Acme Was Once the Dominant Supermarket in Philly. What Went Wrong?
As the iconic chain fights to stay relevant in the age of Whole Foods, its real challenge might be even bigger: overcoming the dark changes to the American economy.
Acme president Jim Perkins, a 55-year-old man with a retired football player’s bulk, steamrolls through his flagship Paoli store, past the bank, the Starbucks, the prepared foods and the top-shelf bakery operation, crowing. “You’ve got this constant flux of change all the time!” he says.
Speaking in a Southern accent that’s a vestige of his stepfather from Tennessee, Perkins circles the cafe-cum-sports-bar, with its flat-screen TVs and beers on tap, to see a sight of no little drama in his world, one that captures this constant flux. Just look, he tells me, at the chips.
Five years ago, he says, gesturing toward a wall of snack foods like a docent guiding me through an art gallery, the healthy options — like, say, blue corn tortilla — might have occupied four feet of shelving space. Now, he says, “It’s 32!”
And look at the broth. “Five years ago, there would have been four feet, but now,” he says, ticking off shelves with his pointer finger, “there’s four, eight, 12, 16 feet! Of just broth!”
Perkins’s passion for grocery stores is palpable, and his mission today is to spread the good news about Acme. “We’re growing,” he says. And he’s right.
The store we’re in — his choice — is one of about 80 that have been renovated and remodeled since 2013, creating spacious modern outlets out of old stock. Acme, under Perkins’s leadership, has also acquired dozens more existing outlets in the past few years, primarily from bankrupted A&P, bringing its roster to 168 stores across six states. And last year, he says, the Acme banner yielded a profit — “not great, but solid” — which suggests vitality in the brand.
To Philadelphians of a certain age, these victories are particularly welcome. The Acme name was iconic in Philadelphia, pioneering “own” brands — store-made items like Louella butter and Victor bread, both of which became staples at Philadelphia dinner tables — and attaining a rare dominance of the market. Under the corporate name American Stores Company, Acme accumulated more than 1,000 outlets and became a touchstone of people’s lives. Philly shoppers didn’t even go to “the grocery store”; instead, they ran to “the Ak-a-me.” The relationship between store and citizen was so intimate that we reshaped the name to suit our local tongue.
For three decades, though, the sense of Acme as cultural bedrock has only been history. The chain has fallen from first place in the market — in the mid-1980s it held an astonishing 34 percent market share — to fourth. Today it clings, according to industry bible Food Trade News, to a slim nine percent share of the grocery pie, behind ShopRite, Wawa and Giant.
To younger ears, the name “Acme” probably elicits a yawn or even derision. The retail food industry rewards revolution, and the past 20 years have featured a particularly rich burst of creative competition — all of which has taken a slice out of Acme’s hide. From niche markets like Whole Foods and Trader Joe’s to bulk-buying options like Costco and Aldi to superstores like Wegmans, consumers enjoy more choices than ever. In this field of varietals, Acme lacks sex appeal.
In fact, for all the positive spin Jim Perkins puts on how well Acme is doing, the truth is that Philly’s former grocery giant still faces challenges. For every shiny modern store Perkins has created, there’s at least one aging, even shabby outlet in need of a makeover. The field of competitors is fierce, and Acme’s target customer — the middle-class shopper — has been steadily disappearing. Prices are higher than at its rivals. Most significantly, Acme’s owners aren’t particularly interested in fully rejuvenating the brand.
Indeed, the big question when it comes to Acme isn’t whether it can reclaim its old glory and emerge once more as the dominant grocer in Philadelphia. Unless something radical changes, it can’t. The real story is how Acme fell so far in the first place.
Though New Philadelphians would be surprised to hear it, for much of Acme’s history, the brand stood for innovation. Its growth into the most powerful supermarket chain in Philadelphia was a shining example of capitalism done right — a symbiotic relationship from which owners, employees and customers all derived great benefits.
Acme began in 1891 with the most romanticized version of the American dream, when two Irishmen, Samuel Robinson and Robert Crawford, stenciled the slogan “The House That Quality Built” on a window at the corner of 2nd and Fernon streets in South Philadelphia and launched an empire.
Acme’s growth into the most powerful supermarket chain in Philadelphia was a shining example of capitalism done right — a symbiotic relationship from which owners, employees and customers all derived great benefits.
The partners added about one store per year before quickening their pace. Then, in 1917, they led a massive merger of rivals, ballooned their holdings to more than 1,000 outlets, and incorporated under the name American Stores. “There need be no fear on the part of employees of this present company that they are in any danger of losing their positions through the consolidation,” Samuel Robinson announced, according to a history published by the Tredyffrin Easttown Historical Society, “as it will be the policy of the company to continue increasing the number of stores and extending the territory, which will mean the need for an even greater number of employees than at present.”
Robinson was true to his word, and his stores set the pace of change for the entire retail food industry. Acme helped lead the shift from counter service, in which customers presented their grocery lists to clerks who fetched the items, to open floor plans and wheeled carts. As the automobile revolutionized travel, Robinson purchased land around his stores to create customer parking. And when he died, in 1958, he left behind a legacy built to outlast him. By the mid-1980s, in fact, Acme had weathered the evolution from corner stores to supermarkets and dominated the eight-county Philadelphia region. Jobs with American Stores, which unionized by 1940, were prized. And for all the innovations, American Stores operated in a steady manner — seeking growth, long-term, by offering customers and employees the same experience: a store, and job, that felt like an extension of home.
“I’d never seen anything like it,” says Bill Bailey, a former vice president with Acme who’d previously worked on the West Coast. “The employees were very often related — grandfathers and moms and dads and cousins — across generations. And they were very proud to work in the stores their grandparents did.”
“There was a strong relationship between management and the unions,” says Francis “Hank” Raucci, a former VP and general counsel for Acme who aided in labor negotiations. “They had their disputes, but it was a partnership in which everyone cared about the stores.”
Acme’s rich history belies the difficulty of the grocery business — and the challenges that face the chain today. Supermarkets traditionally operate on tiny margins of around two percent and require constant vigilance to track changing consumer tastes — from Chef Boyardee to fresh branzino. But in recent years, the whole industry has been disrupted. “The retail food industry has become drastically fragmented,” says John Stanton, a professor of food marketing at St. Joseph’s University, “and food stores have become more specialized. The problem facing Acme and other middle-class grocery stores is, ‘What’s their niche?’”
Markets like Whole Foods and Wegmans cater to foodies, with products like avocado ice cream, sea fennel and algae. Outfits like Aldi and Costco aim at bulk buyers and economically stressed families. And superstores like Walmart and Target offer bargain groceries — often at a loss — in order to move higher-profit items, from lawn fertilizer to flat-screen TVs. In this dynamic, creative environment, Stanton’s thinking goes, a store like Acme is too generalized to stand out. And going forward, the pressures on undifferentiated stores like ShopRite, Giant and Acme will only increase.
One threat is digital. A 2019 report by UBS, a financial analyst, concludes that 75,000 retail outlets in clothing, electronics, furniture and more will close in coming years, shuttered by online competition. (Online food sales are only expected to make up five percent of the retail food industry by 2021, but e-commerce is the fastest-growing segment of the market.) Millennials are an additional drag, preferring to buy groceries at convenience stores, Whole Foods and Trader Joe’s.
The upshot is that the big family grocery store of yesteryear is under siege, with shopping carts, over the long term, pointed the same direction as horse-drawn carriages: out.
The charge for any brand going forward is much as it’s always been: Adapt. Today, that means reframing outlets to co-opt particular niches as well as increasing digital and delivery services over time as a complement to brick-and-mortar stores. The good news, for Acme, is that it couldn’t have asked for a better leader.
Jim Perkins started as a bagger in a California Albertsons 37 years ago and fell in love with retail business. In his evolution into a gun for hire, he’s logged at least 25 separate home addresses, by his own count, leaping between corporate posts.
“In an industry where the leadership has grown somewhat aloof and remote,” says Jeff Metzger, publisher of Food Trade News, which covers the retail industry throughout the Philly region, “he’s warm and accessible … and he’s lived the business.”
Dubbing himself “the hillbilly from Philly” when he’s out pitching Acme, Perkins is something of a tonic — a colorful personality in a cautious corporate world. “I’m the guy the company calls in,” he avows, sounding folksy, shrewd and a little slick, “to fix whatever’s broke.”
Of course, this is also a frank admission of Acme’s general brokenness. Half the chain’s stores have received significant upgrades in recent years, which means the other half remain dull and anachronistic. Locations in Paoli, Havertown and the Snyder Avenue shopping complex (a brand-new store) are modern and inviting. But the Upper Darby location, on Lansdowne Avenue, is sad and uninspiring. And it’s frightening to think what millennials think of the brand when they see the Acme at 5th and Spruce — cramped, run-down, overpriced and desultory, like a ’70s porn shop on Times Square.
“It took many years for the stores to fall into this kind of shape,” says Perkins, “and we can’t get to ’em all overnight. But we will.”
Wendell Young IV, president of United Food and Commercial Workers 1776 — one of the most important unions representing Acme workers — praises Perkins as “ethical” and “very smart.” But he raises one important counterpoint to Perkins’s happy talk: Perkins isn’t really in charge.
Who is? Cerberus Capital Management, a New York-based private equity firm named for a three-headed dog in Greek mythology that keeps dead souls locked in Hell. It’s hard to imagine a clearer statement of ill intention — and that’s who owns Acme.
Cerberus’s co-founder, Steve Feinberg, believes in conducting business quietly (the firm’s PR rep didn’t even respond to an email requesting an interview), but he gained some measure of fame last May when Donald Trump tapped him to help overhaul America’s intelligence services. Feinberg, a Republican donor, was criticized for having no relevant experience. But his defenders noted that he understands organizational dynamics and how to assess an operation. He does, in short, what private equity firms do — acquires businesses and real estate to resell for profit along a strict timeline of five to seven years.
At first glance, this might not sound so bad: Cerberus’s task often requires plowing money into a business to make it more attractive to new owners. But the end goal — a short-term play to generate a large windfall — is completely at odds with how Acme’s original owner, American Stores, conducted business for almost a century, investing, growing, and seeking to sustain its share of the market for as far into the future as anyone could reasonably see.
Cerberus is involved in any number of businesses — manufacturing, financial services, health care, real estate — and its grocery holdings are a particular tangle: 2,300 stores, using 21 different brand names, accumulated since 2006 under the corporate banner of Albertsons. Acme got swept up in 2013, with Perkins brought on board to fix it shortly thereafter. This new Albertsons chain ranks second in sales nationally, behind Kroger, and has achieved profitability. But just last summer, industry analysts were clucking nervously about the total of $12 billion in debt Albertsons has accrued. And of course, Acme remains in need of help.
Ironically, one of Acme’s biggest challenges is something that used to be a strength — its unionized workforce. Perkins says he spends far more on employee health and benefits than rival chains do — a cost he can’t help but pass on to customers. Consumer’s Checkbook, a nonprofit consumer watchdog group that sends undercover shoppers into stores, pegs Acme prices at 12 percent higher than rival chains in the area. “You’ve got to partner with us,” Perkins says of his union members, “or you’ll make us uncompetitive.”
The pension fund, like pension funds everywhere, has been stressed for years — and while “it’s solvent now,” according to Young IV, the union has been working on a legislative fix to stave off longer term problems.
As it turns out, though, Acme has far bigger problems than union costs. In fact, any notion that Acme was simply too good to its workers and brought its problems on itself simply ignores what really happened.
To longtime Philadelphians, Acme’s fall over the past 35 years was a kind of slow-rolling surprise — a degradation that arrived by degrees. But for Wendell Young IV, Acme’s fate wasn’t just predictable. It was predicted. He was a mere naïf, 24 years old, in 1985 when his father sent him to China as part of a delegation of American union organizers.
Young IV’s dad was already a legend in organized labor, a fiery speaker who disdained all union thuggishness and had grown membership in the UFCW from 4,000 to 24,000. “You need to listen to what they’re saying,” Wendell Young III told his son about the trip, to get a “peek at the future.”
The visit consisted of four weeks of excursions to manufacturing plants and meeting rooms and financial talk Young IV didn’t always understand, but one gathering etched itself in his mind. Two dozen Chinese executives, all dressed in gray suits, addressed his delegation at a comically long conference table and spoke, admiringly, of the lessons they’d learned from the United States. Clawing its way back from the Great Depression, America had put its citizens to work building infrastructure while corporations and government invested in research and development efforts, building a robust economy.
Chinese officials said they would use this lesson to lift their own people out of poverty. They were going to plan carefully and maintain slow, sustainable growth that would unfold over an entire century. That caught Young IV’s ear — a room of powerful men hatching a plot that would flower long after their deaths. But the punch line arrived next, when the Chinese explained that while they had learned all these lessons from America, the U.S. had lost its way.
“Really?” Young recalls thinking, his face incredulous. But his hosts explained, patiently and politely, how American companies and government had altered their whole philosophy: investing less in workers and research; seeking results in quarterly and annual reports; and planning along compressed timescales of three, five and seven years.
Young, now 57, shares the story of his China trip because of what it foretold not just about Acme but about the entire American economy. The Chinese, he now understands, were exactly right. While America’s corporate class had once served a wide breadth of stakeholders — investors, customers, employees, communities — by the time Young flew to Beijing, Ronald Reagan was president, American companies were decamping overseas to pay lower wages for the same work, and a new generation of CEOs was rejecting the approach of its predecessors. In a 1981 speech titled “Growing fast in a slow-growth economy,” delivered shortly after he took the helm at GE, Jack Welch advocated selling underperforming businesses and cutting costs to increase profits, which translated to slashing employees and wages and was shorthanded by corporate America as an admonition to honor just one commandment: Maximize shareholder value.
As that maxim took hold, the American middle class shrank. The Philadelphia Inquirer’s old investigative reporting team of Donald Bartlett and James Steele was among the first to measure the vanishing middle class through a series of articles they turned into a 1992 book called America: What Went Wrong. But last year, a three-part story in Fortune magazine, hardly a bastion of socialist dogma, updated the picture, blaming, among other factors, tax breaks that favored investment and real estate over wages, plus the prevalence of hedge funds and equity firms that acquire companies by leveraging massive amounts of debt they then put on the companies’ books. Step two for those firms is to trim employee and research budgets and sell at a profit. And the employees who lose in the deal generally are — or were, at any rate — middle-class.
Philadelphia has hardly been immune to the phenomenon. A 2014 Pew survey found that since 1970, the city’s middle class had shrunk from 59 percent to just 42 percent of the population. For Acme, the shift in Philadelphia’s demographics didn’t have to be cataclysmic. Years ago, the company could have, like some of its competitors, recalibrated to meet the changing population’s needs and consumer tastes. But the same forces that wounded the middle class and carved into Acme’s customer base also blunted the supermarket company’s ability to respond. In sum, when companies became focused on short-term results, Acme came to look like just another acquisition, vulnerable to a series of outsider owners who wreaked havoc on the place from the inside.
Acme was first sold, in 1979, as a form of capitulation to L.S. “Sam” Skaggs, the scion of a family that had pioneered retail chains through the West. Skaggs bought enough American Stores shares that he was able to purchase the company outright and avoid a power struggle. He incorporated his own preexisting retail holdings under the American Stores name but headquartered in Utah, where he lived.
“You could see there was trouble looming,” says Young.
A&P, a great rival chain, was struggling. Food Fair, once a Philly staple, had declared bankruptcy. Acme needed refreshing to compete with new stores like Pathmark, which included items like toasters and curling irons on its grocery shelves. But Skaggs, uneasy about the East Coast and the power of unions there, never quite warmed to his new acquisition. Eleven years after buying American Stores, he sought to sell Acme.
The union tried to negotiate a purchase, emerging as the top bidder. But Skaggs yanked Acme off the market rather than sell out to his employees. From there, Acme entered what Young calls a long “harvesting” phase. Skaggs began a period of diminution, closing and selling stores in the Lehigh Valley, the Philly suburbs and Maryland. Skaggs did well; the company, not so much. And in 1999, he sold all his stores.
Over the next 14 years, Acme would change hands twice more. The first sale, from Skaggs to an earlier iteration of Albertsons, proved a disaster. The new owners had taken on too much debt to make a good go of running the stores, and the next buyer, SuperValu, which took on $6 billion in debt for its 2006 acquisition, was equally cash-strapped.
Along the way, says Young, local management teams kept authoring plans to boost Acme’s relevancy and place in the market. Smaller stores, the runts of about 12,000 square feet, were pitched as heirloom markets of the kind Giant is only launching now, selling fresh produce and organics. Bigger locations with parking lots were billed as fuel centers, with gas stations plopped out front to compete with nearby convenience stores. But the answer from the top was always the same: No. So Acme saw itself continually outflanked by a rising crop of rivals.
“These ideas would have made the company much more competitive,” says Young, “but the owners were always cash-strapped and looking for a cheaper way out.”
Desperate by 2013, SuperValu unloaded the chain to Cerberus.
A few years ago, in a New York parking lot, Marianne Nice-Trionfo saw something unexpected: a new Acme sign going up.
Her mom had retired from Acme with a pension. She herself had since put in a 40-year haul, rising from cashier to corporate manager as the company fell. So seeing Acme grow again, and so dramatically, she felt a well of pride. Then she noticed that some of the people standing around her in the parking lot, who’d worked under the A&P banner that had just come down, had tears in their eyes.
Nice-Trionfo shares this story now when she visits Acme stores. “Tomorrow, it could be our signs coming down,” she tells employees. “So we’ve got to work hard and make these stores successful.”
Perkins, for his part, claims the improvements Acme is making bespeak a new stability. Cerberus wouldn’t be investing that way, he says, if it was bent on “cashing out.” But history, and the realities of the private equity business, suggests this is spin.
“Cerberus’s goal, after being in the grocery business this long,” says Wharton professor Bilge Yilmaz, an expert on private equity companies, “is getting out. Because that’s just what PE firms do.”
Cerberus, in this view, isn’t developing a long-term strategic plan to launch Acme back to the top of the market. Instead, the firm has made targeted investments to shore up a weak link in its larger chain of 2,300 grocery stores. And in fact, contrary to Perkins’s assurances, Cerberus has already been trying to claw its way to an exit — and cash out — for years.
Two years after acquiring Acme, in fact, Cerberus launched a bid to go public; it failed when the estimated stock price came in low. Merger talks with Sprouts Farmers Market stalled. A play for Whole Foods was spurned, with the injury compounded when the organics king sold its virtues to Amazon. The equity company sprinted for another possible exit last year in an attempted merger with publicly traded Rite Aid. That plan fell apart after the drug chain’s shareholders revolted — evidently realizing that merging with a debt-laden grocery company awash in legacy stores was no way to fix a debt-laden fleet of old pharmacies.
In this context, Cerberus’s improvements to Acme look like a kitchen and bathroom remodel prior to flipping a house. So, can Acme ever regain the health and vitality it enjoyed when it was the number one store in the market? In a word, no — particularly not when it’s in the clutches of an owner who doesn’t particularly want it. This loveless marriage, however, will almost certainly end well for Cerberus, while Acme’s prospects figure to worsen.
An article last year in the American Prospect detailed how since 2015, PE firms have taken seven retail food chains into bankruptcy — but not before walking away with tidy profits for themselves. While bankruptcy isn’t on the table for Acme — it and its parent company, Albertsons, are both profitable — there is absolutely no sign that Cerberus has any long-term plan to return the brand to prominence. The firm, under the corporate banner of Albertsons, has followed the model all PE firms employ — leveraging a huge amount of debt. (At one point, interest payments swelled to $1 billion per year.) The upshot is that Cerberus is disinclined temperamentally to plow money into Acme with any kind of long-term horizon of 10 or 20 years in mind.
“They have made some investments, but they will not continuously invest,” says Yilmaz. “It has been more than five years since they acquired Acme, and it’s time to harvest, so they will most likely not throw more money at it and will continue to look for an exit.”
Bankruptcy aside, Cerberus’s debt load and zeal to exit are already undermining the enterprise. The chief competitor to Albertsons for middle-class grocery dollars is Kroger — a business less debt-ridden than Albertsons. Kroger simply has better cash flow and is using it to grow and plan for the long haul, spending to shore up its unionized workforce’s pension fund and doling out pay increases — demonstrating in real time how unions aren’t really the problem. Kroger is also reinvesting in all 2,800 of its physical stores while putting serious money into the digital side of its business, beta-testing its own delivery service last year. Acme, under Cerberus’s stewardship, uses a third-party delivery service, Instacart, and lags behind. The current competitive disadvantage on the digital side is far from dire. Brick-and-mortar still makes up the vast majority of retail food sales. But with Amazon in the mix, this is Game of Thrones stuff, and winter is coming.
Young perceives worrying signs right now. He says there are fewer significant remodels on the schedule for 2019 than in the past. (Perkins responds that they’re maintaining the same pace as in previous years.) Acme has also closed about 10 stores since 2015 as leases expired.
In this light, Marianne Nice-Trionfo’s measured response to the company’s growth looks wise.
Fact is, Cerberus holds the keys, and the long-term survival of any one of its assets will never be foremost in its chief executive’s mind.
Perkins, with a little swagger, says he knows how to boost performance, explaining that in the 27 stores with active liquor licenses, alcohol sales total about $20,000 on average a week. “But the halo,” he says, “is the stores jump a total of $57,000 per week in sales.”
Those who come for vino stay for vittles. And Acme is gearing up, says Perkins, to add another 20 or so beer-and-wine sections. The result is that in the short term, the brand will grow healthier before our eyes, likely staving off — without really changing — the endgame.
After all these years, and probably way too late for Acme, there are indications that corporate America — like a drunk coming to after a Vegas binge — is sobering up to the havoc it’s wrought.
Jack Welch, long credited with inspiring American business to maintain a singular focus on shareholder profits, now calls that the “dumbest idea in the world.” He never intended, he told the Financial Times, for executives to think that pumping up share price should be their main goal. While skepticism is warranted — Welch couldn’t have cleared this up 38 years ago? — the rethink is noteworthy.
At this point, however, bringing back the robust middle class that once crowded every Acme means reversing a process that took 40 years to unfold. And it’s Acme’s misfortune to be trapped in the paws of a company birthed by the old and still ruling paradigm — a company focused only on its own bottom line. And at this point, that company’s options are limited.
Splitting Acme off to shed union contracts and pension liabilities seems unrealistic. “No one is really in buying mode right now,” says Metzger, the grocery analyst, and for a competitor to buy Acme only to shut it down doesn’t make economic sense.
Young says the union could renew its bid, 30 years on, to buy the stores. “There are ways to get it done,” he says, “but the stores, since 1999, have only ever been sold as part of these bigger packages. Cerberus has shown no interest in selling off just one piece of its holdings.”
So what happens now?
Well, the short answer is: nothing much. And on this, Metzger, the academic experts at St. Joe’s, and retired Acme executives Bailey and Raucci all largely agree. Cerberus looks stuck. Until the firm finds an exit, Acme will most likely just … go on, shedding stores slowly, one or two at a time, as leases expire or attractive opportunities to sell an outlet appear. “They might even add stores in the same way,” says Metzger, “here or there” — suggesting just how long this might continue.
Stanton, at St. Joe’s, cautions against taking any additions too seriously. Over time, he believes, the trend line will only point down. “There is a bean counter somewhere in Cerberus looking at two lines,” he says. “One would be the profit or loss of any particular store, and the other is what they could make from selling it. And when that second line appears more attractive than the first, it’s over.”
Death by degrees.
Store by store.
What are the chances, I ask Perkins, Acme will be here in five years?
“One hundred percent,” he says.
“I’d say 100 percent,” replies Perkins. “Twenty? I don’t know.”
He pegs the uncertainty to trend lines affecting every business. And that’s the point: Corporate America has operated on short time horizons for 40 years. And Acme has become a barometer, hidden in plain sight, of our country’s economic travails. In this context, the middle-class grocery store might not look any sexier, but the clatter of shopping-cart wheels on concrete takes on a whole new meaning: as an echo of the American golden age and its long death rattle.
Published as “What Happened to Acme?” in the June 2019 issue of Philadelphia magazine.