2021 Smart & Final Anniversary

Identity, innovation driving popular grocer at anniversary

The way CEO Dave Hirz sees it, there are no other grocery stores that have Smart & Final’s business model.

“It’s completely unique in our industry,” he said. “What makes our model so successful is that Smart & Final is the only place where household customers can come in and find everything on their shopping list and do their club store shopping at the same time. Smart & Final can effectively replace a shopping trip to a conventional store, while eliminating the need for a club membership.”

As the Commerce, California-based chain celebrates its 150th anniversary in 2021, what better time to explore the evolution of its innovative – and successful – approach. In this month’s edition, The Shelby Report of the West takes a deep dive into what makes the company thrive.

“The business customer foundation is difficult to build,” Hirz said. “Honestly, we’ve proven that it’s easier to build a household customer base than it is to build a business customer base. Before we introduced our Extra! store format, we were mostly focused on our business customers.”

Read more from the CEO on page 26.

One way the company has been able to attract and retain customers is through its high-quality private label brand.

What began as “Iris” in 1895 – making it likely one of, if not the earliest, private labels in the U.S. – has grown to include other

brands such as First Street, Simply Value, and Sun Harvest, Smart & Final’s line of natural and organic products.

Hirz said the private label offerings have really resonated with consumers. In fact, he regularly sees the products while out in the community at places such as county fairs, chili cookoffs, Little League snack shacks, and even on TV shows.

Learn more about the company’s private label on page 36.

But to truly see the private label phenomenon in action, the Shelby Report team visited a Smart & Final Extra! store as part of this commemorative feature.

Find out what the VIP team leading the exclusive tour had to share starting on page 60.

Smart & Final has established a reputation as a reliable grocer for businesses and households. However, for decades it has also strived to make a community impact far beyond the checkout lines.

The Smart & Final Charitable Foundation focuses its efforts around five pillars: disaster relief, health and wellness, education, hunger relief and team sports and youth development. Its goal is to give back to the communities the company serves. In 2020, the Charitable Foundation raised almost $2 million to support nearly 1,500 causes.

For more on the philanthropic endeavors, see page 42.

Hirz emphasizes S&F’s uniqueness, teamwork, future

Format of company’s stores lets customers ‘do two shops in one stop’

From staff reports

Eleven years ago, when Dave Hirz first took the call to consider becoming the CEO of Commerce, California-based Smart & Final, he wanted to visit multiple store locations to see what differentiates the brand from its competition.

“I visited more than 30 Smart & Final stores from Northern California to San Diego,” he said. “I spent a lot of time visiting Smart & Final stores to understand its unique model before I joined the organization. Mostly, I wanted to understand Smart & Final’s potential.

How could we better serve Smart & Final’s customers and make it an even better retailer to attract new customers?” Once on board, Hirz quickly embraced the company’s unique approach of catering to both households and business customers. Competitors weren’t (and aren’t) doing the same.

“It’s completely unique in our industry,” he said. “What makes our model so successful is that Smart & Final is the only place where household customers can come in and find everything on their shopping list and do their club shopping at the same time. Smart & Final can effectively replace a shopping trip to a conventional store, while eliminating the need for a club membership.”

“Surprisingly, we discovered that when we started adding household items, our business customers started purchasing them as well,” he said. “Many of our business customers now take care of all of their household shopping at the same time, which allows them to do what they refer to as two shops in one stop. We’re the only place where they can find everything that they need for their small business, such as takeout containers, their toilet seat covers, cooking oils, etc. – and do all of their household shopping – including that oven-roasted chicken they want to have for dinner tonight.”

Hirz shared the Smart & Final, which is celebrating its 150th anniversary this year, attributes approximately 30 percent of its overall sales to businesses, clubs and organizations, while the remaining 70 percent comes from

Dave Hirz

its household customers.

“The business customer foundation is difficult to build,” Hirz said. “Honestly, we’ve proven that it’s easier to build a household customer base than it is to build a business customer base. Before we introduced our Extra! store format, we were mostly focused on our business customers.

“We added 6,000 items into our SKU count to support the new Smart & Final Extra! format, which focused on great value and high-quality private label and a broad assortment of perishable products for the household customer. The result was that our business customers became household customers as well.”

Although it can take some time to build up a business customer base at new locations, Hirz pointed out the patronage that comes with it.

“Once you get that business customer, they’re extremely loyal,” Hirz said. “It’s very difficult for competitors to steal our business customer. They appreciate our product offerings, the service they receive from our store managers and store teams, and the ease with which they can shop our stores. They also really value the quality of our private label. Many of our food service customers have our private label products built into the recipes on their menus.”

Hirz is grateful to see the Smart & Final team still following the same values as when he joined the company 11 years ago.

“The thing I’m most proud of during my 11 years at the company is that the culture is still as strong and unique as it has always been. I really am proud of this,” he said. “It’s such a great company with incredible store associates with such a great culture.”

After his first year of working with the company, Hirz and Human Resources leadership monitored group meetings to help better understand and define the company’s core values.

“In every meeting that we held, the No. 1 core value by a longshot was teamwork, which was really surprising to me,” Hirz said. “I’ve done this process before at other companies and teamwork had never hit the radar. That is when I discovered that teamwork was the biggest differentiator of the Smart & Final culture.”

He attributed this in part to the Smart & Final legacy stores, where employees are cross-trained in all departments, a tradition he is pleased to continue today.

“Everyone does a bit of everything in those stores, and even today in our Extra stores, and it’s a formula that works. I didn’t create the Smart & Final culture – it was created over the past 150 years – but I am really proud of the fact that I have been able to help the Smart & Final team to maintain our unique culture.”

Hirz is quick to praise others.

“I couldn’t do what I do every day without my team. Naturally, I depend on my senior leadership team, but also all of the associates across the company,” he said. “What I’ve learned during my 50 years in the industry is to surround yourself with great people, and really smart people – smarter than you. Most of the people who work for me are smarter than me, and it’s a diverse group of people. My current senior leadership team is the

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strongest I’ve ever had the pleasure to work with, and they have a wide variety of experience and backgrounds, which is extremely valuable.”

In the unforgettable year of the COVID-19 pandemic, Hirz highlighted Smart & Final associates for their dedication. “They came to work every day. They did their job, and they helped us to protect each other and our customers,” he said. He went on to credit Sean Mahoney and the senior leadership team for requiring masks in stores before the state mandated them in order to protect associates and customers.

For the past two years, Smart & Final has spent a significant amount of time, energy and capital focusing on the company’s IT infrastructure. The company has invested in a loyalty program that will be introduced this year.

“Our focus for the past two years has really been IT and digital infrastructure,” Hirz said. “Going forward, I anticipate new store openings and growth to become more organic. There is plenty of opportunity even in the markets in which we currently operate.”

Private label boasts both quantity, quality

Exec: Flavors, trends ‘forever changing’

From staff reports

The plan was simple – introduce a line of canned tomatoes under the name “Iris,” with packaging to emphasize the high-quality contents.

But in doing so, Haas, Baruch & Co. – a predecessor of Commerce, Californiabased Smart & Final – created what is likely one of the earliest, if not the earliest, private label brands in the U.S. Sales of the retailer reached $2 million by 1895 – a huge sum at the time.

This occurred 24 years after the founding of the company, which in 2021 is celebrating its 150th anniversary. Following a merger in 1953, Iris would soon become synonymous with what has evolved into today’s Smart & Final. In fact, the company still uses the brand name.

As recently as the 1990s, most of the chain’s private label items were still under the legacy Iris brand. Today, however, Iris is found on only select household items like paper products and health and beauty care items. Yet, it

still holds a special place in the Smart & Final history.

“We believe we introduced what is actually the first private label brand in the U.S.,” said Smart & Final CEO Dave Hirz.

Shoppers today can find other varieties of Smart & Final’s private label under the names of First Street, Sun Harvest and Simply Value. Let’s take a look at each.

First Street

Smart & Final’s current flagship brand, First Street includes a wide selection of products that range from

Sun Harvest

Sun Harvest offers a wide selection of natural, organic and earth-friendly products for environmental- and health-conscious customers.

The items are free of artificial colors, flavors, preservatives, added hormones or antibiotics, high fructose corn syrup, and hydrogenated oils.

Sun Harvest Organic products are certified organic and meet USDA standards. They also are made without chemicals harmful to the environment.

They can be found in grocery, produce, meat, dairy, paper, cleaning products and packaging.

Simply Value

grocery, frozen and dairy to packaging and cleaning items. The products, which come in both traditional and club-sized offerings, aim to meet the needs of families and

The Simply Value label aims to deliver savings with a variety of trustworthy products at budget-minded prices.

The name can be found on canned goods, cleaning

businesses. Michelle Narain, Vice President - Private Label, estimates that nearly 90 percent of the company’s entire private label sales come from First Street.

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supplies and paper products, as well as frozen and deli selections. Customers can fill their pantries with Simply Value without emptying their wallets.

Today, for every dollar a business customer spends with Smart & Final, over 40 cents of it are spent on private label. “Which is really, really high,” Hirz said. “Customers love our private label. It’s been an important part of our assortment and an important part of the success of the company.”

According to Michelle Narain, who helped bolster the private label sector when she came on board in 2018, the company focuses a lot on quality. “We’ve expanded our quality assurance team to ensure that before we take on any supplier, we are testing the product and verifying that it’s up to our specifications and that it’s exactly what we want,” she said.

Smart & Final also has invested in a “specification system,” where it can house all of the private label quality guidelines for suppliers to meet.

This allows for constant communication with vendors and suppliers. “Our team is constantly going to the shelf, pulling items off and opening them to make sure they’re meeting our expectations,” Narain said. “We take every single customer complaint seriously.”

Hirz said the private label offerings have really resonated with consumers, in particular since Narain came on board. In fact, he regularly sees the products while out in the community at places such as county fairs, chili cookoffs, Little League snack shacks, and they make regular appearances on TV shows, as many studios shop the two Burbank stores.

“Across the markets in which we operate you’ll see our private label everywhere,” Hirz said. “From tattoo parlors to office buildings and everything in between, Smart & Final is there to supply them.”

Narain noted that “it’s an exciting time for private label as the possibilities seem endless.”

From staff reports

Smart & Final has established a reputation as a reliable grocer for businesses and households. However, for decades the Commerce, California-based company also has strived to make a community impact far beyond the checkout lines.

In 2001, The Smart & Final Disaster Relief Fund was established to give back, improve the quality of life and nourish the communities Smart & Final serves throughout California, Nevada and Arizona.

Years later, the fund was renamed the Smart & Final Charitable Foundation to better reflect its broader areas of focus.

In addition to disaster relief, the Foundation supports four other pillars of focus: health and wellness, education, hunger relief and team sports and youth development. In 2020, the Charitable Foundation raised almost $2 million to support nearly 1,500 causes.

“Our goal is to give back to the communities we serve,” said Tinamarie Squieri who manages the Charitable Foundation. “We want to work with nonprofits that don’t

always get funding from other sources.”

Some of the organizations they support include recreational sports leagues, schools, and Boys & Girls clubs in addition to local food banks and homeless and at-risk youth projects such as Olive Crest. Smart & Final holds multiple annual fundraisers in stores for its community partners with varying community service missions.

As an example, Squieri shared how the Smart & Final Charitable Foundation assisted a Little League after its snack shack had been broken into and vandalized.

“The Charitable Foundation provided cash funding, as well as products for the snack shack to get back open and running,” Squieri said. “We worked with our vendors to even replace some of the machines for free.”

Customers can always find a donation canister at any Smart & Final store. “Many of our generous associates contribute to the foundation through a volunteer payroll deduction,” Squieri added.

Goal has always been ‘giving back to the communities we serve’ Foundation fond of nonprofits that don’t always get support from other sources

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The company also holds an annual golf tournament to solicit vendor support of the Foundation. Other fundraising efforts include candy sales with products from leading manufacturers.

Smart & Final’s community partners include: ￭ Feeding America – Supports hunger relief efforts throughout communities with edible but unsold food that is donated to one of the 15 Feeding America member food banks.

City of Hope – A leading research and treatment center for cancer, diabetes and other life-threatening diseases. Smart & Final hosts the annual Kids 4 Hope in-store fundraising campaign.

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￭

Olive Crest – Works to meet the individual needs of kids in crisis by providing safe homes, counseling, and education for both youth and parents.

Among the foundation’s recent accomplishments: ￭

A partnership with Olive Crest, through which in 2020 Smart & Final was able to raise more than $577,000 over a two-week period. ￭ A $500,000 donation to City of Hope. ￭

Three million pounds of food donated to Feeding America in 2020. ￭ $151,000 raised during the KFI PastaThon to benefit Caterina’s Club. ￭ $10,000 donated to Dress for Success, a nonprofit that works to enable women to successfully transition into the workforce, build thriving careers and succeed professionally and personally.

￭

In response to the COVID-19 pandemic, Smart & Final donated about $300,000 in food and monetary donations and gift cards, as well as 260,000 bags of food for food pantries to distribute in communities. across California, Nevada and Arizona

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Supporting local fire and police stations and veteran organizations.

150 years of quality, value and convenience within grocery industry

Known

as Smart & Final today, L.A. area company began in 1871

Smart & Final’s story covers an eventful 150 years. Predating what has become the standard of grocery retailing today, the popular West Coast chain evolved through acquisitions, innovations and other significant business changes over a century and a half of meeting the expectations of household and business shoppers.

The story begins in Los Angeles in 1871 with Herman Hellman, Jacob Haas and Bernard Cohn opening Hellman-Haas Grocery Co., which sold daily necessities like flour, brown sugar, salt, patent medicines, rope, sheepherding supplies, chewing tobacco and gunpowder.

By the turn of the century, the sole owners of Hellman-Haas were Abraham Haas (brother of Jacob Haas) and Jacob Baruch, who bought

Abraham Haas

Herman Hellman

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out Herman Hellman, Jacob Haas and Bernard Cohn. The company name was changed to Haas, Baruch & Co. in 1889.

By 1900, Haas, Baruch & Co. was a flourishing, wholesale grocer. Over the next two decades, a chain of events – including construction of the Los Angeles Aqueduct, the

discovery of oil in nearby Long Beach and the opening of the Panama Canal – pushed the area’s population to nearly 1 million.

Haas, Baruch & Co. proved its vitality after recording sales of $2 million in 1895 and began to establish itself as Los Angeles’ preeminent wholesale grocer. They also introduced its high-quality private label brand known as Iris.

J.S. “Jim” Smart and H.D. “Hildane” Final

Meanwhile, J.S. “Jim” Smart, a banker from Saginaw, Michigan, purchased the Santa Ana Wholesale Grocery Co., which supplied feed and grain to local farmers. Smart partnered with H.D. “Hildane” Final, and the company was renamed Smart & Final Wholesale Grocers. The business

Hellman Haas Associates 1890s

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relocated near the docks in San Pedro, and by 1919 its annual sales had surged to $10 million.

The grocery industry was changing. As retail grocers gained strength, many were negotiating discounts directly with manufacturers, avoiding wholesalers altogether.

Competition turned brutal. Of the city’s 16 wholesale grocers in 1920, just seven remained a decade later.

Smart & Final survived by introducing the concept of “cash and carry,” today’s way of self-serve shopping. Before that, grocery stores required a clerk to collect goods for the customers.

Smart & Final’s novel cash and carry store debuted in Long Beach in 1923, as the company had determined that opening grocery locations near customers’ businesses

would spare them the time and trouble trekking to a remote warehouse.

In 1953, Smart & Final Wholesale Grocers merged with Haas, Baruch & Co. The combined company kept the name Smart & Final and relocated to Vernon, Calif., which at the time was the preferred distribution location for several wholesale and retail companies.

The Thriftimart supermarket chain bought Smart & Final in 1955, under which the private label Iris brand expanded to include hundreds of frozen food products, paper, and canned goods, as well as janitorial supplies.

In the early 1980s, Thriftimart Inc. changed its name to Smart & Final Iris Corp. and in 1988 was acquired by Casino USA, the American subsidiary of Casino Groupe. Shortly thereafter, the Thriftimart stores were liquidated

Please see page 54

During this decade, Smart & Final was expanding into Arizona and Nevada, and continued to increase its presence in California, growing to 140 stores in 20 counties by 1995.

The company made its first venture outside of the U.S. in 1993, opening stores in Mexico through a joint partnership. Five years later, Smart & Final acquired United Grocers’ Cash & Carry chain in 1998, expanding its West Coast operations from Northern Mexico to the Canadian border.

That same year, Smart & Final acquired some of the assets of United Grocers Inc., an Oregon-based company. This included their cash and carry store chain (later called Smart Foodservice Warehouse Stores). In 2020, Smart Foodservice Warehouse Stores was sold to US Foods.

In May 2007, Smart & Final was acquired by funds managed by affiliates of Apollo Management, which led to the company entering a new niche of food retailing. It purchased 27 Southern California Henry’s Farmers Market stores and eight Texas Sun Harvest stores.

The following year, Smart & Final debuted the Smart & Final Extra! format, with larger store footprints and an expanded merchandise selection.

After opening eight Smart & Final Extra! stores in 2008, 10 years of significant growth followed. This was facilitated by the acquisition of a dedicated perishables warehouse and

William and Gertrude Final, H.D. Final’s children.

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further supported by continued investments in distribution capabilities and in-store merchandising.

In early 2011, Smart & Final sold the Henry’s Farmers Market and Sun Harvest stores to Sprouts Farmers Markets. Smart & Final was then acquired by Ares Management LP, a private equity firm, in 2012.

Two years later, Smart & Final marked another historic moment with an initial public offering of 13,450,000 shares. That same year, the company celebrated its 200th store in Long Beach, Calif., the city where it had opened its first location under the Smart & Final name.

In 2016, Smart & Final Extra! store expansion continued with the acquisition of 33 former Haggen store leases in California, which reopened as Smart & Final Extra! stores.

In 2018, the company celebrated the opening of its 200th Extra! format store, again located in Long Beach, where the original banner store was opened.

The following year Smart & Final Stores Inc. was privatized through an acquisition by funds managed by affiliates of Apollo Global Management LLC, a leading global alternative investment manager.

Today, Smart & Final continues to accelerate its growth by introducing pick-up and delivery options and opening new stores to provide customers quality, value and convenience..

Leadership team highlights the identity of Smart & Final Extra!

VIP tour details how brand is ‘more like a club store with groceries’

From staff reports

As shoppers peruse a Smart & Final Extra! store, they will find an extensive variety of products to serve even the largest of households and businesses.

To illustrate that point – and in conjunction with the Commerce, California-based grocery chain’s 150th anniversary in 2021 – members of the executive team recently took

The Shelby Report of the West on a tour of a Smart & Final Extra! store in Tustin.

Matt Reeve, VP of sales and merchandising, said, “It’s important to ensure that customers understand what Smart & Final offers. A Smart & Final Extra! combines a warehouse store with traditional grocery retailer with offerings like farm-fresh produce and meat, frozen foods, dairy, deli, grocery basics and natural and organic options – offering a true one-stop shop.

“We’re not a traditional grocery store, we’re much more like a club store with groceries. In virtually every Smart & Final store, you walk into a nice display of some of our club pack items that you might find in a warehouse store, which reinforces the message of what Smart & Final carries,” Reeve explained.

Entering a store, customers will see they are somewhere much different from other grocery or warehouse chains but will still find everything they want and need.

“In our Extra! stores, we love to have our fresh products up front, which explains why we always have our produce department right off the main entry. You’ll also find flowers kept within eyesight,” Reeve said.

Matt Reeve

“From the first moment the customer walks through our doors, we really want to establish that they’re somewhere different. With our fresh products and club assortments up front, we immediately reinforce that we’re a one-stop shop.”

Sean Mahony, VP of store operations, said Smart & Final maintains its household and business customer base by going the extra mile for shoppers. That means personalization and ensuring needs are being met.

“For a lot of customers, it’s making sure we have the product for them,” Mahony said. “If you own a business, you often struggle to find the time to make multiple grocery store trips or become frustrated when you find a store doesn’t have what you’re looking for once you arrive.

Sean Mahony

“With our customer personalization, we make sure we’ve got what they need, when they need it. Whether that means we’ve already rung up the items or that we’ve got it ready to go for them to easily pick up. This is something that differentiates Smart & Final from the competition out there today.”

Scott Drew, COO, touts Smart & Final as the smaller, faster grocery warehouse store.

“We‘re able to price competitively to keep our labor costs down,” he said of Smart & Final’s operational strategy. “We aim to keep our overhead expenses low. When you look throughout the store, you’ll notice that our overheads keep our back stock, which lends itself to a lot of efficiencies.

“We don’t keep much product in our back warehouse storage area. This helps restocking become a one-touch process, and we put this savings towards a competitive pricing strategy.”

As customers interact with associates in the store, some may come to learn their stories of development throughout the years. Katrina Brooks, district area trainer, shared her own experiences with the company.

“Smart & Final definitely places a huge emphasis on training and development,” she said. “Teamwork is a core company value, and even when I was working in the stores, there was a lot of cross-training. You are given the chance to wear a lot of different hats. From my role as a trainer, I get to see associates when they first start, and then help facilitate their growth and development.”

Brooks shared the company’s five core values: teamwork, integrity, accountability, respect and growth. She was sure to discuss growth, specifically, as it has been integral in her own journey.

“When I started at Smart & Final, I completed the Retail Management Certificate Program, which the company paid for,” she said. “After that, I was able to finally finish my associate’s degree, which the company also helped fund. Recently, I went back to school to finish my bachelor’s degree, and the company provided me with multiple scholarships.”

Scott Drew

Katrina Brooks