ap and the failure of genius

It is a development as unthinkable 50 years ago as the collapse of the Soviet Union or cheap import goods from Communist China, though it is getting considerably less press or public attention: The A&P grocery chain.

It is a development as unthinkable 50 years ago as the collapse of the Soviet Union or cheap import goods from Communist China, though it is getting considerably less press or public attention: The A&P grocery chain – in the Eisenhower era, the iconic faceless mega-corporation that dominated the grocery business in America – has filed for bankruptcy protection, and is winding down its remaining 338 stores in the eastern USA.

Though it never cut much of a commercial figure in Western Canada, The Great Atlantic and Pacific Tea Company (that was its real, largely unknown name) did have a major presence in Ontario and Quebec from the 1920s until its operational closing in 2009.

That a company which was once of such size and importance that it spooked the US government into hitting it with anti-trust investigations for 25 years should disappear with such a comparative whimper is both remarkable and instructive.

A&P is a classic example of how a technologically and commercially innovative enterprise allowed itself to fall into decadence because it did not know how to systematize commercial genius. Because you cannot systematize genius.

To call such a faceless, apparently bland business like A&P innovative may sound counter-intuitive, but it is nevertheless true: A&P became the corporate behemoth it was by the mid-‘Thirties of the last century largely because it was the front runner in using what we would now call data mining to shape and rationalize its business.

Through most of its halcyon years, it was in the entrepreneurial hands of the brothers George and John Hartford.

As befits a company so archetypically “faceless,” not much is known about either of these men, apparently because, despite their enormous wealth and corporate power, there really wasn’t very much to know.

John, the younger brother, and the more out-going of the two (and also, fittingly, the major salesman and business relations manager of the duo) apparently had a midlife-crisis extra-marital fling with a younger woman that ended in a quickly and expensively terminated marriage, then a re-marriage with his original wife. But that is about as close to any kind of wild times or scandal as the Hartford brothers ever came.

By some measures, it was the staid, respectable and otherwise unimaginative older brother George who was the genius of the pair. Though he went no farther than the Grade 9 in school, George was a numbers guy, and he pretty much invented the art of looking at business data to determine what his customers wanted in various regions of the country, and how to shape the A&P business to serve those customers at prices that undersold the competition.

It was John, though, who came up with the idea that volume was everything: Reduced profit per sales unit was actually a good sign, as long as your sales volumes increased. Lower margins, coupled with increased sales volumes, would balance out to better overall return on investment.

This strategy made a lot of sense in the early decades of the 20th century, which saw the mass urbanization of the United States population – a social movement so strong it allowed A&P, with its cent-a-unit-less marketing strategy, to outlast even the huge devastation of the Great Depression.

Grocery venders in small town stores were faced with a double whammy of decreased consumer spending, combined with a decreasing number of local consumers; with, on top of all that, increased competition from firms like A&P, who could exploit their growing urban market share to produce efficiencies far outside the range of the small, independent rural grocer.

The Hartford brothers actually did nothing in terms of technological innovation. Their middle brother, Edward, who died young in 1922 and had nothing to do with the A&P store, was actually the major inventor in the family, with several patents in automotive suspension and other innovations.

What the two other Hartford brothers specialized in was reviewing currently available technologies (cheaper and more efficient canning factories, cheaper and more available store refrigeration units), and turning them into coherent responses to the business challenges of their time.

The downside of all this is that the brothers, for all their discipline and imagination, never provided for any successor regime.

When they died in the ‘50s, after a combined140 years or more of service in the company, they left behind them an ultra-conservative, yes-man business culture that missed the boat when it came to adapting to the social and business realities of the post-Second World War world, when the direction of urbanization reversed, from the cities to the suburbs, and shopping malls became the new mode of marketing.

Today, a retail chain that once did a billion dollars worth of business in the 1930s out of more than 16,000 stores, is down to 338 shops, most of them carrying other labels than A&P.

The lesson of all this, particularly germane to companies like Apple, with the recent departure of a genius like Steve Jobs: You can systematize sales and production, but you cannot systematize genius or imagination – and you cannot make money, in the long term, without either of those.

Readers who a piqued to know more about the rise and fall of A&P should look to Marc Levinson’s eminently readable The Great A&P and the Struggle for Small Business in America; it served as the inspiration for this article, and for some of the facts presented here – though none of the opinions.

Rick Steele is a technology junkie who lives in Whitehorse.