Last updated on May 28th, 2024
Affiliated Foods Inc. in Amarillo, Texas, has been named The Shelby Report of the Southwest’s 2024 Wholesaler of the Year. Celebrating its 76th year in business, the co-op got its start when a group of six retailers came together to open their own warehouse and use their collective buying power to get better cost of goods and better compete in the marketplace.
Randy Arceneaux, president and CEO, said Affiliated’s beginnings are similar to that of other co-op warehouses, but added that, “76 years later, we’re still here. Not to mention, we’re doing $1.7 billion a year in volume.”
When the co-op was founded, its customer base was located within about 30 miles of the warehouse. Today, Affiliated Foods is in eight states and serves more than 240 members at 740 different locations. Its trucks travel as far as 720 miles one way. Member retailers range in size from 5,000-65,000 square feet.
“That’s the beauty of the independent operator. They have stores based on the need within the community they serve,” Arceneaux said.
A small percentage of its members are convenience stores, such as Allsup’s and Yesway.
Arceneaux noted Affiliated’s produce micro-packs were initially developed for Allsup’s, but the popularity of the item grew so much that several of its larger member stores carry them in a grab-and-go section in their produce departments.
“It was intended for one group of members and it has become a key item for all.”
Board of directors’ role
Affiliated Foods has 13 members on its board of directors, representing the company’s trade area.
The board’s role is to help shape the growth and development of the warehouse, along with ensuring they are doing what’s needed to help the independent operator survive, Arceneaux said.
All board members are store owners.
“They have to do a great job of walking into a board meeting, taking off their hat as a retailer and putting on a board member for Affiliated hat and keep focused on what’s good for the whole cooperative,” he said.
“And if you always do what’s good for the whole of the cooperative, then you will always do what’s good for the whole of the membership, because they go hand in hand. I tell people this all the time. We are just a mirror image of a supermarket, but we don’t have a checkout stand. We’re just a big grocery store.
“If we’re successful at wholesale, then it allows our membership to be successful at retail because we’re giving them the right programs, the right items, the right cost of goods to be competitive. So in the boardroom, their fiduciary responsibility – like mine as the CEO – is to make sure that we have those programs in place. We manage the operations here to be as lean and nimble as possible and find as many efficiencies as we can so that we can keep costs of goods down, so that the members can compete in their respective markets.”
Arceneaux said it was the vision of the board that allowed Affiliated to purchase its subsidiary production companies, which include a dairy, bakery, bottled water plant along with meat-cutting and produce facilities. The co-op also has partnered with a vertical growing operation to provide tomatoes and peppers for its members.
Having those facilities makes the day-to-day operations more complex, he said, but it allows the co-op to control its own destiny in those categories. “Kudos to our board over the years to not be closed minded but rather open minded and say, hey, our philosophy is this – if we can do it as good or better, at the same cost or lower, then we ought to do it ourselves.”
Subsidiaries are Plains Dairy, Tri-State Baking Company, Affiliated Fresh Cuts, Farmers Veg Pak and Panhandle Pure. The origin of its most recent subsidiary, Panhandle Pure bottled water, goes back to the COVID-19 pandemic, when bottled water suppliers were prioritizing their largest customers and often had little or no supply for anyone else.
Arceneaux said Affiliated Foods’ members never ran out of milk or bread during the pandemic because Affiliated produces those products.
“We didn’t have any other customer base to service outside of our customers, so we controlled that, and they never ran out of those key element items during the pandemic. Hence, today is why we have a Panhandle Pure bottle facility to produce bottled water.
“We got cut so much product during the pandemic from our supplier that we said we’re not going to be controlled by this anymore. We’re going to go out and put in our own bottled water plant and control our own destiny moving forward. And that’s been tremendously successful for us.”
Affiliated Foods continues to invest in its subsidiaries. It is expanding the bakery to produce specialty bread. The facility currently produces basics such as white, wheat, whole wheat and honey wheat, but Arceneaux said the category is growing into more specialty breads, as customers seek healthier options.
“With the expansion, we will have the opportunity to get into grain breads and put our customers into a category that they actually own now, not having to depend on a third-party bread company to provide those items.”
This allows retailer members to keep up with trends in the category. On the dairy side, Affiliated Foods has just launched a fresh, lactose-free milk product in a half gallon and gallon. Again, this is consumer driven.
These actions allow Affiliated Foods to have a better advantage in cost and supply for its members in the market.
The most current area Affiliated has decided to explore is a partnership with Brushwood Acre Farms, a vertical produce grower. While it does not own the growing operation, it has contracted to buy 100 percent of its produce.
Arceneaux said they see “a big runway in that,” with Brushwood Acre Farms looking to expand its operation and grow more items.
Affiliated Foods also is in the process of building a 110,000-square-foot new products facility as part of its Farmers Veg Pak subsidiary. Arceneaux said more space was needed in the main warehouse, so they decided to move produce across the street and tie it into the total produce operation.
That move will free up 83,000 square feet, which will be converted to additional frozen and dairy space, as AFI continues to grow those categories.
“Basically, they will all be connected … and a lot bigger footprint for produce,” he said, adding it will enhance shelf life, productivity and the right temperatures in the storage areas within the produce facility. “All of that will increase our efficiencies and the quality, which also reduces shrink, which all comes into play for our membership and cost of goods.”
Another expansion is 110,000 square feet added to the dry facility of the main warehouse. It has 45-foot ceilings, and a vertical selection area is being installed that will house slower-moving items.
“The auto-selectors will select multiple stores in a vertical process, which will allow efficiencies and not traveling the whole million-square-foot warehouse, where those items are in different areas and different slots throughout the dry space,” Arceneaux said. “Those efficiencies come into cost savings at the end of the day.”
Technology upgrades
Affiliated Foods also is working to upgrade its technology systems. Arceneaux said the co-op is wrapping up installation of a new procurement system in the warehouse and is in the process of installing a new yard management system that will track trailers at the facility.
This will increase efficiencies in moving loads and having them ready for delivery, he said.
The co-op also is in the beginning phases of implementing a truck tracking system. This mobile application will allow stores to track trucks while enroute for delivery. Arceneaux said this is a “big, big deal for our membership, and we’re excited about that.”
He added they also did a customer satisfaction survey through ROFDA in September, with members requesting better communication between the warehouse and themselves.
To that end, the tracking system will give retailers real-time information on the status of expected deliveries. Also, truck drivers will fill out a customer satisfaction form upon delivery.
Another way Affiliated will address member concerns is by launching a website tied into its customer portal – AFI News.
“That will be video driven where I or any one of the management team can get out there and post videos to inform customers of new items, new processes, giving them a State of Affiliated. I can get on there once a week, just let them know what’s going on in our world here at the warehouse and how that’s going to impact them as a customer.
“It will allow all of the key people in our company to communicate with that customer through video through our retailers’ portal, which I think is as good as it gets when you come to communicate with the membership,” he said.
Top-to-top meetings
Arceneaux said a lot of his background in the grocery business has been in procurement and marketing. He likes to negotiate and remains involved in procurement operations at AFI. He also sits in on every business review.
In addition, he is involved in putting together a game plan on how to make changes that will allow Affiliated Foods to grow business.
“Because again, at the end of the day, price is important in our stores. Price is always going to be important, but also how we go to market with our members as far as the service aspect or the variety aspect also plays a part in that.”
Arceneaux said he will always be involved in those top-to-top meetings with vendors, challenging his staff to “be better every day on the negotiating side … making sure that we’re getting our fair share of not only product but getting our fair share of the marketing funds available from the CPG companies.”
Culture
As a co-op, Arceneaux says it is important to remember “we are owned by who we serve.” All of AFI’s profits go back to its members each year, which is an added benefit to them.
“The pressure is on me and my team every day to be as nimble as we can, find efficiencies as we can, not only to drive cost down every day for them to be competitive, but also to make sure that we give them good year-end dividends that they can utilize to reinvest in their stores, i.e. in pricing and/or equipment, or back into their own associates,” he said.
“That’s the beauty of the co-op environment. It’s not hard to remember who you work for every day when you get to this building. It’s pretty simple. We work for the customer that we service every day – they’re also our boss. So I’ve got over 240 bosses that I report to every day.”
Arceneaux said the culture at Affiliated – that he has worked hard over the last 15 years to instill in all associates – is that “at the end of the day, every decision we make, every action that we take here every day, impacts the end user, which is our member, which actually goes all the way down to the consumer.”
It is all about family – the family of AFI associates and members, who serve those shopping in the stores.
“What more is there than food, right? We all sit around a table at some point of the day with certain people – family, friends. Food is the center of what we do.”
He said Affiliated’s role is serving the members that own the co-op. “That’s our culture here. I think everyone here understands that very, very well … At the end of the day, that’s our goal – how do we make our members successful? Because without a successful member, we don’t have a successful warehouse for them. And this is their warehouse; this is not our warehouse.”
To achieve that goal, Arceneaux said the communication and collaboration within AFI has to be strong, adding that there are no silos in the building.
“Nobody operates in their own little world and secludes themselves from what takes place in this facility. Everyone works in unison with each other’s department because we all have the same goal at the end of the day, with the same cause at the end of the day. And everybody understands that and so collaboration within our management, collaboration within our supervisors, collaboration within our production facility with our production employees, all have to take place for this engine to work.”
Driving the bus
Arceneaux said he has been in the grocery business for 48 years, and the passion he had for it when he started remains today. He said the best part of his job at AFI every day is watching the organization in action.
“When we finish our expansion, we’re at 1.3 million square feet. I’ve got 1,500 people that come to this building every day, understanding what their purpose is and how all of that is orchestrated to come together. And at the end of the day, we’re taking care of our customers with the products and services that they need to compete in the marketplace. And it happens every day.”
He said the average consumer has no idea what it takes to get groceries on a shelf for them to buy. It all starts not only at the production facilities but also with the retailer understanding their customers and markets enough to carry the right goods and services.
They come to AFI to make sure they carry those goods and provide the services to help them be successful. Then, it takes the associates at the warehouse to understand their part in delivering those goods and services to help their members succeed.
“When you think about that full circle that takes place every single day here, it somewhat overwhelms you and at the same time, it just makes your heart feel good at the end of the day, that you’re contributing not only to feeding America in your region, but that you’re contributing to the lives of individuals and giving them a purpose every day,” Arceneaux said.
As CEO, sharing his vision and getting the buy-in from AFI associates to stay on mission is key.
“Everybody in this organization has heard me say this – I’m just a school bus driver. My job is to keep the school bus between the lines on the road. But everyone that comes to this facility every day, they are the engine, the parts, the doors, the tires, the seats of that school bus. They’re the ones that really make the school bus run.
“I just have to keep it focused and keep it between the lines moving forward. And what a joy that is every day to have that opportunity to continue to be a bus driver. I really enjoy it.”
Read more wholesaler and distributor news from The Shelby Report.
Affiliated Foods was also honored in 2019 as The Shelby Report of the Southwest’s Wholesaler of the Year.
