Houchens explained in his book.“He was producing a lot of cars, and the people were buying them. Farmers who used to stop and loaf with me were using those cars and trucks to go into larger towns to
Ervin Houchens by his cousin, and it suited him just fine. He proudly wore it his entire life. Born in a three-room log cabin in rural Barren County, Kentucky, on December 16, 1897, Ervin “Tut” Houchens was one of ten children of tenant farmer James Hardin Houchens and his wife Liza Ann Woodcock Houchens. Ervin learned the value of hard work from his father, and at age ten, he began working for others to help support the family. By the time he was twelve, he was making enough to fully support himself with a seventy-five-cents a day income. At nineteen, with $300 in his pocket, he became a self-made man, opening a general store in a tiny building he constructed with his brother on his father’s
farm. On the business foundation of that first modest store Houchens opened in 1917, he would build upon his dream, eventually opening supermarkets, variety stores, and shopping centers. A century later, Houchens is a household name in Kentucky and beyond, and Ervin Houchens’ legacy lives on through those who knew him and worked with him. “Mr. Houchens loved people. He genuinely loved people,” says Sandy Mays, a retired longtime employee and executive assistant to Houchens’ CEO Jimmie Gipson. “When I worked in the store, he would come in and would always speak. He didn’t come in saying, ‘Oh, this shelf doesn’t look right.’ He came in asking, ‘Now how are you
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shop. I saw that there was little future for country stores.”The farming life wouldn’t last for long, however, and Houchens soon turned his eye back to the grocery business. The 1920s came to a horrific close with a stock market crash that ravaged the American economy, ushering in the Great Depression of the 1930s. In 1931, undaunted by the economic downturn, Houchens seized an opportunity to take over a bankrupt grocery store located on the
doing today? You feeling okay? You doing okay?’ I remember that about him.” Mike Givens, Houchens board member and former vice president of meat operations, agrees. “He was a phenomenal person. He really wanted to make the life of the employee as good as he could be,” Givens explains. “He was very loyal to you in that sense, and the employees were very loyal to him.” Loyalty to both his employees and customers, as well as hard work, a knack for business, with a pinch of frugalness and grit thrown in were all ingredients in Houchens’ success in the grocery business. From day one, he had the customers in mind, even in his advertising, according to Houchens’ president, Spencer Coates. “At certain times of
the year produce would be high, so Mr. Houchens would advertise in the paper, ‘I have so and so, but I wouldn’t buy it if I were you because it’s too expensive!’” Houchens’ customer-first mindset carried over into his home life too. His daughter Covella Houchens Biggers, writing in a postscript in her father’s book, said that he would bring home dented cans from his grocery stores. “Mother said that she didn’t know why we had to have all those dented cans when there were plenty of undamaged cans in the store,” she recalled. “And when she complained, Daddy would simply reply, ‘It is better for us to use them than for one of our customers.’” The selflessness Houchens demonstrated and his love for people also
square in Glasgow, Kentucky, against the advice of close friends. Competition in the grocery business was fierce in the town, but since he didn’t have to put any money down for the store, he felt he had little to lose.“I made money right from the first day,”Houchens said.“The customers I had out at Cross Roads came back to me now that I was in town. I succeeded with the Glasgow store because I was willing to work hard and because I constantly kept my eyes open for good buys for my customers.”
were evident through his generosity. His success in business meant he could give back to the community through his foundation and to his employees in the form of profit-sharing. But he never wore his success on his sleeve; he was still the same man he was when he opened his first store in rural Kentucky. He was often seen around town wearing the same old suit and driving the same old car, a white Chevrolet, with blue smoke trailing from its tailpipe. His car is now in a museum on the farm where Houchens’ first store still stands. “Mr. Houchens was not materialistic,” explains David Puckett, retired IBM data/computer specialist. “If you were around him and you didn’t know who he was, you would think he was
someone who lived from paycheck to paycheck because he never acted like someone who had everything that he could possibly want.” In 1983, after sixty-six years in the grocery business, Ervin Houchens retired. Nine years later, he passed away in his sleep on August 17, 1992, at the age of ninety-four. Wendell Jordan, (Solomon Jordan’s husband) who was the first customer in Houchens’ little general store, paid tribute to his friend in They Called Me TUT: “He was a good man . . . He always followed the golden rule in his dealings with others. He is one of the nicest men I have ever known, a man who is not ashamed of where he was raised, one who has never forgotten his boyhood friends.”
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Ervin Houchens was born in 1897 in Barren County, Kentucky, eleven miles from Glasgow, shortly before this county map was published. Warren County, where he would rise to be a retail giant in Bowling Green, is immediately to the west.
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After Houchens’ success with the Glasgow store,“Expansion came almost accidentally.” One merchant, who was in serious financial trouble, gave Houchens his store. Then another merchant died, and Houchens took over his business. Growth continued through the 1930s, as Houchens expanded to the neighboring towns of Cave City, Horse Cave, Scottsville, Munfordville, Elizabethtown, Vine Grove, and Franklin. In 1939, Houchens opened a large store in Bowling Green and introduced a new way of shopping for groceries: self-service. Prior to that time, customers shopping in Houchens’ stores would tell a clerk what they needed, and the clerk would pull it for them and bag it. At the new Bowling Green location, customers could walk through the store, pick up what they needed, and bring their items to a counter in the front of the store to be checked out. It was a concept that didn’t go over very well initially.“Self-service was a hard idea to sell,” explained Houchens.“At first, people didn’t like it, they wanted to be waited on.” But Houchens was pleased with the new store.“It was one of the better stores in Bowling Green.” The opening of the Bowling Green store would prove to be the end of further expansion by Houchens for a while as America focused on World War II in the early 1940s. The war brought shortages and rationing which led to inflation, prompting the U.S. government to establish price controls. Labor was also in short supply as enlistment drained the farm fields, schools, and other potential workforce pools, and the impact was almost immediate on the grocery busi-
CHAPTER ONE THE FOUNDATIONAL YEARS—RESPECTING AND ENJOYING THE WORK Store #20 in Glasgow, Kentucky, 1949.
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The Grand Opening for Store #12, in Bowling Green, Kentucky, 1944. 10
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ness. Complicating matters for Houchens, his Glasgow warehouse burned to the ground one evening in February 1943, destroying his entire inventory.“The fire occurred just as the government imposed rationing,” he said.“You talk about hurting! The day before the fire, I had owned a warehouse full of merchandise and suddenly I had only the inventory out in the stores. The day after the fire, while the ashes were still smoldering, I headed for Louisville and spent two days searching for merchandise, looking for anybody who would let me have stuff to sell so that I could stay in business.” Houchens persevered and managed to endure the hard times brought about by the war. When the war ended in 1945, Houchens moved his operations to Bowling Green after acquiring J.B. Reynolds’ wholesale business. With returning soldiers providing a new labor force, he started expanding again, opening stores throughout Kentucky in Russellville, Auburn, Fountain Run, Gamaliel, Tompkinsville, and Hodgenville.
foundation supported the United Way, hospitals, fire departments, youth organizations, and recreational and educational activities. The foundation also made cash gifts as well as loans to numerous churches in the western Kentucky region.“Very few people have any idea of all the good the foundation has been able to do over the years,” said Houchens.“It’s more pleasure than you can imagine to be able to do something for people that need help and appreciate it.” The Houchens Foundation was turned over to Houchens’ family two years before his death.“The family still operates the foundation to this day. They’ve carried that on all these years for him,” says Sandy Mays, who was executive assistant to Houchens CEO, Jimmie Gipson.“To Mr. Houchens, people were always first.”
Giving Back Houchens never lost sight of the people in the communities who sustained his business, and he wanted to say thank you. Once settled in Bowling Green, he established a charitable foundation in order to give back to all of those communities. Every year, Houchens added up the gross profits of the corporation before taxes and set aside 5 percent of that amount for the Houchens Foundation. Funds from the 11
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Houchens Store #6, Scottsville, Kentucky.
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Building the Houchens Family “This company has changed so many lives. I’ve witnessed it. It’s totally 100 percent true.” —Sandy Mays, retired longtime Houchens employee The 1950s was a decade of prosperity. The U.S. economy was thriving, and people were buying new cars, houses, and consumer goods. To stay competitive, Ervin Houchens knew he would have to sell in volume, and to do so, he continued to add more stores, including his first store in Tennessee, in the town of Lafayette. Houchens also knew the complexity of his expanding business would require new technology. Gone were the days of using a simple cash drawer under the counter and of looking on a shelf or walking into a warehouse to see what was in stock. Grocery stores were now using modern cash registers, and computers were being introduced into the industry as well. In 1959, with some hesitation, Houchens acquired a computer for his company. It was one of the first computers in the town of Bowling Green. “I had a hard time getting used to the computer,” admitted Houchens in his book.“It can do a lot of things a whole lot faster than
a human can, but improperly applied to a business problem it can make mistakes a thousand times faster than an incompetent employee.”After a rocky start in implementing new technology into the business, Houchens put David Puckett in charge.“We had a professional computer programmer, but Mr. Houchens thought you needed to know about the grocery business as well,” Puckett explains.“He wanted someone in the computer department that knew something about the grocery side, not just the machines.” Puckett fit the bill. He had worked for Houchens in the Munfordville, Kentucky, store when he was in high school and had taken data processing classes at Western Kentucky University. With Puckett in place, Houchens was able to obtain the computer applications he needed to run his business.“We did payroll, stock status reports, inventory listing, invoicing, receiving,” says Puckett.“Anything that needed to be printed, we did it.”
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James and Suel Houchens, Mr. Houchens’ nephews and part of the 1970s and 80s leadership team.
Puckett was assisted by Jean Carlisle, who joined the company in 1959.“Jean was the fastest and most accurate key puncher. She was the backbone as far as getting the work done,” says Puckett.“She worked tirelessly and saved me many, many times.” Key punch cards were used to input programs and data into the computer. Carlisle recalls,“You would punch a card for a case of beans, a case of peas, a case of peaches. If a store ordered a case of peaches, you had to pull a card for that store and run their order. It was a job.” In addition to new technology, other innovations came to the grocery industry in the 1950s, including the arrival of retail packaged frozen foods and self-service meats. Dairy and produce departments expanded as well, and the popular rewards program, S&H Green Stamps, was introduced into Houchens stores. A Culture of Caring As the company expanded its footprint over the years, Ervin Houchens relied on his team to help make his grocery business a success. Employees—from meat cutter, to cashier, to warehouse clerk—needed to be willing to work hard, strive for personal and professional growth, and have the best interests of the company and their co-workers in mind. In turn, Houchens vowed to meet the employees’ investment in the company with an investment in their futures, in the form of profit-sharing. continued on page 19
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The Grand Opening of Store 36, in Morgantown, Kentucky, in 1972.
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When Houchens Industries became an ESOP Company When Houchens Industries became an ESOP company, the ESOP was still a new concept in the corporate landscape. Sandy Mays, who later became the company’s ESOP administrator, says that she and others at the company had never heard of an ESOP, nor understood what it would mean to their futures. “Never heard of it,” she says. “It was brand new. They weren’t really known in the country at the time. We’re one of the first and largest, and nobody really had any experience with them. It was strictly a scratch and dig situation.” Today, Houchens Industries is among the leaders of ESOP companies. Its website puts in the simplest of terms what an ESOP is: “An Employee Stock Ownership Plan and Trust provides employees with a retirement through the company. Employees earn ESOP shares which are awarded annually by the trust to each qualifying employees’ account. ESOP shares are subject to vesting requirements and are held in that trust account until the employee retires or leaves the company. An ESOP provides employees with an opportunity to contribute to the success of the retirement
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plan. The value of the ESOP shares is determined by the total appraised value of the company at the end of each fiscal year.” Regulated by the federal Employee Retirement Income Security Act (ERISA), ESOPs include everyone from the lowest paid employee to the CEO. What most could never envision when Houchens’ employees bought back the company and made it an ESOP company, is that the plan would mint a number of millionaires. Especially gratifying to CEO Jimmie Gipson is that the wealth stays in the communities in which employees live and work. “That money will stay in small communities where the retirees live and will recycle several times over. In essence, that is the mechanism that Houchens now uses to give back to all the communities we serve.” Sharon French is a testament to that. She retired after thirty-six years of working in the meat department and as a deli manager for one of the Houchens markets. She says that leaving her work at Houchens was heartbreaking. “I cried all day when I retired,” she says. But she has since dried her eyes and has
been able to enjoy the many benefits of retiring from an ESOP. French says she’s taken care of some physical and medical needs, met many of the needs of her family, and has even gone into real estate development with her son-in-law. “People work all their lives and don’t have what we have,” she says. Terry Cornell, a long-term associate with Houchens, agrees. “The ESOP has been unbelievable.” But, he says, it took some convincing in the early days when the subject of using part of the employee profit-sharing proceeds for the buyback was first being discussed. “They took us in the back room and talked to us. They thought it would be good for us in the long run. But it’s been unbelievable.” And Charlie Meyers, who was able to retire at age fifty-six as a warehouse manager, says his twenty-eight years with Houchens Industries were wonderful years. “I’ve always felt very blessed and fortunate,” he says. “The overall scope of the company changed a lot over my time here, but the overall atmosphere didn’t. It’s still a family-oriented environment.” Caring for the employees as if they were a member of the family is what the ESOP allows company leadership
to do. Spencer Coates, Houchens Industries president, says, “The greatest thing about my job and Jimmie’s job is one day a year when we hand out the beneficial ownership for this company to employees, and particularly when they retire, and they are able the cash out and they receive that check. The ESOP helps some folks that may not have had a chance to put away any resources for retirement, go into those years of their lives quite comfortably by being financially well prepared. We have many long-term participants that have and will retire from the company,
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and through the ESOP, will be able to live comfortably.” Jim Vance, president of Pan-Oston, says that Houchens Industries provides something unique that makes his job especially rewarding. “My favorite time of the year is the first/second week of May when I am able to give out our certificates,” he says. “I have several employees now that their accounts are significant six-figure accounts. And, there’s no way they’d be able to touch that. It’s life changing . . . it’s like winning the lottery. “My grandfather worked sixty years in a cotton mill. He received a watch and a $50 pension, and he was happy. But, for me, to be able to work for the shareholders being employees that I work for and create value for them, was what drove me.” Vance recalls an employee who approached him after the May certificates were issued and his valuation was significant. “He’s never made more than $12-$13 an hour, and his aspiration is five acres with a small house.” Andy Barker of Van Meter Insurance has seen the incredible rewards at his company as well but says that it took a while for his employees to really
understand the benefits of being part of an ESOP. “They didn’t really understand what the value of this is, you know,” he says. “And then, first year, you receive that first ESOP statement, this piece of paper. All of our people have been fully vested now—seven years to fully vest. We’ve had some retire . . . and they call you back and they’re like, ‘I can’t believe that you always said this was a great thing. I can’t tell you how much this has changed the quality of my life.’” And people are taking notice— both locally and all the way to Capitol Hill. Senator Mitch McConnell (R-KY), in his address to attendees of the ESOP Association’s annual conference in 2012 said, “I want to especially compliment the leadership of the chairman of Houchens, Jimmie Gipson, and the president, Spencer Coates. Spencer was the ESOP Association’s Board of Governor’s Outstanding Member in 2010, and under his and Jimmie’s watch, Houchens has led the way in funding the Employee Ownership Foundation.” Rep. Brett Guthrie (R-KY) has also been a proponent of the ESOP and uses Houchens Industries as a stellar example of what the business model
can do. In 2014, during a session of the House Committee on Education and the Workforce, Guthrie told former Secretary of Labor Tom Perez that Houchens Industries, which is in his district, has created unprecedented wealth for its employees. “When I’m back in my district, across from me in one of the grocery stores, the lady who makes ham sandwiches in the deli probably didn’t make much more than minimum wage,” Guthrie said. “But when she retired, she may have retired with seven figures in her account.” Retiree Sandy Mays recalled that they didn’t need recognition from Congress to know that they’re onto something very special. “The ESOPs were valued once a year, so we gave out statements once a year. I sent those out, and I answered all the questions— you know, ‘What does this mean? What do I do with it? How do I get it?’ “That is what kept me going and doing this, so many people; they’re good people. The stories of what it did, what I’ve seen it do to their lives . . . I spent many an afternoon crying where something’s so heartfelt, of what this really meant to somebody from their heart,” explains Mays. “And
it has made the difference in people’s lives, surviving or not surviving.” And for Jean Carlisle, who spent forty-four years with Houchens Industries, it has meant a comfortable retirement and special memories of those she worked with and continues to consider family. When Ervin Houchens retired, he gave Carlisle his office chair, which she has placed in front of her husband’s grandfather’s roll-top desk. Sitting in the chair and reflecting on a career at Houchens Industries brings her great joy that she sums up simply, “Mr. Houchens was wonderful.”
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Houchens distribution facility, Bowling Green, Kentucky, 1978.
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Launched in 1960, Houchens’ employee profit-sharing program proved to be a rewarding benefit for employees and their families. Each year, Houchens put the equivalent of 15 percent of each employees’ salary into a fund; employees did not contribute anything. After fifteen years, employees were fully vested—when they left the company, they could take that money with them. Employees who left before fifteen years received a smaller percentage. “What he did was phenomenal,”says Mike Givens, board member and former vice president of meat operations.“It didn’t matter if you were part time or full time, he would put that money in there for you. It was like an IRA for the rest of your life. The money just kept growing.” Houchens knew that his employees were the heart and soul of his company, and the investment in the profit-sharing plan meant that they would have a secure retirement.“I’m convinced that I have had some of the finest employees ever,”he said.“And I don’t think that I am fooling myself when I think that they have a high regard for me. I believe that a lot of them think as much of me as they did of their own fathers.” Houchens cared deeply for his employees; his devotion to them was sincere, and they were equally devoted to him. He had many employees who worked for him all of their lives. Royce Keown, retired board member and vice president of retail operations, began his forty-year career with Houchens stocking shelves.“You couldn’t work for
Jean Carlisle came to Houchens in 1959 and made herself valuable with the company’s foray into the computer age as a skilled and fast data entry expert.
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A PORTFOLIO FOR SUCCESS THE STORY OF HOUCHENS INDUSTRIES
a better company,” says Keown.“Mr. Houchens had his hand stuck out all the time to try to help somebody. He was a very thoughtful man, and he cared about all of his employees.” Sharon French, another longtime employee who worked in the meat department and later as a deli manager, says that Houchens was a giver.“My parents always taught me to treat people like you want to be treated,” she says.“I believe Mr. Houchens had to be raised that way because he helped a lot of people.” Houchens had created a culture of caring at his company, and it’s a culture that endures today. Explosive Growth and Diversification Growth continued at a rapid rate for the Houchens chain in the 1960s and 1970s. The company, which had changed its name to Houchens Industries, Inc. in 1972, opened additional grocery stores in Kentucky and Tennessee. Ervin Houchens also tried his hand at diversification when he built his first shopping center, anchored by his first supermarket, in Bowling Green.“The downtown shopping area had parking problems, and I saw the edge of town center with adequate parking space was the answer to a need,” said Houchens. He also believed that a shopping center would offer the customer the advantage of one-stop shopping—a place where they could buy all of their daily needs, such as groceries, hardware, medicine, and variety items. After the success of Plaza Shopping Center, two more shopping centers were added in Mike Givens (left) and Royce Keowan at Keowan’s retirement ceremony. 20
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(Left and Below) Company picnics at Houchens. (Bottom Left) A Taste of Sizzle marketing and branding event at Houchens.
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October 10, 1974, at the Grand Opening for the Leitchfield, Kentucky, store. Erving Houchens is in the center.
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Bowling Green: Western Gateway Shopping Center and Collett Cove. More shopping centers in other towns soon followed, and a new venture was on the horizon for the Houchens chain—variety stores. Houchens felt strongly that every shopping center should have a variety store. Remembering how his blacksmith shop brought in traffic at his old Cross Roads store, he believed that variety stores would bring in traffic to his grocery stores. Operating as Houchens Family Centers and Ben Franklin Family Stores, these new stores were located in Hodgenville, Hardinsburg, and Hillview, Kentucky, and Clarkesville and Portland, Tennessee. The stores offered a wide range of inexpensive merchandise, including household items, crafts, seasonal products, and health and beauty aids. The stores proved not to be successful, however, due to competition from major discount retailers who had entered the market. They would later be phased out in the early 1980s. The Beginning of a New Era The eighties would bring change to Houchens Industries. New stores were built, older stores were remodeled, and others were expanded. Four stores were sold to Bi-Rite-Foodtown, and Store #1 in downtown Bowling Green was closed. Ervin Houchens was now in his eighties, and with more than sixty years in the business, he was looking to retire.“The water cooler discussion was that he wanted employees to own the company,” says Sandy Mays and Linda Freeman. 23
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Houchens chairman and CEO Jimmie Gipson. As it turned out, it was probably best for the employees who wanted to stay and work, as they could share in a successful ESOP-owned company. But at that time, it was not meant to be, and Houchens, after much discussion with his family, reluctantly decided to sell his company. In 1981, Malone and Hyde, a grocery wholesaler based in Nashville, Tennessee, had expressed interest in purchasing Houchens, and it was reported in the newspapers that a deal had been completed. Word of the sale caused a great deal of concern among Houchens’ employees and customers. But, in the end, the two companies could not come to an agreement, and the deal fell through. Two years passed before Houchens entered into discussions with Chattanooga, Tennessee-based Red Food Stores and its French parent company, Promodès. The two companies reached an agreement, and in July 1983, the sale was finalized. In September, Ervin Houchens retired at the age of eighty-five and assumed the role of chairman emeritus. His nephew, Ruel Houchens, was named president. Ruel brought years of experience into his new role. He and his twin brother, Suel, had worked in Houchens stores since they were thirteen years old. All other Houchens officers and employees remained in their positions. Under the new corporate ownership, the largest Houchens store was built in Bowling Green. With 44,000 square feet, it was considered a superstore in its time, and, in 1986, the Bowling Green warehouse closed because it could no longer handle the volume of goods needed Ervin Houchens’ desk paraphernalia at the Houchens Museum, Barren County, Kentucky. 24
Ervin Houchens at a company event.
Houchens’ company picnics, such as these, were a popular tradition at the company for years.
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to supply the Houchens stores. The mid-eighties also brought new competition into a growing Bowling Green, which also negatively impacted Houchens stores. In January 1988, in a turn of events, Promodès decided to sell the Houchens stores. Red Food president, Bill Stewart, approached Ruel Houchens about putting together a management team to purchase the company. The news reached Jimmie Gipson, who was at that time Houchens’ chief financial officer.“I talked to Ruel,” says Gipson, “and I said, ‘Why don’t we try to set up an ESOP?’”An ESOP, or an employee stock ownership plan, is a program that provides a company’s workforce with an ownership interest in the company—in essence, Houchens’ employees would buy the company back. After much debate on the opportunity to approach repurchase of the company through an ESOP structure, Ruel Houchens and Jimmie Gipson contacted their local banker, Wendell Strode, who recommended they hire Spencer Coates as their financial consultant. Coates at the time was a partner with national CPA firm, BKD, and would join Houchens several years later in 2003 as president.“Frankly, none of us knew much about ESOPs because they were very rare at that time,” recalls Coates.“After doing a lot of research, it took us about ten or eleven months to make it happen. We had talked with four banks headed by Citizen Fidelity and Loan, which now is PNC, into loaning us forty-five million dollars, and we took fifteen million dollars out of the employee profit-sharing plan. We bought the company for sixty million dollars.” Mike Givens and Sharon French. 27
A PORTFOLIO FOR SUCCESS THE STORY OF HOUCHENS INDUSTRIES
Gipson says there were a lot of questions from the employees, especially since about half of all the money in the employee profit-sharing plan had been borrowed to finance the buyback.“There was, as you can image, skepticism about it, and it was a big change,”he says. “We felt good about it, or I did. I believed in what we were doing, and most of the time when there’s logic behind that, you have a good chance of success.” Coates agrees that there was some uncertainty among the employees.“A lot of the employees were for it. Some were not,”he says.“Some were concerned that we weren’t going to make a go of it, but the trustees, Houchens, and Gipson were very confident that it was a good thing to do.” On November 21, 1988, the sale was completed.“When the employees bought the company back, that was a happy day for everyone,”says Royce Keown.“That would have never happened if Ervin Houchens had not been putting money back for his employees.” “We’re owners!”says Mike Givens.“The employees would say,‘Does that mean I can go up to the register, and if I want to take $20 out of the register, I can, because I’m an owner?’” What ESOP ownership does mean is that Houchens’ employees can have the opportunity to work for a good retirement.“It’s good for everybody. It’s good for the person who makes nine dollars an hour. When they retire, if they’ve worked here their whole career, it changes their life from a financial standpoint,”explains Gipson.“They leave with a half-amillion dollars or a million dollars or more. That’s life changing.” 28
Houchens store managers’ meeting in the 1980s in Bowling Green.
“A lot of the employees were for the ESOP. Some were not. Some were concerned that we weren’t going to make a go of it, but [we] were very confident.” — Spencer Coates
Jimmie Gipson and Ruel Houchens. Note-burning ceremony from October 12, 1996. Original note from the ESOP acquiring the company.
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The benefits speak for themselves, says Coates. “Even though some of those employees who had balances in their profit-sharing plan initially were skeptical, you can’t find anybody who’s skeptical now.” Sandy Mays, who worked behind the scenes during the company buyback, says that she gives all the credit to Ruel Houchens,
Gipson, and Coates. “They were men on a mission. They were strong. They were determined. They would say, ‘This is what we’re doing, and we’re going to make it happen.’ And they did. They did.”
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HOUCHENS INDUSTRIES, INC.
A December 1998 day trip to the grand opening of the 100th and 101st Save-A-Lot stores in Tennessee and North Carolina. Left to right: Jimmie Gipson, Don Sidwell, Danny Vincent, JT Haynes, and Mike Givens. (Inset) Mike Givens and Noel Hunt at a 1996 Save-A-Lot Grand Opening in Greensburg, Kentucky.
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Houchens Industries Diversifies “We never had to look for business. People were just coming to us because they heard how great this was for their employees.” —Spencer Coates, president, Houchens Industries The times were changing, and a new competitor was taking its place among the grocery giants—Walmart. Corner markets weren’t going to be enough to maintain a presence in the grocery big leagues, in which “super” markets were beginning to reach into formerly rural areas. Houchens, which had made its name as a grocer and had a solid record of success in that realm, first sought to expand holdings in the grocery arena. Jimmie Gipson says he recalls in 1990 bringing an opportunity to purchase a Save-A-Lot store to Ruel to solicit his thoughts.“Discussions developed that made us believe that this format could be a way for us to diversify from the original Houchens Market concept. We purchased that store and later that year purchased a few more,” says Gipson.“As the format showed success, we hired a management team to grow the concept. Noel Hunt, Wayne Woody, and John Mudd were instrumental in guiding the concept
from its early days to the success it became. We made a very large investment with one group of Save-A-Lot owners, I think about forty stores at one time. Over time, store count grew gradually to over two hundred Save-A-Lots, making us the largest licensee of that business at that time.” David Burnett was part of the ownership group that sold several of the existing Save-A-Lot stores to Houchens in 1994. Though he originally signed a three-year contract to stay on and manage the stores, he has now been there well over twenty years, and remains on the Board of Directors for the company today. The reason, he believes, is the decision from the top to allow companies under the Houchens’ umbrella to continue business as usual without fear of micromanagement.“We have a great deal of autonomy to run our divisions and really to exercise that ESOP mindset,” says Burnett. “Honestly, it’s been an amazing journey.” 33
A PORTFOLIO FOR SUCCESS THE STORY OF HOUCHENS INDUSTRIES
ESOP—A Magnet for More Business An unexpected marketing tool in Houchens Industry’s pocket was the ESOP, still a fairly new concept, but highly attractive to employers hoping to keep and reward good employees. Under the ESOP plan, participants receive a number of shares in the company depending upon their pay grade. With each year that passes, employees realize a greater return on their employment, eventually allowing for a comfortable retirement. As word of the benefits of the ESOP at Houchens Industries spread, businesses began to approach them, asking to be included under the umbrella, which now boasts a widely diverse $3 billion portfolio, rivaling any of their earliest expectations.
Stephens pipe and steel building, one of Houchens’ many non-grocery companies. 34
The first move outside of the traditional grocery sphere after becoming an ESOP was the acquisition of about forty convenience stores under the banner of Jr. Foods. Then in 1999, Houchens made its first acquisition of a non-grocery-related entity with the purchase of Southern Recycling, a company which had done business with Houchens Markets for years recycling its boxes. Bringing them into the Houchens’ family seemed only natural. Today, Southern Recycling is a thriving operation with locations in Bowling Green and Owensboro, Kentucky, and Clarksville and Nashville, Tennessee. Around the same time, an insurance agency originally founded by Ervin Houchens and his partners, the Center of Insurance,
An employee meeting at Houchens Insurance Group in Bowling Green.
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was being managed by Cecil Martin, the husband to Houchens’ granddaughter, Lynn. Coates recalls that Martin told them, “I would like to sell my business, Center of Insurance, to Houchens. I’ll finance it and guarantee the debt. I’d like my employees to participate in the ESOP.” And with that, insurance became one of Houchens’ offerings. Coates chalks up the first of many insurance acquisitions to one thing: the ESOP. “Everyone had heard about how well these people were doing with their stock because the stock started out at $6 a share and kept growing,” he says.
Founded in 1927 in New York, Cohen’s Fashion Optical is a member of the Houchens family. 36
Houchens Industries was becoming regionally renowned for what retirement from one of its companies could look like.“People were coming to us because they heard how great this could be for their employees,” says Coates.“People were flocking to us because of the value that their employees could receive from this and because they couldn’t do it on their own, and we had the scale to make it happen.” From those early years as an ESOP company and the beginning of diversification, acquisitions came along steadily. Stewart Richey Construction’s Bill Richey and Buster Stewart also approached the company and asked to be merged into the Houchens framework. Because they fit the model of what the leadership was looking for, they were welcomed into the family. Stewart Richey Construction has flourished, and its work can be seen all over Kentucky, Tennessee, and adjacent areas. Gipson and Coates agree, however, that not every company in search of a piece of the ESOP pie is a good fit. Coates says,“What are we looking for when these things happen? We’re looking for, number one,
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a company that has been around for a period of time and has good sustained cash flow, good integrity, and will shine a good light on the company; and we’re looking for good management that is not interested in feathering their own nests but has the welfare of their employees first at heart. Then, can we borrow the money to finance it, or do we have the money to finance it? Those were the three criteria.” Gipson adds,“We are basically looking for companies that are well run, have a good profitable history, and have the mindset that they want to be part of something that is good for everyone.”
when wrongful death litigation against the big tobacco companies was rampant. But Kelley’s company was so new, it couldn’t be included in any of the class-action suits of the day. While other cigarette companies were trying to figure out how to win lawsuits, Kelley was in expansion mode, buying up the American Tobacco assets from Brown and Williamson for $35 million and rolling them into his company, Commonwealth Brands. When the dust settled, and the assessors had the chance to survey the facility and equipment,
Commonwealth Brands Perhaps the single, largest catalyst in Houchens’ diversification came from an unlikely alliance with Brad Kelley and his discount cigarette company. Kelley, a native Kentuckian and son of a farmer who grew, among other things, tobacco, approached Houchens Industries with an idea. What may have sounded impossible and perhaps foolhardy when Kelley originally pitched the idea, turned out to be an example of where preparedness meets opportunity. In the late 1990s, Kelley had started up USA Gold, a discount cigarette company during a time With almost one hundred locations, mostly in the Northeast, Cohen’s offers not only fashion eye glasses, but also exams and insurance. 37
A PORTFOLIO FOR SUCCESS THE STORY OF HOUCHENS INDUSTRIES
American Tobacco assets were somewhere around $435 million. Kelley had made a very good deal. “As a part of the deal in buying the assets of American Tobacco, and none of the brands he bought, by the way, had ever
been sued for killing anybody, and certainly USA Gold had not been on the market but just two or three years, so it certainly didn’t have any liability, but Brown and Williamson had agreed to indemnify Commonwealth for any liability that they may have,” says Coates.
Jimmie Gipson—The Definition of When Preparedness Meets Opportunity He’s soft-spoken, humble, loves a good joke, and is brimming with common sense and business acumen. Jimmie Gipson, CEO of one of the world’s largest and most profitable ESOPowned companies, Houchens Industries, doesn’t want to be anywhere else, doing anything else. His career has been built around the Houchens vision, and his leadership decisions have made the future of Houchens’ retirees unbelievably bright. Gipson was instrumental in facilitating the ESOP buyback from Red Food, setting up the ESOP, and leading the way in acquiring diverse companies to add to the Houchens portfolio. But he wasn’t plucked from Wall Street to become CEO of this $3 billion corporation. Instead, he came up through the ranks, having started with the
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company in 1965 as controller, just two short years after his graduation from Bowling Green Business University, now part of Western Kentucky University. In 1986, he was promoted to vice president of finance and in 1988, he joined the board of directors. Gipson was named CEO in 1993 when Ervin Houchens’ nephew, Ruel, retired, marking the first time in the company’s history that someone outside the family held that position. From the outset, Gipson brought his own brand of management expertise and techniques to the company. He, too, is a true believer in customer service, but he also feels that numbers never lie. From his earliest days as chief financial officer, he fed data into the company’s sole personal computer and generated spreadsheets (sometimes enlarging
them on large-format paper in order to stick them to easels for presentations). “I’m a businessman, not a groceryman,” he says. “I’m making decisions from a business perspective. If you have something you want to try out in our stores, then let’s test some stores and see what the numbers say. I’ll agree with anything you want to do if you test it.” His other instinct is for people, and not necessarily those with MBAs. “I can learn more from a round of golf, learn more about their true character, than I can from a resume,” he says. What’s he looking for? “Common sense. We don’t need rocket scientists. But we do need people who are loyal, and who are going to work harder than others, like the sixth man on a basketball team.” Sandy Mays was by Gipson’s side in some capacity for thirty-eight years,
first in accounting and then in managing the ESOP and as his executive assistant before recently retiring. She says she started doing sales analysis, reviewing bags of register tapes; but even though the workplace changed, Gipson was a constant in making the work enjoyable. “Things change the more people you add to the mix, but we had fun all the hours we worked,” she recalls. To be certain, there have been difficult times, such as the buyback, coming up with new concepts like the Cross Roads Market to keep the food division fresh, and managing an ever-growing portfolio of companies. But Gipson’s deep understanding of business has been the signature of his leadership. “I’ve never had the mindset to grow big for bigger’s sake,” he says. “When opportunity comes, I
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Acquiring Commonwealth Brands into the Houchens Industries’ family made good business sense for all parties involved. Houchens purchased Commonwealth Brands in 2001, growing it to become the fourth largest cigarette manufacturer in the U.S.,
and then sold it in 2007 for $1.9 billion to Imperial Tobacco Group of the U.K. Imperial noted that Commonwealth Brands was particularly attractive for one reason: It was created in the 1990s and had never lost a smoking-related lawsuit, nor had it been named in any
think if you understand the definition of luck, it’s when preparedness meets opportunity.” “As companies continue to fold into Houchens Industries, the people, their spirit and entrepreneurial drive are what help set us apart from a typical single-interest organization,” Gipson told Chain Store Age. Diversification has served the company well. That said, for over one hundred years the grocery component has been ever-present. Never losing sight of the deep roots, Gipson has already prepared the organization for an ongoing presence in grocery far into the future. Development continues with the company’s current brands of IGA, Crossroads IGA, Pricele$$ Foods, Food Giant, Save-A-lot, multiple quick-serve restaurant and food service brands,
here,” Gipson told the Bowling Green Daily News in 2012. “I enjoy what I’m doing, I think I’m beneficial in what I’m doing, and when those two things are gone, I won’t be here,” says Gipson. But when the time does come for him to
and even the recent addition of ACE Hardware to the food group portfolio. With his current leadership team of Dion Houchins, Jimmy Nichols, Kevin Ladd, Stephen Reed, and Alan Larsen in place, he feels that the foundational part of the company is well prepared to contribute to the overall success of the organization ongoing. And he understands what makes Houchens work and what won’t. “Everybody is sharing the same pot of gold. I don’t do any more or less than somebody else,” he says. In November 2007, Gipson was named the 2007 Ernst & Young Entrepreneur of the Year in the Kentucky/ Ohio region, but recognition is not what keeps him showing up for work every day. “As long as I have my health and can be productive, I plan on being
step away from the company, there is a corporate plan drawn up and sitting in secure vault. Ever prepared, you can be sure it is based on common sense and numbers.
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Sheldon’s Express Pharmacy, based in Bowling Green, with eight locations in Kentucky and Indiana in 2019, offers additional services such as health apps, strep testing, travel care services and more.
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class-action lawsuit. At the time of the sale, Gipson told the Bowling Green Daily News,“The transaction also generates significant value for Houchens’ shareholders and will provide funds to expand our existing businesses and acquire new business platforms.” The value generated from the sale of Commonwealth Brands was much more far-reaching than anyone could have anticipated. Because of the nature of ESOPs and the government regulations regarding taxation, it became immediately incumbent upon Houchens to quickly reinvest the nearly $2 billion from the sale within a one-year period. Coates says,“So we began to search the marketplace for opportunities and bought Tampico, which is a citrus company based in Chicago that sells citrus juices all over the country and in fifty foreign countries. We bought Cohen’s Optical, which is an optical company with stores in New York and throughout the Northeast and Florida and Puerto Rico. We bought 50 percent interest in Stephens Pipe and Steel, which is the largest domestic manufacturer of fence products throughout the U.S. We bought 62 percent interest in Hilliard Lyons, which is a large regional investment banking firm.” Mike Givens, a Houchens board member and former vice president of meat operations, says the sale of the cigarette company allowed Houchens Industries to become so much more than anticipated.“We have some great companies that we bought with the money we made off the tobacco company,” he says. At a time when many businesses were shuttering their doors and sending employees
Sheldon’s Fairview Avenue location in Bowling Green.
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out to the unemployment lines due to the Great Recession, Houchens Industries was beginning an unprecedented expansion. To the number, each of the companies acquired by Houchens echo the same theme: to be able to provide something special to the employees. Added Value for Employees One of those companies is Pan-Oston, a manufacturer of retail front-end fixtures, check-out counters, and display cases, acquired by Houchens in 2002. The company averages $40 to $50 million per year in sales. Jim Vance, president and COO of Pan-Oston, says,“I think Pan-Oston was probably one of the first manufacturing-type acquisitions.” Vance, who has forty years in manufacturing, including fourteen with Pan-Oston, knows from experience that Houchens is able to offer something remarkably unique.“If you’re someone like me in a manufacturing-type environment and are where you can create value for someone else, and it happens to be the folks you push hard every day. There is nothing better than that,” he says.“I always send Jimmie and Spencer a thank-you note every year because it’s just a blessing to me to be a part of it. It doesn’t change the way we manage the business. We basically wouldn’t do anything different, except now you have the blessing of basically handing somebody something that wouldn’t have that opportunity otherwise.” Pan-Oston fabricates shelving and other displays for retail clients. 42
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Vance adds: “It’s been the most rewarding fourteen years of my previous forty years. And I worked for some really good companies, was able to do some really good things, and saw a lot of stuff. But, at the end of the day, to create value for somebody—you know, I probably created a lot of value over the years for stockholders that I don’t even know. It was always measured on shareholder value, that’s what you’re supposed to do. That’s what you are charged to do, and that’s what you do. But, the sacrifices that people have to go through day in and day out to create that value, it’s very nice to be able to say that they receive the benefit of that.” Meanwhile, the food division had not been forgotten during the ever-expanding diversification phase. Coates says that a company for which he had formed an ESOP, Food Giant in Missouri, became yet another member of Houchens Industries in 2004.“They had one hundred stores, fairly large grocery stores, in small towns scattered throughout Missouri, Mississippi, Arkansas, North Florida, and a few other states, but extremely profitable. They also heard about Houchens and they wanted to become part of that, and so we merged them in, and that’s been a tremendous operation,” Coates says. Gipson and Coates have managed to grow the business and the ESOP plan and still maintain the family atmosphere of the early days at Houchens Industries by being involved and present when the acquired companies need them, but also knowing when to leave companies alone and allow them to manage themselves. Andy Pan-Oston corporate headquarters. 43
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Inside the quality-control facility at Tampico Beverages, which joined the Houchens family in 2008.
“Houchens is a family of brands. They allow their management team to make decisions, and they really care about the employee base.” — Scott Miller, Tampico Beverages 44
Barker, president of Van Meter Insurance, says,“I think it was Mr. Gipson who said that, when they’re acquiring these companies, nobody knows better how to run the companies than the people who are already there.” In August 2006, Van Meter Insurance was acquired by Houchens. “At that point in time, we were about $15.7 million in revenue, just Van Meter,”says Barker.“Today, we’re about $55 million. The awesome thing that has taken place for us is that Houchens, having twenty-eight different operating companies, us being an insurance business, we all of a sudden had warm introductions to all of Houchens’ companies.” He attributes Van Meter Insurance’s phenomenal success after coming into Houchens to one thing—the ESOP.“I think there’s one echoing theme of our success: That’s what it comes down to, our ownership mentality by each individual of our employees, to be a part of something that’s greater.” Scott Miller, CEO of Tampico Beverages, Inc., couldn’t agree more. Miller, who hails from a background with PepsiCo and Snapple, among others, joined Tampico in 2005 and helped make Tampico Beverages the number one refrigerated juice drink in the United States and one of the leading suppliers of flavored drink concentrates in the world. In 2008, Miller oversaw the sale of the company to Houchens Industries, and he’s had no regrets. “We were concerned that if we were acquired by a conglomerate, our people would be lost,” he says of Tampico’s 120 employees domestically and internationally. “Houchens is what I would call a family of brands. They
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Headquartered in Chicago, Illinois, Tampico Beverages is the top refrigerated juice drink in the United States, and a worldwide leading supplier of flavored drink concentrates.
allow their management teams to make decisions, and they really care about their employee base.” He appreciates Houchens’ longterm view of business, which he shares, and he believes it is the primary reason for his company’s low, 3 percent turnover rate. “Our experience has been an outstanding one from a partnership standpoint,” says Miller. “We’re all really one under the umbrella. When the world turned upside down in 2008, you saw them be steady stewards of the culture. They’re great partners and great gatekeepers of the brand.” Miller’s favorite time of the year, he says, is May, when he passes out the ESOP share statements. That’s when the employees really have a sense of what being a participant in an ESOP-owned company means. “It’s a wonderful opportunity to share with the employees that everything they do makes a difference.” And, he adds, the access each company has to the leadership at the top is unprecedented, and while they make themselves available to attend town hall meetings or charity events, they also allow companies to operate independently. “They (the employees) see Spencer and Jimmie several times a year. “I think it’s a very rare and special place to work,” Miller says, echoing the sentiments of employees throughout Houchens Industries, both old and new. “What they say is what they do and what they do is what they say. It’s been the best place I’ve ever worked. It really fosters a culture that can make your employees feel that they are a family.” 45
A PORTFOLIO FOR SUCCESS THE STORY OF HOUCHENS INDUSTRIES
The Houchens Industries Business Model Southern Recycling’s services range from the processing of metals, cardboard, and plastics to car crushing, metal shredding, and baling.
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The way Houchens treats Tampico Beverages, Inc., Pan-Oston, Van Meter Insurance, or markets in the food division is always the same—because it’s the fair way to do business.“We don’t change the name of anything,” says Coates.“The legacy of that business stays in place and we grow the business, and when those people retire, the money stays in the local place and those communities continue to thrive.” He continues,“We receive calls every week of people who want to join us.”What makes Houchens Industries unique is the way they do business. Coates explains that the private equity group model of business is to snap up companies, hold them four or five years, and then sell them off.“That’s not our deal. We want to buy something and hold it for a long, long time and provide for the employees’ security. Their idea is to hold it and cut employees and sell it off to somebody else; the employees be damned, I guess. That’s not our model.” Houchens Industries’ model is designed to support its community and local endeavors wherever one of the companies under its umbrella is located. In Bowling Green, Western Kentucky University named its stadium Houchens Industries-L.T. Smith Stadium after it received a $5 million gift for renovation and expansion from the company. “Very early on, Western Kentucky University was a part of my life experience,” Gipson told
In 1999, Southern Recycling became the first non-grocery member of the Houchens family. The Bowling Green-based addition was a perfect fit for the growing grocery chain.
A PORTFOLIO FOR SUCCESS THE STORY OF HOUCHENS INDUSTRIES
the local newspaper. “Growing up in the area, and as a graduate of WKU, I became aware of the value that a university can have on its community, and how important it was for the community to reciprocate. Strengthening the university through whatever support Houchens Industries can offer as a corporate citizen leads to a stronger geographic region both economically and socially, and should ultimately lead to a stronger pool of talent for everyone to pull from.” Nonprofits that benefit from the volunteer hours and financial support of Houchens employees include, but are not limited to, St. Jude Children’s Research Hospital, the American Cancer Society, Boys and Girls Clubs, and Junior Achievement. The future of Houchens Industries and its vast portfolio of ESOPowned companies is bright, and growth is in the forecast, perhaps because Gipson and Coates continue to enjoy the day-to-day challenges. “Both of them still have so much joy and enthusiasm in what they do,” says Sandy Mays, the former ESOP administrator and Gipson’s executive assistant.“The fact that this company has changed so many lives . . . it’s like family; but then on the business side, the insight that they’ve
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had—if I meshed it together going forward, I see no reason or anything that won’t make it brighter than it was.” After a century of growth, diversification, and innovation, Houchens is, today, one of the largest ESOP-owned companies in the country with holdings in retail groceries, convenience stores, quick-serve restaurants, insurance, manufacturing, construction, recycling, tanning supply distribution, optical stores, financial services, and property management. Its mission statement merely says: To enhance shareholder value through a variety of well-performing businesses.“The principle of trying to do something for your employees is the principle we apply today,” Gipson says. And the employees would, in chorus, say,“Job well done!” Susan Tweedy, a thirty-year employee who works in IT but who began by bagging groceries in one of the Houchens stores, says,“People would always say to me, ‘Do you know how fortunate you are to have been employed by Houchens?’” Indeed, she does.
INDEX
Italic page numbers indicate photographs A ACE Hardware, 39 added value for employees, 42–45 Allen’s Cross Roads, 5–7, 23 American Cancer Society, 48 American Tobacco, 37–38 Arkansas, 43 Auburn, Kentucky, viii, 11 B Barker, Andy, 17, 43–44 Barren County, Kentucky, ii, 2, 6, 8, 24 beginning of a new era, 23–31 beginnings of a grocery empire, 5–11 Ben Franklin Family Store, 23 Biggers (Martin), Lynn, 36 Biggers, Covella Houchens, 6–7 Bi-Rite-Foodtown, 23 BKD, 27 Bowling Green Business University, 38 Bowling Green Daily News, 39–40 Bowling Green, Kentucky building the Houchens family, 13, 20, 23–24, 27 distribution facility, 18 diversification of Houchens, 34, 46 foundational years, 8, 11 Houchens Insurance Group, 35 Houchens stores, 3, 4, 10 managers’ meeting, 29 map, 8 Sheldon’s Express Pharmacy, 40, 41 Southern Recycling, 47 Boys and Girls Clubs, 48 Bradshaw (Houchens), Eloise, 6 Brown and Williamson, 37–38 building the Houchens family, 13–31 Burnett, David, 33 business, ESOP as magnet for more, 34–37 business model, Houchens’, 46–48
C Capitol Hill, 17 caring, culture of, 14–20 Carlisle, Jean, 14, 17, 19 Cave City, Kentucky, 8 Center of Insurance, 34, 36 Chain Store Age, 39 Chattanooga, Tennessee, 24 Chicago, Illinois, 40, 45 Citizen Fidelity and Loan, 27 Clarksville, Tennessee, 23, 34 Coates, Spencer building the Houchens family, 16–17, 27–28, 31 diversification of Houchens, 33, 36, 38, 40, 42–43, 45–46, 48 foundational years, 7 Cohen’s Fashion Optical, 36, 37, 40 Collett Cove, 23 Committee on Education and the Workforce, House, 17 Commonwealth Brands, 37–42 Congress, U.S., 5, 17 Cornell, Terry, 16 Cross Roads Market, 38 Crossroads IGA, 39 culture of caring, 14–20 D distribution facility, 18 diversification, explosive growth and, 20–23 diversification of Houchens Industries, 33–48 E Elizabethtown, Kentucky, 8 empire, beginnings of a grocery, 5–11 Employee Ownership Foundation, 17 Employee Retirement Income Security Act (ERISA), 16 Employee Stock Ownership Plan (ESOP). See ESOP (Employee Stock Ownership Plan) employees, added value for, 42–45 enjoying and respecting work, 1–12 entrepeneur, Houchens as a young, 2–5
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INDEX
Entrepeneur of the Year, Ernst & Young, 39 era, beginning of a new, 23–31 ERISA (Employee Retirement Income Security Act), 16 Ernst & Young, 39 ESOP (Employee Stock Ownership Plan) building the Houchens family, 16–18, 24, 27–28 diversification of Houchens, 33, 38, 40, 43–45, 48 documents, 16, 17 foundational years, 2 as magnet for more business, 34–37 ESOP Association, 17 Europe, 5 explosive growth and diversification, 20–23 F family, building the Houchens, 13–31 Florida, 40, 43 Food Giant, 39, 43 Ford, Henry, 6 foundational years, 1–12 founder, Houchens as, 6–7 Fountain Run, Kentucky, 11 Franklin, Kentucky, 8 Freeman, Linda, 23 French, Sharon, 16, 20, 27 G Gamaliel, Kentucky, 11 Germany, 5 Gipson, Jimmie building the Houchens family, 16–17, 24, 27–28, 31 as definition of preparedness meeting opportunity, 38–39 diversification of Houchens, 33, 36–37, 40, 42–46, 48 foundational years, 6, 11 photos, 30, 32, 39 Givens, Mike, 7, 19, 20, 27, 28, 32, 40 Glasgow, Kentucky, 2, 7–8, 8, 9, 11 Great Depression, 7 Great Recession, 42 Greensburg, Kentucky, 32
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grocery empire, beginnings of a, 5–11 growth and diversification, explosive, 20–23 Guthrie, Brett, 17 H Hardinsburg, Kentucky, 23 Haynes, J. T., 32 Hillview, Kentucky, 23 Hodgenville, Kentucky, 11, 23 Horse Cave, Kentucky, 8 Houchens (Biggers), Covella, 6–7 Houchens, Bertha, 5 Houchens, Eloise Bradshaw, 6 Houchens, Ervin article, 11 building the Houchens family, 13–14, 17, 19–20, 23–24, 28 diversification of Houchens, 34, 36, 38 foundational years, 1–2, 5–8, 11 photos, 4, 5, 6, 22, 25 Houchens, James, 14 Houchens, James Hardin, 6 Houchens, Liza Ann Woodcock, 6 Houchens, Ruel, 24, 27, 30, 31, 33, 38 Houchens, Suel, 14, 24 Houchens Family Center, 23 Houchens Foundation, 11 Houchens Industries, Inc., 1–2, 7, 13–31, 33–48 Houchens Industries-L.T. Smith Stadium, 46 Houchens Insurance Group, 35 Houchens Markets, 1, 28, 33–34, 39 Houchens Museum, 24 Houchins, Dion, 39 House of Representatives, U.S., 17 Hunt, Noel, 32, 33 I IGA, 39 Illinois, 40, 45 Imperial Tobacco Group, 39 Indiana, 40
INDEX
J Jordan, Solomon, 7 Jordan, Wendell, 2, 7 Jr. Foods, 34 Junior Achievement, 48 K Kelley, Brad, 37–38 Kentucky building the Houchens family, 13, 20, 23–24, 27 distribution facility, 18 diversification of Houchens, 34, 36, 39, 46 foundational years, 2, 5–8, 11 Houchens Insurance Group, 35 Houchens Museum, 24 Houchens stores, ii, viii, 3, 4, 6, 9, 10, 12, 15, 22 managers’ meeting, 29 map, 8 Save-a-Lot, 32 Sheldon’s Express Pharmacy, 40, 41 Southern Recycling, 47 Keown, Royce, 19–20, 20, 28 L Ladd, Kevin, 39 Lafayette, Tennessee, 13 Larsen, Alan, 39 Leitchfield, Kentucky, 22 Louisville, Kentucky, 5, 11 Lyons, Hilliard, 40 M magnet for more business, ESOP as, 34–37 Malone and Hyde, 24 managers’ meeting, 29 Martin, Cecil, 36 Martin, Lynn Biggers, 36 Mays, Sandy building the Houchens family, 13, 16–17, 31
diversification of Houchens, 38, 48 foundational years, 6, 11 photo, 23 McConnell, Mitch, 17 Meyers, Charlie, 16 Miller, Scott, 44–45 Mississippi, 43 Missouri, 43 model, Houchens’ business, 46–48 Morgantown, Kentucky, 15 Mudd, John, 33 Munfordville, Kentucky, 8, 13 N Nashville, Tennessee, 24, 34 new era, beginning of a, 23–31 New York, 36, 40 Nichols, Jimmy, 39 North America, 2 O Ohio, 39 opportunity meeting preparedness, 38–39 Owensboro, Kentucky, 34 P Pan-Oston, 17, 42, 42, 43, 46 PepsiCo, 44 Perez, Tom, 17 picnics, company, 26 Plaza Shopping Center, 20 PNC, 27 Portland, Tennessee, 23 preparedness meeting opportunity, 38–39 Pricele$$ Foods, 39 Promodès, 24, 27 Puckett, David, 7, 13–14 Puerto Rico, 40
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INDEX
R Red Food Stores, 24, 27, 38 Reed, Stephen, 39 respecting and enjoying work, 1–12 Reynolds, J. B., 11 Richey, Bill, 36 Russellville, Kentucky, 11 S S&H Green Stamps, 14 Save-a-Lot, 32, 33, 39 Scottsville, Kentucky, 8, 12 Sheldon’s Express Pharmacy, 40, 41 Sidwell, Don, 32 Snapple, 44 Southern Recycling, 34, 46, 47 St. Jude Children’s Research Hospital, 48 Stephens Pipe and Steel, 34, 40 Stewart, Bill, 27 Stewart, Buster, 36 Stewart Richey Construction, 36 stores, Houchens, ii, viii, 3, 4, 6, 9, 10, 12, 15, 22 Strode, Wendell, 27
T
Tampico Beverages, Inc., 40, 44, 44, 45, 46 A Taste of Sizzle, 21 Tennessee, 13, 20, 23–24, 34, 36 They Called Me TUT (Houchens), 1–2, 6–7 Tompkinsville, Kentucky, 11 Tweedy, Susan, 48
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U
United Kingdom, 39 United Way, 11 USA Gold, 37–38
V
value for employees, added, 42–45 Van Meter Insurance, 17, 44, 46 Vance, Jim, 17, 42–43 Vincent, Danny, 32 Vine Grove, Kentucky, 8
W
Wall Street, 38 Walmart, 33 Warren County, Kentucky, 8 Western Gateway Shopping Center, 23 Western Kentucky University, 13, 38, 46, 48 Wilson, Woodrow, 5 Woodcock (Houchens), Liza Ann, 6 Woody, Wayne, 33 work, respecting and enjoying, 1–12 World War I, 5 World War II, 8
Y
young entrepeneur, Houchens as a, 2–5