2021 MDI WOY

The Shelby Report of the Southeast Celebrates the 2021 Southeast Wholesaler of the Year

As anniversary approaches, CEO

reflects

Praises people ‘who are the reason we are here today’

The Shelby Report of The Southeast recently caught up with Brian George, chairman and CEO of MDI, to discuss the upcoming milestone for the company and reflect on its continued growth and trajectory.

Founded in 1931, Merchants Distributors is a privately-owned wholesale grocery store distributor headquartered in Hickory, North Carolina. It supplies more than 600 retail food stores with food and non-food items in North Carolina, South Carolina, Georgia, Tennessee, Virginia, Alabama, West Virginia, Ohio, Florida, Pennsylvania, Maryland and Kentucky. MDI also exports to some 20 countries.

Merchants Distributors is a wholly owned subsidiary of Alex Lee. The company has a strong customer focus and offers a variety of services to help their customers succeed.

What is MDI doing to celebrate 90 years?

Alex Lee, MDI’s parent company, is having a pixel party to celebrate our 90th anniversary. We are inviting all employees and hosts from retail stores, distribution centers and offices to participate in the celebration by submitting selfies or photos to become part of a final AR image that will be revealed on our anniversary, Sept. 21.

The people who make up Alex Lee, MDI, and its sister companies are why the business has continued to grow for 90 years. We want to celebrate all of the people who are the reason we are here today, and who are building our future so that we can celebrate many more years.

How would you compare the company from when it first started to where it is now?

We are a lot bigger today, and we have a lot more technology to help us serve our customers. One thing that hasn’t changed is our focus on the customer and how we can best serve them.

Our founders believed that if our customers, suppliers, and employees are successful then we will also be successful, and we continue to operate under that belief today.

Any company operation that may have changed but values that still remain?

Many company operations have changed over the 90 years. When we started, everything was stacked on the floor of a warehouse and loaded onto trucks by the case. Today, we have racks, pallets, pallet jacks, forklifts, etc., and we will be introducing automation into the warehouse operations for ambient grocery in 2023.

We also continue to see changes in technology. We moved from paper inventory to punch cards to mainframe computers, and now cloud-based transactions.

Trucks have changed a lot over the years, too. They

on company’s journey

have air conditioning and other comforts for the drivers, as well as safety features like cameras that monitor unusual events.

Our values have stayed the same throughout all the operational changes. We believe in taking care of our customers and doing what we say we will do.

Our nine key values are all focused on providing the best for our customers and community. Those values are: accountability; communications; excellence; family; frugality; innovation; integrity; profitability; and respect.

Any acquisitions or expansions that you felt really changed the game for MDI?

Acquiring Lowes Foods in 1984 was the point where MDI made a commitment to retail. By acquiring our own stores, we were able to learn more about operating retail stores and better support independent customers who are running their own stores.

Not only does having owned retail help with our buying power, but it also has provided us a place to experiment and learn at retail.

A key expansion that made MDI’s continued growth possible was the building of a new distribution center in Hickory, North Carolina, in 1997. This greatly expanded our capacity and provided new technology for better efficiency.

The acquisition of Souto Foods by Alex Lee in 2017 accelerated our growth in Latino markets, and it has enabled MDI to build a full-service Latino offering for our customers, as well as expanding the offerings for Souto Foods customers.

In 2019, Alex Lee acquired W. Lee Flowers and their retail stores, which once again, created additional growth for MDI and expanded the MDI supply chain network by adding the distribution center in South Carolina.

What does the future hold for MDI?

MDI is in the midst of an automated warehouse expansion at the Hickory distribution center, where we will add significant capacity and improve efficiency.

Features of the new expansion include a building that will be 80 feet high, twice as tall as our current facility.

The warehouse expansion will benefit MDI employees and the community by creating more than 100 jobs over the next 10 years, as well as 50 new job positions within the automation environment. We’re also adding new offices and breakrooms to support automation and the employee experience.

We also have continued to grow our Latino offerings

along with our sister company, Souto Foods, which is located in Norcross, Georgia.

We also see the continued innovation at retail with growth in e-commerce and bringing unique experiences into the retail stores. We focus on meeting the customers where they are and enabling the easiest and most entertaining shopping experience whether online or in store.

How are things at MDI these days?

I am continually impressed by the dedication and commitment to excellence that I see in our employees every day. The last couple of years have put tremendous pressure on the entire supply chain, and our employees have risen to every challenge.

We will continue to focus on serving our customers and supporting our communities. Together, we will continue to be better at everything we do. As we have done over the past 90 years, we will continue to innovate and adapt to serve our customers.

We can accomplish anything together. With an entrepreneurial spirit and dedication to serving customers, we can adapt and grow.

Brian George

Through the years: Retracing the history of Alex Lee and MDI Business has continued to grow through sound practices, innovation and technology

Founding

Purchased in 1931 by Alex and Lee George, Merchants Produce Co. operated with 12 employees, three trucks, and 5,000 square feet of warehouse space.

Serving restaurants, schools, hospitals and mill stores, in addition to small grocery stores, the company expanded the product line as business grew.

By 1938, the company grew to Merchants Produce and Grocery Company. Alex and Lee George set out to service grocery stores in the area with the goods they needed to operate.

Early years

Merchants Produce and Grocery Company had fierce competition, but was able to expand by valuing employees and customers and continuing to innovate in operations and sales. In 1949, the company became one of the earliest wholesalers to install IBM punch card tabulating machinery. Perpetual inventory and print invoices were now maintained mechanically.

Company becomes MDI

In 1956, the company began cost plus pricing, enabling it to sell higher volume

at lower cost and changed its name to Merchants Distributors Inc., or MDI, supplying products to fullservice grocery stores.

Start in Hickory

Open for business on Main Avenue

Southest in Hickory, North Carolina, IFH operated initially with 14 employees and finished the first year with $1.8 million in sales. Moving to new quarters in 1972, IFH was able to grow sales to $5 million. By 1976, sales were $15 million.

Galaxy merchandising program introduced

New warehouse

The company’s growth required a new warehouse. In 1959, it moved into a new facility of 172,000 square feet. In 1963, it moved to a mainframe computer with superior customer and inventory tracking, improved reporting and an ability to control pricing.

In the 1970s, MDI developed the Galaxy merchandising program to offer a broader range of retail-merchandising support for independent customers. It continued to partner with them in growing their business and its own.

South Carolina entrance

In 1982, IFH moved into South Carolina with the purchase of Brothers Foods of Dillon, South Carolina, adding $6 million to IFH’s sales volume.

Due to a fire in the Dillon facility, a new warehouse operation was built in Florence, South Carolina, and the IFH presence was expanded in the coastal regions of the Carolinas.

Acquisition of Lowe’s Food Stores

The company continued its commitment to the customer by creating an advertising department, offering a rack service program and limited retail pricing options, as well as installing modern warehouse technology and equipment.

Formation of IFH

In 1965, the company recognized the need to separate the grocery business from the food service business. Alex and Lee George, with Norman James of the James Corp., formed Institution Food House, or IFH, as a separate company. Lee George became president, and IFH took over serving restaurants, schools and hospitals.

Established by James Lowe in 1954 in north Wilkesboro, North Carolina, and subsequently owned by JC Faw, Lowe’s Food Stores, or LFS, operated 75 stores in Virginia and North Carolina. MDI acquired Lowes Foods in 1984.

Lowes Foods, worked to bring faster checkout, increased productivity, upscale customer service and quality to a successful business. LFS had added 19 more stores by 1989. The FreshSmart concept of Lowes Foods was introduced in 1994.

Three companies of Alex Lee

In 1985, MDI acquired full ownership of IFH, establishing a fully integrated food service distribution company.

In 1997, Lowes Foods purchased Byrd Food Stores in eastern North Carolina, and in 2000 purchased 12 Hannaford Brothers stores in Raleigh and Wilmington, North Carolina, bringing the number of stores to more than 100.

In 1992, LFS, IFH and MDI became the three companies of Alex Lee Inc., named in honor of its founders. Please see page 40

From

Expansion continues

The business growth continued. In 1998, the company built a million-square-foot warehouse in the Hickory area. That warehouse incorporates all of the best of technology and is staffed by well-trained and dedicated employees.

Also in 1998, Alex Lee entered into a new storage and distribution business, Consolidation Services, which supplies an array of warehousing and distribution services, specializing in helping manufacturers ship product to retail.

Busy stretch

In September 2003, IFH entered into a new venture called IFH ChefSmart, a new retail concept.

In 2006, IFH’s Florence distribution center moved into a new, expanded, modern facility.

In 2007, Alex Lee built a meat-cutting facility operated by Vantage Foods in Lenoir, North Carolina, which provides case-ready meat to Lowes Foods and MDI’s independent customers. It also services IFH with products cut for food service.

LFS continued to expand by opening its first Lowes Foods Fuel station in 2007. In 2010, a new Lowes Foods concept store opened in Hickory.

In 2011, LFS introduced a new value

format called Just$ave, which continues to expand.

In 2012, Alex Lee, Inc. sold IFH to Performance Food Group turning its focus to the retail and wholesale distribution businesses.

Revised vision born

In 2013, Lowes Foods set out to break the mold of the standard supermarket and create a distinctive grocery shopping experience worthy of its Carolina roots.

The development began with in-depth consumer research and a series of overnight workshops designed to get the best ideas from managers across all facets of the business, including all store managers and many from MDI.

During these workshops, a new vision for Lowes Foods was born: “We bring community back to the table.” And a number of new concepts were created, including Chicken Kitchen, SausageWorks, Pick & Prep and the Community Table. In January, 2013, Lowes Foods reopened the first store to offer all of the new concepts in Clemmons, North Carolina.

Just$ave was part of the process as well. The vision for Just$ave – “We make saving a big DEAL” – is the foundation of the Just$ave gaming concept, which

introduces the feeling of winning into the shopping experience. This spark of innovation has led to continued development of new concepts to further differentiate stores.

In 2014, MDI completed a 116,000-squarefoot freezer expansion.

Purchase of Souto Foods

In 2017, Alex Lee acquired Souto Foods, located in Atlanta, Georgia. Souto offers an extensive selection of products from Latin America and the Caribbean, as well as other countries around the world.

In 2019, Alex Lee acquired W. Lee Flowers, a wholesale and retail grocery company based in Scranton, S.C. It maintains a

full-line, 400,000-square-foot warehouse facility that houses all major departments. It owns and operates IGA and KJ’s Market retail stores in the Carolinas and Georgia.

Addition of BI-LO stores, expanded warehouse

Alex Lee purchased BI-LO stores in South Carolina and Georgia from Southeastern Grocers in August 2020. In total, 22 stores were eventually acquired – 17 were converted to KJ’s Markets and five became Lowes Foods stores.

MDI announces expansion, creating

facility, including the installation of sophisticated logistics technology and automation to support rapid growth of the business.

“We are excited to continue to grow in Hickory, where we were founded nearly 90 years ago,” said Brian George, chairman and CEO of MDI. “The quality of life and the business support from North Carolina and our local community makes Hickory an ideal location to continue to grow our business.”

Hank Guess, the mayor of Hickory, said the city is excited MDI selected it for this “significant expansion, investment and new job creation.”

“MDI is a local homegrown business and has always been a great corporate citizen…we are also thankful for the strong long-standing partnership that exists between Caldwell County and the city, which helped to make this project a reality for both of our communities,” Guess said.

Randy Church, chairman of the Caldwell County Commission, echoed those sentiments.

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jobs in Hickory,

NC Investment from grocery distributor to total $120 million, 200,000 square feet

MDI, a wholesale grocery distributor founded in Hickory in 1931, has announced it will invest $120 million to expand its services and operations. The company anticipates adding about 200,000 square feet to its facilities.

“Caldwell County, the city of Hickory, and the state of North Carolina partnered to seal a landmark deal with MDI,” said Deborah Murray with the Caldwell Economic Development Commission.

“The company’s $120-million investment and implementation of leading-edge technologies will further guarantee the brightest future for the company and the region.”

MDI and its parent company, Alex Lee, were founded in Hickory and maintain headquarters there, distributing both food and non-food grocery items to more than 600 retail stores across the United States and other locations.

The company also provides additional support to its customers, including retail automation services, advertising and placement and price hosting, among others. The company’s project in Caldwell County will renovate and expand the company’s existing

“We are proud MDI chose Caldwell County for its new investment, new technology and new jobs. We are also proud of our partnership with the city of Hickory and its match of Caldwell incentives, which helped land the deal,” he said.

“MDI is a critical, essential industry – in the COVID era, before and after. We are proud they continue to call Caldwell home.”

Although wages for the new jobs will vary depending on position, the company said the average salary will be $51,634, above the current average wage in Caldwell of $40,124. It’s projected the state and local area will see an additional impact of more than $5.7 million each year from the new payroll.

MDI’s project in North Carolina will be facilitated, in part, by a Job Development Investment Grant approved by the state’s Economic Investment Committee. Over the course of 12 years, the project is estimated to grow the state’s economy by $305.5 million.

Using a formula that takes into account the new tax revenues generated by the new jobs, the agreement authorizes the potential reimbursement to the company of up to $1.34 million spread over 12 years. Payments for all JDIGs occur only after performance verification by the departments of commerce and revenue that the company has met its incremental job creation and investment targets.

In addition, other key partners on this project were the North Carolina General Assembly, the North Carolina Community College System, Caldwell County, the city of Hickory and the Caldwell County EDC.