Hinky Dinky History
Forward by Michael Newman…PLEASE READ
I wasn’t asked to write a forward to this piece but I think it’s useful to preface the reading of this history with the consideration of a few thoughts.
First, it’s important to note that this was written at the request of the Nebraska Jewish Historical Society and as such is written with a general audience and the historical record in mind. No two historians will construct identical narratives from a record the same events, especially not historians lacking an academic dispassion for the story they’re telling.
All history is subjective and at the mercy of such things as memory, perspective, access to first sources and an appreciation of the sensitivities of various constituencies that may one day be reading. Many readers, especially those with a connection to the people and events recounted will have additional and sometimes differing data.
When I first read this history, it generated numerous “but what about this?” questions. I plan to ask many of those questions. I’m sure some of them seemed to be too trivial for the originally-intended readership and some may just not have been considered. Here, we can explore that minutia.
I’m immensely grateful that my uncle Bob took the time to research and compose this history. Decades may have otherwise passed and the opportunity for this history to have been documented, lost. I know he looked to others for assistance and input, including my father and Herb Berkowitz.
Additionally, it is my desire to one day supplement this document with photographic illustrations with the author’s permission.
Hinky Dinky History by E.R. “Bob” Newman, 2009
This history is the story of a chain of grocery stores, having its origin and demise in Omaha, surrounding communities, and eventually throughout the country. Its beginnings may be traced to two Jewish Hungarian immigrants, both named Newman. Their descendants started and built a chain of stores, named “Hinky Dinky”. Towards its end over seventy groceries were operated under Newman family ownership. At its peak, Hinky Dinky had eighteen stores in Omaha, three in Lincoln, four in Des Moines, and about fifteen in smaller towns in Iowa, Kansas, Missouri, and South Dakota. As early as the mid 1930’s Hinky Dinky’s share of the Omaha retail grocery market was at least 30% every year. This dominance continued until the mid 1960’s. Although the name of the chain was “Hinky Dinky Stores”, roughly half of the stores owned and operated by the Newman family interests were ultimately not run under that banner. Unknown to most local people was the fact that the Newmans also opened and operated some thirty-five “leased food departments” located throughout the continental United States, Puerto Rico, and the Virgin Islands. The above numbers are approximate because over time stores were relocated, closed, and opened. Thus, it is impossible to give exact counts.
I EARLIEST GROCERY ROOTS
The known roots of the Hinky Dinky grocery chain go back to a small Hungarian village near Budapest, where Bernard (Baruch) Neumann operated a “general” store. It is presumed this store featured groceries. When his daughter, Fanny, was a teenage girl, she was in charge of sundries, such as “needles and thread”. After immigrating to the United States in the 1880’s, Fanny met and married Moritz Newman in Omaha, who had also immigrated in the 1880’s. After they married they opened a grocery store, offering credit, named “M. Newman” in Sioux City, Iowa.
Family lore does not depict Moritz as being particularly ambitious. A story meant to be humorous, but also depictive, held that Moritz invented self-service groceries. It went that he spent the good part of each day sitting in a chair in front of his store. From there he could direct customers to which aisle and shelf they would find the items they wanted. On the other hand, Fanny was highly energetic. For instance, she frequently arose before dawn to bake a half dozen or more loaves of bread. It may have been Fanny’s drive that led to the first Newman venture into the grocery business in the United States.
Moritz and Fanny had four children. They were Henry, Jules, Albert, and Sally, in order of age. The Moritz Newmans were exceedingly poor. For example, to survive the cold winters, the boys would gather at nearby railroad tracks and taunt the trainmen until they would amuse themselves by throwing coal at them. The boys then gathered the lumps of coal, needed for heating and cooking at home. On cold winter mornings the family warmed themselves around a pot-bellied stove, fueled with the “donated” coal. Once, Jules was asked by his grandchildren what kind of toys he had when he was a kid. He responded, “Toys? The only toy ever owned in my family was a dime store tin horn, which we all shared!”
From these early hardships grew the ambition to succeed. Jules’s entrepreneurial bent showed up at a young age. When about eight or nine, he began gathering portions of used newspapers left in neighborhood bars, of which there were many in those days. He then would sort the disarray of papers into complete versions, after which he went back into the bars and sold then for the retail price, about three cents at that time. It was from these beginnings that the Hinky Dinky story unfolds.
II FIRST NEWMAN GROCERY IN OMAHA
The story of why Moritz, Fanny, and their children moved to Omaha is a family favorite. It involved an animal called a “t-choor”. This word is probably not Yiddish. Most of Grandma Newman’s funny words and sayings were explained as either Hungarian or Gypsy. One day a “t-choor” ventured into the Sioux City store. The odor which it left and which hung on in the store made it impossible to remain. So they returned to Omaha where they had first met and opened a second “M. Newman” store in Omaha’s near north side, where most of the Jewish people in Omaha lived.
Herb Berkowitz, who played a prominent role in Hinky Dinky’s history (more about Herb later), has fond memories of often going with his mother to his Uncle Moritz’s store, where he could count on being given an ice cream cone.
III JULES NEWMAN OPENS FIRST STORE WITH PARTNER
It was in this store where Moritz’s sons, learned the rudiments of retail groceries. After WWI, in which they had all served, Jules (also known as Jule, Julius, and JM) worked for the Union Pacific RR in the parts department. Jules saved as much of his paychecks as he could with the idea that he would open a first grocery store which would some day become a chain. He believed he could compete with Piggly Wiggly (later bought by Safeway) and A&P, the two largest national chains at that time. Both had operations in Omaha. After working at UP for about five years and saving as much money as he could, he was faced with a dilemma. He was offered the position of general manager of the entire UP parts operation. But he had saved up $1800, a large sum at that time, and enough money to open a store with a partner, named Wohlner. The store was in Benson (now an Omaha neighborhood) and was named the “Benson Grocery”.
Throughout this history Jules Newman has been arbitrarily referred to as “Jules”. He was also often called either “Jule” or “Julius”. Once he was asked which of the three names was the correct one. His response was that he wasn’t sure, but since there were two other “Julius Newmans” in Omaha, he went by either Jule or Jules. After he had passed away, the birth certificate in his safety deposit box showed that his given name was “Julius Morris Newman”. Another name, which he acquired after Hinky Dinky had grown to a large local company, was “JM”. At first it was mostly used by company personnel. As time went on, he was often referred to as “JM” by his children, grandchildren and daughter-in-laws (and still is to this day). To the rank and file of the Hinky Dinky Company he was “Mr. Newman”.
IV JULES ACQUIRES WOHLNER’S INTEREST
Jules and Wohlner were very successful. Jules did the buying and Wohlner ran the operation. Jules was a very shrewd buyer, often cajoling salesmen and food manufactures into extra cases, especially when he was aware of oversupplies, such as California vegetables or Hawaiian pineapple. In those days such items were generally canned and, therefore, had a long shelf life. After some time the basement of their store was full of merchandise, which had essentially cost nothing. One day Wohlner, who had no idea of what the stock in the basement was worth, decided he wanted to cash in and offered to sell his half interest for $40,000. Wohlner assumed his offer would be rejected out of hand, but Jules agreed and shook on it right away. He wrote a check made out to Wohlner and told him he would deposit it in Wohlner’s account. The next morning Jules was at the bank the minute it opened and deposited the check. Wohlner, who by that time had become suspicious of how easy the “negotiation” had gone, was looking for Jules, but to no avail.
V JULES ENVISIONS A CHAIN
After Jules became the sole owner of his first store he began opening more stores in Omaha throughout the mid-twenties. About the time he was gaining a reputation as an up and coming local businessman, Sadie Greenberg, the wife of Jules’s insurance agent, Dave Greenberg, invited Esther Kaplan, her childhood friend, from Seattle to visit. Sadie fixed up Esther with Jules and they fell in love and married. Esther played a vital role throughout Jules’s career. Jules’s strong suit was buying and merchandising; Esther’s was her outgoing personality and ability to develop strong ties with the store workers. Early on Esther worked at check out counters. Her magnetic personality was instrumental in gaining employee loyalty and allowing Jules the time to pursue his ambition to build a chain of stores.
VI FAMILY MEMBERS JOIN TO AID EXPANSION
As more stores were added, Jules felt that he needed additional management people. His brother Henry began working for him after he bought Wohlner’s interest in the Benson store. Later he invited his other brother, Albert, and his cousin, Ben Silver, to join them. Before then, Albert and Ben owned and operated small independent stores in South Omaha and Council Bluffs. Henry became the outside man, visiting stores to help the managers and maintain feedback; Albert was the produce buyer; and Ben managed central bookkeeping.
As more stores were added, Henry determined that, in addition to the several supervisors reporting to him, specialists in the various food departments would enable each supervisor to cover additional stores, the specialists being more skilled in their areas of expertise. Eventually, Henry employed specialists in produce, meat, frozen food, dairy, general merchandise, and front end operations.
The three Newman brothers’ sister, Sally, who was the youngest of the siblings, worked in the central office doing a variety of tasks. Notably, she handled the switchboard, shunting calls to various people. Sally never had any executive duties, nor did she own any part of the company. Perhaps this was due to her being female in an era when women were not expected to be business persons. She was, however, of great value to her brothers. She was friendly with the other office workers and was trusted by them. She could always be counted on to warn of any problems among the office crew before things got out of hand.
It is significant that none of these persons had an education above that of the eighth grade and, except for Jules, it is not certain the others went that far. When Jules married Esther, the family immediately achieved a higher educational level. Esther had a high school diploma, a rare accomplishment, especially for a female, in those years.
As an aside, it should be noted that there was another Newman connection with the grocery business in Omaha. Louis Sommer was married to Amalia Newman (known to all as Millie). Millie was Jules’ second cousin, her grandfather being Moritz’s uncle (See I EARLIEST GROCERY ROOTS above). Louis operated a grocery just east of 49th Street on Dodge Street until his death in the forties. The store, “Louis Sommer’s Grocery”, was not cash and carry and catered to upper middle and upper income customers. Hence, it was not directly competitive with Hinky Dinky, which served the larger, middle income population. The Sommers and Newmans were close and comprised an extended family. Louis’s and Millie’s daughter, Bea Sommer, and their granddaughter, Shelly Sommer Bann still live in Omaha.
VII HINKY DINKY NAME
Besides the “Benson Grocery”, the other stores had different names. When the stores were incorporated, the name selected for the corporation was American Community Stores Corporation (hereinafter ACSC). It was believed that this name would not be suitable for retail operations. The name chosen was “Hinky Dinky”. A common question is, “How did this name come about?” Like selecting a name for a new baby, all kinds of suggestions were considered. For some time no one could agree, nor was any name suggested which anyone was really excited about. One time, on returning from a visit to friends in Sioux City, the three brothers began singing songs. One song was a popular WWI song they all knew, “Hinky Dinky Parlez-vous”. Suddenly, Henry called out, “Hinky Dinky”! The name was certainly unique; it was catchy, and quite similar to “Piggly Wiggly”, a national chain with over 2500 stores. There was instant agreement among the three young men.
VIII PIGGLY WIGGLY LAWSUIT
Shortly after the stock market crash in 1929 and the onset of the Great Depression, Hinky Dinky was sued by Piggly Wiggly for both patent and trademark infringement. By that time there were at least fifteen Hinky Dinky stores. Herb Berkowitz remembers that there were twenty Hinky Dinky stores in 1931 when he began working for the company. To put it mildly, the Newmans were scared. They feared they wouldn’t be able to stand up to being sued by one of the largest companies in the country. There were no patent attorneys in Omaha. Isador Ziegler, the company attorney, suggested they contact Walter W. Head, who had been the company’s banker when he was president of the Omaha National Bank and was now a prominent banker and insurance executive in St. Louis. Head was also president of the American Bankers Association and the national president of the Boy Scouts of America.
Head agreed to help, but as incentive he wanted to own a share of Hinky Dinky. Ziegler already had a stake he probably acquired in exchange for legal services. Head shrewdly demanded enough of the company to be able to have majority control with Ziegler if they could cajole any one of Jules’s family members to join them. The Newman family, impressed with Head’s credentials and needing support from a heavy hitter, agreed to sell the interest.
The patent infringement claim was based on an invention by Clarence Saunders
(http://en.wikipedia.org/wiki/Piggly_Wiggly US Patent 1,242,872). Saunders was the founder of Piggly Wiggly, as well as the purported originator of self-service groceries. The invention claimed a store layout which employed fingers of display shelving projecting from each side wall of the store. The “fingers” alternated, thus requiring a shopper to make a sinuous trip through the store in order to exit without going against the flow of traffic. Thereby each customer would be exposed to all goods. Evidently, Hinky Dinky Stores employed a layout which infringed the Piggly Wiggly owned patent. The St. Louis patent attorney brought in by Head asked if it would be possible to cut aisles across the fingers adjacent to the walls. The Newman boys said they’d try it. Eureka! Customers liked the stores better due to the increased freedom of movement, and the suit was dropped.
The trademark claim was simply that the name “Hinky Dinky” would be confused with “Piggly Wiggly”, causing customers to think it was the same company. This claim was evidently considered too weak and was dropped along with the patent claim when Hinky Dinky revised its layout so as to no longer be infringing. Actually the trademark claim would have had a better chance of success had any of the Newman’s been required to testify as to how the name had been selected. This is true because trademark law recognizes a strong presumption of infringement if it can be shown that the defendant had been thinking of the plaintiff’s trademark when the defendant chose his trademark. Had this claim been tried the name “Hinky Dinky” may have been short-lived.
IX OMAHA PRICE WARS IN LATE 30’S
A few years before the Pearl Harbor attack Safeway, which had previously bought the Omaha Piggly Wiggly stores, began slashing prices in Omaha, ostensibly in an effort to eliminate or weaken A&P, which had five or six stores in Omaha at the time. In the eyes of all other grocers in the area the purpose was to drive them out of business. Hinky Dinky believed it was the primary target, Safeway being strong enough in its other markets to easily handle an isolated price war. For example, chicken was being sold at 15 cents a pound and eggs at 10 cents a dozen, far below cost. Regular headlines in the local papers at the time daily listed the numbers of single store owners which had gone out of business. All told, many dozens of small grocers were forced to close their doors.
Hinky Dinky was desperate. Jules traveled to Oakland, California, Safeway’s headquarter city, and met with its president, Lingan A. Warren, in hopes he could talk some sense into him. The meeting was very short. Warren opened the conversation by stating that Safeway currently had three Jewish employees, citing the names and locations of each one. It was unclear to Jules whether he was bragging about how unbiased he was or letting Jules know the extent of his anti-Semitism. Safeway having approximately 3000 stores at the time, Jules took it the latter way and left in disgust. That meeting led to one of Jules’ sons hearing his first Yiddish word. Whenever Jules drove by a Safeway, he would mumble, “momsers.” (It should not be assumed that Safeway today is an anti-semitic organization. Seventy years have passed since Lingan Warren was its president.)
Next Jules traveled to Washington, D.C., the headquarters of the National Association of Food Chains (NAFC), of which Hinky Dinky was a member. At the time there was talk in Congress of passing a federal law which would tax every chain an annual fee of something like $150 per store. NAFC was established primarily to protect the giant nationwide chains against such laws. To add legitimacy, small regional chains, such as Hinky Dinky, were encouraged to join. By belonging, such companies were able to keep up with new technology and maintain valuable contact with each other. In Washington Jules sat down with the NAFC president and described the dire situation in Omaha. He pleaded that it would be in the interest of the large chains to stop predatory pricing and, thereby, fend off such a tax. The next morning, Jules called home to see how things were going. He was told that, to everyone’s surprise, Safeway had begun raising prices that very morning!
As an aside, Herb Berkowitz recalls that this episode cost Safeway millions of dollars and, likely, Lingan Warren his job. In Herb’s eyes, JM was a hero.
X PRIVATE LABELS
There was another problem the regional chains had with respect to the giant nationwide chains. Their buying power enabled them to establish house labels which could far undersell the national advertised brands and, at the same time, improve their profit mix with higher margins. Jules believed that a group of non-competing regional chains could eliminate this advantage by forming a co-operative which would develop its own private label brands.
He approached a several other non-competing regional chains which in total had enough sales to develop a private label for their own stores in cooperation with each other. Large city regional chains, such as Penn Fruit in Philadelphia, Weingarten’s in Houston, Star Markets in Boston, Big Bear in Columbus and Millers in Denver, saw the value of Jules’s idea and joined in. By and large these companies were owned and operated by entrepreneurial families with long term ambitions for future generations. They also saw an opportunity for one-upping the giant chains by setting a quality standard comparable to or better than that of the national brands. In those rare instances when that standard couldn’t be achieved, they agreed they would not carry the item in private label.
As stated earlier, Jules’s wife, Esther, played a vital role in the success of Hinky Dinky. Esther accompanied Jules to annual NAFC and Supermarket Institute (SMI) meetings, where socializing among couples was a highlight in addition to business meetings. In no small measure, Esther’s personal charm and gregariousness was instrumental, in addition to Jules’ reputation as an incomparable buyer and merchandiser, in selling the cooperative private label concept to this group of outstanding chain store operators.
The name of the co-op was Topco, and its major dry grocery brand was Food Club. Later, in addition to the Food Club label, Top Frost frozen foods and other grocery groups were added. Not taking any chances on its quality standards, in addition to buyers, Topco employed full time quality control experts who made periodic visits to contract packers. The popularity of the Topco brands contributed greatly to Hinky Dinky’s success.
Albert Newman could see some distinct advantages in using the Topco co-op with its buying power in the purchase of fruits and vegetables. He spearheaded the development of a new Topco division charged with the acquisition of produce. Previously, carload lots had to be bought on trust from distant shippers, usually through brokers. In addition, because the growing conditions varied from valley to valley in California, a buyer located in the Midwest was at a disadvantage in not knowing which grower was best situated at any particular time. The giant chains had field buyers who, not only kept abreast of the varying conditions, but could be counted on for the largest orders, thereby directing the best quality produce to individual stores which could best take advantage of premium quality. The Topco produce division quickly eliminated this disadvantage for its members.
Another and growing opportunity in the fresh produce area was increasing consumer sophistication in terms of demanding variety. To meet this changing consumer demand, Albert sent his most experienced buyer to the Chicago wholesale produce market every week where he bought several truckloads of varieties of specialty items, thereby insuring that Hinky Dinky would continue to match or outstrip its competition.
XI OUTSIDE OWNERS
Not known to the general public or those outside the Newman family was the effort by Zeigler and Head (See VIII PIGGLY WIGGLY LAWSUIT above) to sell the Hinky Dinky chain. They tried numerous times to entice Albert, Henry or Ben Silver to join them in forming a majority bloc which could put the chain out for bid. As none of these three share owners had children, Zeigler and Head thought they had a chance to woo at least one of them away. Jules, who had four sons, was strongly opposed to a sale. To their credit the brothers and cousin remained loyal to Jules (and their nephews and cousins), and never seriously considered joining in any such deal.
XII DISTRIBUTION CENTERS AND WHOLESALE GOCERIES
Early on, Jules found he could no longer rely on space in store basements to contain his large staple grocery purchases. He felt he needed a warehouse which would include a central office like that of Safeway. He rented his first warehouse at 9th and Dodge.
In the mid-thirties it became obvious that the warehouse at 9th & Dodge could not hold the quantity of staple groceries Jules was able to buy advantageously. In addition Albert was pushing for a building, either with cold storage facilities, or one in which coolers could be built. Also, Albert saw a great advantage in buying bananas in carload lots and ripening them, if needed, before delivery to the stores. This would require specialized banana ripening rooms. A warehouse far larger than anything the brothers could imagine became available at 11th & Jones. It covered a half block and was nine stores high. Along one side was a dock of perfect height for semi trailers and along the other side was Union Pacific rail. UP was the ideal railroad for groceries in the Omaha area as most staple and perishable goods moved east and west.
Jules convinced the owners that he could utilize the huge excess space profitably. Within the first year the warehouse was substantially full. In addition Merchants Wholesale Grocery was formed to sell to independent stores, restaurants and institutions, resulting in another need for more space. Merchants Wholesale was run by Sam Cohen, whom many Omahans will remember.
As the country was working its way out of the depression, increasing prices were adding to Hinky Dinky’s profits due to the Jules’s forward buys. With a large central warehouse, Hinky Dinky began offering more variety than most competition, enhancing its appeal. Thus, Hinky Dinky was able to adopt a philosophy of offering just about all items in both private label and advertised brand. Meanwhile, Safeway emphasized its private label, often giving less desirable shelf position to national brands. Consequently, Hinky Dinky had more appeal to those shoppers who preferred the advertised brands, while at the same time pleasing those who enjoyed the prices and quality of Food Club and Top Frost. Meanwhile, A&P had closed its Omaha stores and Safeway was the only meaningful chain competition. Eventually, warehouse space was doubled by the purchase of the adjoining building on the same block.
Nevertheless, along the way Hinky Dinky’s warehouse became obsolete. The trend nationally for both nationwide chain groceries and regional operators was one floor, high ceiling “distribution centers”. For a variety of reasons, Hinky Dinky followed the trend and built new facilities at 108th and F Street. The high cost of union labor, up-to-date forklift and pallet material handling methods, and the wasted space and time of moving goods from floor to floor via elevators, made this move inevitable. Both Safeway and the Associated Grocers co-op (AG) were operating in such modern facilities. AG was a co-op formed by independent stores which needed an answer to the efficiencies of the central warehousing and mass buying of the chains. AG and efficient privately owned wholesale grocery operations around the country saved the day for the independent grocer and, eventually, represented a huge opportunity for profit for Hinky Dinky, as will be explained later (See XIX FIRST LEASED FOOD DEPARTMENT, XX LEASED FOOD DEPARTMENT EXPANSION, and XXI SALE OF LEASED FOOD DEPARTMENTS below).
XIII HINKY DINKY INNOVATIONS
Hinky Dinky was a pioneer in its markets. Originally, Hinky Dinky operated “cash and carry stores”, as opposed to “credit and delivery” stores. These stores, called “basket stores”, used lightweight wooden shopping baskets with fold up handles. Cashiers tossed the empty baskets into an adjoining bin for reuse by entering customers. The success of these original Hinky Dinky stores, in combination with the founder’s ambition, resulted in perpetually expanding store size, variety, and more perishable departments. Hinky Dinky introduced to the Omaha market wheeled, nesting shopping carts, wider aisles, and automated checkout counters. Hinky Dinky Stores were the first stores in Omaha to offer frozen foods in open “coffin-style” sales cases, to sell meats self-service from refrigerated cases, and to employ automatic entrance doors.
Shortly after the Korean War Jules proposed giant sized stores, of 30,000 square feet and up, another innovation at that time. When asked what could be done with all that surplus space, he answered that we could fill it with massive displays of advertised items and other special values, that we could increase customer appeal with added variety, and that, if need be, we could add lines of general merchandise which were appropriate for self-service. His foresight proved correct as all of these aspects are now common features in today’s supermarkets.
XIV COUSINS JOIN COMPANY
In the late 20’s, Ted Newman, a first cousin of Jules, Albert, Henry, and Sally, began working for Hinky Dinky. He first managed the third Hinky Dinky, which was located near 47th and Military Avenue. His next assignment was to manage a downtown store Hinky Dinky acquired from two partners, named Cohen and Feltman. This store was located between 15th and 16th Streets on Douglas, cater-corner from Brandeis. Many young Jewish men, such as Kevee Kirshenbaum and Bae Epstein, worked at the Hinky Dinky “Cofelts” store, and remember Ted Newman as a tough, but fair boss. Hinky Dinky’s first downtown store, which was nearby (between Douglas and Dodge), was managed by Jack Newberg. Jack, another member of the Omaha Jewish Community, was an excellent grocery manager. He later opened his own grocery store in Blair, Nebraska, which also was very successful.
After World War II, Hinky Dinky “Cofelts” was replaced by a new store at 18th and Chicago. This store featured a rotating circular tower, which many older Omahans will remember. Following this assignment, Ted moved to the main office where he bought frozen foods, an important department by that time, as well as other lines. Ted became extremely adept at estimating the gross profits of competitor’s stores through his knowledge of case costs and by observing prices as he walked through their stores. This knack was especially valuable when the company began entering other metropolitan markets as detailed later (See XIX FIRST LEASED FOOD DEPARTMENT, XX LEASED FOOD DEPARTMENT EXPANSION, and XXI SALE OF LEASED FOOD DEPARTMENTS below).
Herb Berkowitz, another cousin of the Newman brothers, began working for Hinky Dinky when he was seventeen years old. He remained a Hinky Dinky employee until his retirement, his employment being only interrupted by WWII when he served in the Army. After managing stores and serving as a supervisor for many years, Herb became a grocery buyer. Ultimately he began assisting Jules in buying and merchandising staple groceries. Herb was very gifted at this work and soon Jules was training him as his understudy. Herb is now ninety-five years old and lives in Fort Myers, Florida, where he plays golf and bridge regularly.
After the unfortunate death of Esther from cancer in 1956, Jules realized that his zest for the everyday grind of grocery buying had waned. About this time, it was obvious to everyone that Herb was ready to become the head grocery buyer and merchandise manager of the company. In this capacity Herb was the overall manager of all merchandising functions. As opposed to store operations, Herb’s responsibilities covered every aspect of buying, advertising, and selling goods in all departments of the stores. Not only did he see that all food and non-food segments of the stores were properly merchandised within each Omaha area store, but also for other metropolitan areas such as Lincoln, Sioux City, and Des Moines. Each of these marketing areas presented a different set of problems, as well as for each of about a dozen separate smaller towns where a Hinky Dinky store was located. While handling such responsibilities, Herb continued buying staple grocery items, bringing in exceptional, additional profits for the company with the techniques he had learned from Jules, his mentor. In addition, Herb assumed Jules’ prominent role in the direction of the Topco organization, assuring its continued success.
XV SECOND GENERATION LEADERSHIP
Three of Jules’ sons worked for Hinky Dinky following their college education. C. M. “Nick” Newman+, who served in the Navy in WWII, went to work for the company after obtaining degrees at Stanford University and Chicago University. E. R. “Bob” Newman obtained a degree in construction engineering at Stanford University, after which he served in the Air Force during the Korean War and then went to work for the company. After the company was sold (See XXII SALE OF HINKY DINKY and XXI SALE OF LEASED FOOD DEPARTMENTS below.), he obtained a law degree at Creighton University and practiced law for ten years. Jim Newman, the third son, who did not work for Hinky Dinky attended Stanford University and obtained a degree in music at Oberlin College. Later he opened fine art galleries in San Francisco and Los Angeles. Murray, the youngest son went to work for Hinky Dinky after graduating from Wharton’s School of Finance at Pennsylvania University. It was time for the next generation to take over company leadership. Jules surrendered the title and responsibility of President to Nick and became solely the Chairman of the Board. Bob became Executive Vice President. Murray began learning the buying end of the business and training as Herb’s understudy.
Nick Newman was only 30 years old when he took over the reins of the Company, and Bob was 27 when he began assisting Nick. Nick and Bob quickly gained the respect of company executives as well as store level personnel. As the company grew, Nick saw the need to add professional executives to the staff, such as a controller, a personnel manager and others needed by a large concern. At the same time he and Bob maintained involvement in the every day functions of the grocery operation, seeing that store operations, merchandising and all other aspects of the business were in synch. Nick relied heavily on Bob in effecting his policies and programs.
Nick brought Chuck Monasee, a Colonel stationed at SAC Air Base, on to the staff. Chuck, like many other very bright and capable Air Force men, was brought to SAC because of his background in administration. While the military was becoming more tolerant of minorities, Chuck, believing he had the potential to become a general, thought his Jewish religion made this quite unlikely. I feel certain that Chuck would agree that such prejudice is relatively rare in today’s military. Chuck and Nick had become friends, and Nick asked Chuck to work for the company. The Company was at a point where more a professional approach to administration was in dire need. Chuck was a perfect fit.
Nick was also a community leader. An example of the value of his connections with the greater Omaha community was the role he played to help Omaha avoid race riots in 1966 and 1967, such as were occurring in other cities. In Atlanta, San Francisco, Oakland, Baltimore, Seattle, Cleveland, Cincinnati, Columbus, Newark, Chicago, New York City and Detroit businesses were being burned and looted. Knowing that Hinky Dinky had always fostered excellent relations with the Omaha black community, Peter Kiewit of Kiewit & Sons and several other leading Omaha businessmen called Nick and asked what he could do to discourage such a riot in Omaha. Nick’s solution was to promise local black leadership that he would institute racial sensitivity training for all Hinky Dinky store managers and other key personnel. He also promised to encourage other major employers in Omaha to do the same. Due to this novel approach, there were no serious riots in Omaha.
At this time the Black Panther Party, an African-American organization established to promote Black Power and self-defense through acts of social agitation, had become active in Omaha. The Party was visiting companies and demanding that blacks be immediately hired. Hinky Dinky had always employed more blacks than other retailers in Omaha. Some Black Panthers were entering Hinky Dinky stores and intimidating store personnel. They demanded that Hinky Dinky’s employees make up at least ten per cent of its work force (roughly the same percentage of the city’s black population at the time). Nick was able to show them that blacks already comprised nearly ten percent of the Hinky Dinky work force, and the problem disappeared.
In addition to his duties as Executive Vice-President, Bob also took on special projects when action was deemed necessary. For instance, when Hinky Dinky’s non-food business had gone awry, Bob stepped in. The quality of much of the merchandise had drifted below the level thought appropriate for the Hinky Dinky customer base and was detracting from its image. Also, a large amount of undesirable merchandise was using valuable store space and capital. Bob totally revamped the department, both as to its management and price lines. The change was so successful that in time store level department managers, as well as traveling supervisors were added. Bob also oversaw store planning, real estate development, store maintenance, and warehousing.
As mentioned earlier Murray, who recently had graduated from college, was being primed to eventually become the merchandise manager of the Hinky Dinky Company. Initially he bought several categories of staple groceries while training under Herb.
It is difficult to cover the many contributions to Hinky Dinky’s growth and welfare attributed to Jules’ three sons and cousin Herb. They were a godsend to the organization at the time when Jules wanted to disengage himself from the every day management of what had grown into a large and complex enterprise.
XVI A DOWNTOWN HINKY DINKY WITH ROOF TOP PARKING
The story of Hinky Dinky’s early experience in Council Bluffs, Iowa, in which Herb was a major player, is too good not to be included in this history. About 1935 Hinky Dinky, for the first time, had a store which was losing money. It was located in downtown Council Bluffs on W. Broadway, the main street. At that time Herb was a combination store auditor and supervisor, while attending Creighton University at night. Before closing the store, Jules decided to reassign Herb to take over supervision of that one store, giving him full authority to do or change anything he wanted, including staff, merchandising, pricing, and advertising. The closing would be deferred for one month. In three months time the W. Broadway Hinky Dinky became the leading store in the chain, in both volume and profits.
A short time later the closed Woodward Candy factory building, directly across the street from this store, was being torn down. At Herb’s suggestion Jules contacted the owner and bought what was left of the building. The building was located on a narrow city block, but it did cover that entire block. This store became the first real Hinky Dinky supermarket and for a number of years was the leading store in the chain. Eventually the store was managed by Louis Minkin, another member of the local Jewish Community.
The Woodward Candy building had four floors prior to its partial demolition. When Hinky Dinky bought the building, two floors remained. The level of the second floor was close to that of W. Pierce Street, just south of W. Broadway Street. When Bob Newman joined the company he calculated that the heavy timber construction would be strong enough to support paving and parked cars. The roof and walls of the empty second floor were removed, the floor was black-topped, and an elevator was installed. Formerly without parking, the addition of its own parking gave the downtown store a large boost of volume and profits.
XVII OTHER MEMBERS OF THE OMAHA JEWISH COMMUNITY
Two other members of the Omaha Jewish community who played significant roles at Hinky Dinky and then went on to successes in the grocery business were brothers, Allan and Jeffrey Noddle. Allan began his exposure in the retail food business with Hinky Dinky as a buyer and merchandiser, later becoming Executive Vice President. In subsequent years, Allan became the President and CEO of Royal Ahold, and in 2002 he retired from its Corporate Executive Board of Directors. At that time Royal Ahold was a 75 billion dollar company with operations in 28 countries and on four continents.
Jeffery Noddle began his career in Hinky Dinky’s leased food department division (See XX LEASED FOOD DEPARTMENT EXPANSION below). He rose quickly in his career and later went on to join Supervalu Inc., one of the largest wholesale and food retail companies in the world. Today he is currently Chairman, President and CEO of Supervalu, Inc. At present its sales are approximately 40 billion dollars.
Harlan Noddle, deceased brother of Allan and Jeffrey, and Jay Lerner are two other members of the Omaha Jewish community who played significant roles at Hinky Dinky. Harlan worked in store planning, real estate, and the leased food department division before leaving to develop his own very successful commercial real estate company. Jay, like Harlan, worked in real estate and store planning, later establishing his own highly successful commercial real estate development business. Hinky Dinky was proud to be the progenitor of these successful Omahans.
XVIII COMPANY OWNERSHIP BY YOUNGER GENERATION
Walter Head and Isador Zeigler were the only stockholders not active in the business (See XI OUTSIDE OWNERS above). Eventually they became tired of waiting for the day when the Newman family would be willing to sell the company, and sold their interests to the four Newman sons. When Albert, Henry and Ben were at retirement age, they also sold their interests to the Newman sons. Since the company was growing and realizing considerable profits, it took a lot of money to buy this stock, which amounted to about eighty percent of the outstanding shares. Fortunately, these opportunities occurred over an extended period of time. With help from Jules and long term bank loans to Nick and Bob, the four Newman boys were eventually able to obtain full ownership of all the common stock of ACSC. Later, when the company had become one of the larger Omaha businesses, shares of the company were earned by many key executives who had played essential roles in building the company, usually in lieu of well-deserved bonuses.
XVIII TRADING STAMPS
Another major development in the grocery business which affected not only Hinky Dinky, but also the entire grocery picture was trading stamps. Many old time grocers could remember a spate of trading stamps which spread throughout the country back in the twenties and were advising against them. Nevertheless, as competition heated up after the Korean War, trading stamps began to appear in various markets throughout the country. Trading stamps generally increased expenses by about two percent of sales. Since the grocery business typically netted only a one to two percent profit, stamps were a huge commitment. Usually a regional chain somewhere in the country, hungry for additional volume, would introduce stamps. So long as the majority of competing stores did not have stamps, the cost could be recouped through additional sales volume, which usually was in the range of ten to fifteen percent.
But the trend was sweeping the nation like wild fire. The Kroger Company was the first national chain to take the plunge into stamps. Kroger determined it wanted to go chain-wide with its own stamp company on a pre-determined target date, without competition having any idea of what was coming. As it was extremely expensive to set up all the elements of a new stamp operation, they decided to invite a dozen or so non-competing regional chains to partner with them in establishing the new stamp company. Hinky Dinky was one of the invited regional chains. The name of the stamps was Top Value. The impact was tremendous. Sales and profits soared. But the opposite happened to Safeway and the independents. As might be expected, they soon followed with their own stamp operations, the independents with S&H Green stamps and Safeway with Gold Bond stamps. While stores could still be profitable with stamps, the benefits soon became watered down. Stamps became a defensive necessity and, as warned by the “old timers”, eventually an additional overhead item.
What finally wrote the end of the stamp fad in Omaha was Shavers Stores, a new and growing chain. Neil Shaver, the son of the founder was a good amateur actor. He saw an opportunity to challenge stamps without being saddled with their cost. Shavers introduced late night movies on TV. Popular old movies were shown, usually after the ten o’clock news. Neil Shaver was an outstanding TV personality. Every week he would explain on his show how Shavers could undersell the “stamp” stores, due to the heavy burden of stamps and his lower cost structure. He was telling the truth. In addition he did not advertise deep loss leaders, which probably saved him more than the cost of stamps. Both his prices and costs were noticeably lower. These advantages ultimately brought on the demise of stamps in Omaha and, likely, the Shaver Stores as well, since most of its growth could be attributed to lower prices. Neil Shaver was a better actor than grocer, and when he was no longer able to undersell competition, his stores faltered.
XIX FIRST LEASED FOOD DEPARTMENT
In the early 1960’s one floor self-service department stores, sometimes called “discount stores”, were flourishing throughout the country. Copying the grocery store format, these stores used checkout counters, shopping carts and discounted pre-priced items. Like grocery supermarkets, all the goods were displayed on one floor. At first, these stores were “developments” by entrepreneurial businessmen who leased out most or all of the departments. Large department store chains, such as Target and Walmart, eventually became the dominant operator of such stores.
One such independent entrepreneur was Alvin Einbender, son of the well-known Mrs. Einbender of St. Joseph, Missouri. He had exposure to the power of discounting merchandise through working in his mother’s store, a downtown lady’s ready-to-wear store of about four floors. She sold “French room” quality clothes at low prices to customers living far beyond the St. Joseph trade area.
The inclusion of groceries within such discount department stores had been tried previously, but with little success. In general, consumers didn’t buy groceries on the same trip as other goods; the distance to the parking lot was farther than usual, and food departments within such stores didn’t offer any appreciable advantage over conventional supermarkets.
During his high school days Alvin Einbender had become acquainted with several of the Newman brothers. He contacted Nick and Bob Newman and told them he had bought a giant discount store in Louisville, Kentucky. This store had a grocery lessee which was failing for the reasons set forth above and, as a result, not serving as a traffic builder. He had hoped this lessee would feature prices far below supermarkets in the region. This lessee had other stores in Louisville and, no doubt, did not want to upset the local price structure. Einbender asked the Newmans if they were interested in taking over this food department and if they would be able to substantially undersell the market. He also wanted a grocery operator which would become one of his team of lessees in additional stores as he expanded to other cities.
At first the Newmans didn’t see how they could run such a store. First of all, their modus operandi was to furnish store managers with a host of supports, such as training and supervision for department managers, central buying and advertising, and so on and so on. Secondly, supermarket margins were typically low enough to make it extremely difficult to make the impact Einbender wanted. In addition, Louisville was too far away for both supervision and shipping, and advertising in a large metropolitan market for one store, regardless of its volume would be prohibitively expensive.
However, at about the same time they were approached by Alvin Einbender, Jules, Nick and Bob had visited an individual (whose name has been forgotten) who was reputed to have about six or seven successful groceries selling at very low prices in small towns across Iowa. The intriguing thing about this operator was that he, with perhaps his wife, owned and operated the chain without any other staff. This man, who by the way was Jewish, was very open about his management style. Essentially, he hired experienced chain store managers or supervisors to manage each store and he paid them a generous percentage of the net store profit. He made an arrangement with a low-cost, efficient wholesaler and allowed each manager to set his own prices. He might visit each store only two or three times a year, his schedule being primarily dictated by the bottom line. Being operators of a conventional chain of stores, the Newmans were amazed and impressed by the efficiency of his approach. In essence he had built a chain of successful independent stores, but he was the sole owner and, thus, bore all the risk.
If Hinky Dinky was to adopt this man’s management style for a remote discount store food department, there would still be other problems. One was the need for a reliable, low-cost wholesale grocery supplier. Herb Berkowitz knew of a very low cost independent wholesaler in Chicago which could deliver goods to stores at costs even lower than Hinky Dinky, due to its huge volume. In addition, this wholesaler was willing, on a trial basis, to ship from Chicago to Louisville without delivery charges, the reason being that, it would never need to return to Chicago from Louisville with an empty truck, provided the leased food department would buy the anticipated quantities. This was due to the large amount of groceries this wholesaler bought from points east of Chicago.
Another problem was how to set and control prices far below local competition. Hinky Dinky management didn’t believe it would be feasible to allow a manager far from Omaha to set his own prices. If prices were not far enough below competition, volume might not be great enough, and there would be pressure to advertise loss leaders, defeating the entire philosophy of the approach. However, besides Shavers (See XVIII TRADING STAMPS above.), there was another competitor who had taught Hinky Dinky a hard lesson. Dahl’s Supermarkets in Des Moines for years undersold the market by not using stamps and deep loss leaders. Dahl’s had only about four stores and a very thin administration. It was known that Dahl’s gave each of its stores a formula for setting prices. Stores were given a book with percentages to add to delivered cost for various departments of the store. A fixed add-on was set for other departments, and, in a few instances managers were to check and meet nearby competition. The formula guaranteed that prices would make a huge impact. Dahl’s gave Hinky Dinky and other operators in Des Moines a tough time.
Before Hinky Dinky turned Alvin Einbender down, a light bulb flashed at about the same time above the heads of its management people. Perhaps it could operate remote stores along the same lines as the small town operator in Iowa, set up “formula” prices similar to Dahl’s, and be supplied by the Chicago wholesaler. The pieces of the puzzle were falling into place. At that time substantially all Louisville grocers issued trading stamps. In addition, their advertisements featured deep loss leaders, which it was deemed were responsible for reducing gross margins by as much four percent!
In essence Hinky Dinky could apply the harsh lessons learned from its Omaha friend, Neil Shaver. He built a chain of successful stores by not offering trading stamps, by not advertising deep loss leaders, and by telling the public the truth: his prices were considerably lower and, most importantly, why. Hinky Dinky believed it could do the same thing in remote locations anywhere in the country as a “department” within a discount store. Only those markets would be selected in which trading stamps and loss leaders were used extensively, where going grocery prices were on the high side, and where a low cost wholesale supplier could be found. By that time there were efficient wholesale grocery operations throughout the country, either co-ops or independently owned and operated.
Alvin Einbender was told Hinky Dinky was willing to operate the grocery department in his store with groceries priced substantially below the market in Louisville. Competing stores would have no answer, as it would not pay to bother with a single store within a discount store. No doubt competition expected the new food department operator from Nebraska to fold shortly due to its extremely low prices. A kicker would be that shoppers might purchase their major weekly order at the leased department and use conventional stores for their specials, increasing the gross margin advantage.
After totaling the potential savings, it was believed overall store prices could conservatively be pegged five to six percent lower than competition. These numbers were comprised of about two percent for stamps, about two to three percent for no loss leaders, about one percent for the cost of a weekly newspaper ad, and about one-half percent for lower delivered wholesale grocery costs. Based on these figures, a leased food department could sell six percent below competition at equivalent per square foot store volume and still achieve the typical supermarket profit of two percent net before taxes. The low prices would be obvious to customers and the impact would be striking. If the store did materially more than conventional store volume, the savings realized by using only occasional “institutional” advertising and rarely visiting a store without a troubling bottom line, could easily cover the low cost of general administration.
Top level grocery talent would be hired in each market or transferred from the Hinky Dinky operation; each store would be given a formula book for pricing; and store management would be trained on how to hire help and other skills not required by chain store managers. Store level management would be given monthly profit and loss statements and paid a healthy percent of the net. All advertising would be institutional; i.e., no loss leaders.
The Louisville experiment was a huge success. Store volume was so high, earnings were three to four percent of sales before taxes. Plus, the store manager was earning far more that he had ever thought possible working for a chain, and he would not be required to have the capital and take the risks involved in owning his own store.
XX LEASED FOOD DEPARTMENT EXPANSION
Alvin Einbender opened more discount stores in other major cities and Hinky Dinky, as well as his non-grocery lessees, joined him in each. Soon Hinky Dinky’s reputation as a successful leased grocery operator spread and before long it was in demand as a lessee by many other discount store operators. Only “soft” markets with a good wholesale supplier and where most of the supermarkets were issuing stamps and/or other expensive volume building incentives were selected. The leased departments did especially well in southwest cities such as San Antonio, Corpus Cristi, Tucson, and McCallen. After the “leased food department” division had been in existence for only about four years, it was earning roughly the same amount of money as the entire Hinky Dinky Store division! Eventually, the “leased department” division was separately incorporated and Herb Berkowitz was elected president.
Herb’s contribution to the success of this division was enormous; he even came up with its corporate name, “Supermarkets Interstate”. When Supermarkets Interstate was spun off, Chuck Monasee was elected President of Hinky Dinky Stores Company. Both corporations were subsidiaries of ACSC.
There were about twenty leased departments when J. C. Penney Company decided it would enter the one-floor, self-service department store business under the “Treasure Island” and “The Treasury” names. It did not want to lease any departments, as did most other discount stores, because it was already in the general merchandise business. The one retail field it knew nothing about was groceries. Penney came to Supermarkets Interstate with plans to open multiple stores within large metropolitan markets. Penney planned to open three or four stores on a single day in each market.
Penney was up front in that they would eventually want to own the grocery departments along with all other departments. This did not bother Supermarkets Interstate management because it knew that trading stamps would soon become a passing fad and it would lose much of its advantages, as well as, profits. If the timing were right, Supermarkets Interstate could “reluctantly” agree to sell about the time Penney would approach it. Although the Penney commitment would strain its capabilities, the opportunity couldn’t be passed up. The results in these stores were exceedingly good. Ultimately, Supermarkets Interstate also operated large food departments in about five of Penney’s conventional “J.C. Penney” stores, as well as in “Globe” discount store division of the Walgreen Co.
XXI SALE OF LEASED FOOD DEPARTMENTS
In about 1972 Penney informed Supermarket Interstate that it was ready to buy the leased food departments, which at that time included three stores in Milwaukee, four in Los Angeles, four in Atlanta, many in large Texas cities, three in Puerto Rico, and one in St. Croix. Penney was told an offer would be entertained, but that it would have to be for all the Supermarkets Interstate stores, since its administration was structured to handle all thirty plus stores. The sale was made for the entire division and the timing was right. It is doubtful that any of the food departments then operated is still in business, and Penney has since closed or sold all its Treasure Island stores.
XXII SALE OF HINKY DINKY
Not long after the sale to Penney, Hinky Dinky was approached by the Cullum Company of Dallas, Texas, with an offer to buy Hinky Dinky. Cullum operated a regional chain of groceries named Tom Thumb. Cullum was a much larger enterprise than Hinky Dinky, owning another chain of stores and several other businesses in addition to Tom Thumb. Cullum was impressed with Chuck Monasee and believed he would be the perfect manager for an Omaha division, if he agreed. At that time there were over thirty Hinky Dinky grocery stores. A sale was made, but things did not go well for Hinky Dinky after Cullum took it over. Many of its stores were small and out-dated. Chuck had been told that capital would be available to right these conditions, but, probably because Cullum was having unexpected difficulties with its Tom Thumb stores, this promise was never honored.
Also, it had become increasingly difficult to operate successful stores against non-union competition. New non-union chain operators, such as Baker’s, were opening in Omaha with large stores, fewer in number than Hinky Dinky, but strategically spaced to cover the entire Omaha market. These were not the only reasons Hinky Dinky didn’t survive. Baker’s was a very well operated and merchandised chain. It gradually became the dominant operator in Omaha and Hinky Dinky has vanished from the scene. Safeway had closed its Omaha division many years earlier for much the same reasons.
XXIII THE GREATEST LOSSES
Shortly after negotiations for the sale of Hinky Dinky had begun, Nick Newman became terminally ill with cancer. His death was the second time cancer had struck the Newman family. Esther and Nick were the crown jewels of the family. Their untimely deaths occurred at ages 56 and 47, respectively.