Houchens Food Group (HFG) is a subsidiary of Houchens Industries, an employee stock ownership plan (ESOP) that includes 14 other subsidiary companies. Houchens Industries is highly diversified with businesses in construction, insurance, pharmacy, pet and retail.
HFG has been recognized as The Shelby Report’s Exceptional Independent Retail Organization. The company launched a new program this year, Store Manager Appreciation Awards, to recognize the importance of these men and women and the role they play in leading their stores and impacting their communities.
For this EIRO salute, Shelby’s Stephanie Reid and Treva Bennett visited with many HFG executives, employees and partners to learn what makes the company so successful.
Storied history
Houchens Food Group started as a single store in rural Glasgow, Kentucky, in 1917. That store – a 12-foot by 24-foot building – still stands as a testament to the tenacity and growth of the company over its 107-year legacy.
Ervin G. Houchens founded the company with a single store, fulfilling a need he saw in his immediate community. Boldly expanding the store count with three locations during the Great Depression, the company continued to grow in store count and sales volume into the 1970s with 55 locations.
“An important piece of our history is that Mr. Houchens saw the importance of the employees taking ownership in our business and started a profit sharing back in the ‘60s, which was somewhat unusual at that time. It’s an interesting piece of our evolution, because years later we became a 100 percent employee-owned company,” said Greg Rush, the company’s president.
At age 85, Houchens retired, and his son, Rural Houchens, became president. But the decision was made in the mid 1980s to sell the company. A few years later, in the late ‘80s, key members of the leadership team at the time came up with the idea of buying the company back from the ownership group and to create the ESOP.
“In the ‘90s, we saw – specifically in our area – that the competition of Kroger and Walmart was making it more difficult to operate independent grocery stores. We saw in the Save A Lot mode a way to cater to the budget-conscious customer with a unique discount grocery brand,” Rush said.
Houchens Food Group Inc. operates more than 300 grocery locations in mainly rural and mid-size metro markets across 15 states.
“All our employee-owners should be immensely proud of the growth and success of their company,” Rush said.
[RELATED: Houchens Food Group Promotes Rush To President, Knies To CMO, SVP]
ESOP
In the late 1990s, the company began to diversify. Houchens leadership saw that the ESOP, based in one industry, was vulnerable to changes in the economy.
“With a retirement plan, you want that to be stable over time, and value was seen in diversification,” Rush said. “That led to our first acquisition, a small chain of convenience stores, propelling us into the convenience and fuel businesses. To drive further diversity, the second acquisition was a tobacco manufacturing company.”
Houchens Industries would acquire several other locally owned businesses, including insurance and construction in the early 2000s.
“Ultimately, the tobacco company was sold in the mid-2000s, and we’ve continued to evolve and diversify to the current company, which includes 14 subsidiaries. Houchens Industries is one of the largest and certainly the most diversified ESOP in the country,” Rush said.
Today, Houchens Food Group, a subsidiary of Houchens Industries, comprises 400 retail locations, including grocery, convenience, restaurants and hardware. HFG has about 40 ACE Hardware stores and 20 restaurants that include Sonic and Slim Chickens. It also has eateries inside of some of its convenience stores, such as Subway, Schlotzsky’s and Which Wich.
“Even within the food group, we have diversification in formats and businesses,” Rush said.
He went on to note the ESOP has been a valuable tool to retain quality employees because there’s a long- term positive impact.
“The beauty of the ESOP is that, unlike a 401(k) savings plan – where you’re taking some money out of every paycheck to fund your future retirement – it is completely company funded.”
According to the Houchens Industries website, every year eligible participants receive a stock contribution related to the release of shares and reallocation of forfeitures in accordance with the plan document. These annual contributions are made entirely by the company and never involve employee contributions.
“We publish on our website the historical rates as a percentage of employee income, and that rate has sustained in the low teens,” Rush said. “If you think about it from a 401(k) perspective, many plans will match up to a certain point.
“But even if you take the company contribution and the employee contribution, that mid-teen number that we’ve been trending is actually better than a historical 401(k). There’s no guarantee of that, but historically we’ve had very good performance from the ESOP.”
Since the inception of the ESOP on Nov. 12, 1988, employees have been paid cumulative benefits of more than $2 billion, according to the website.
“We refer to each other as employee-owners. Once you become part of the ESOP, this is your company, and these are your dollars that we’re spending … or these are additional dollars that we are being rewarded from our customers in the form of sales,” Rush said.
Store Manager Appreciation Awards
HFG hosted luncheons for its grocery store managers as part of its inaugural Store Manager Appreciation Awards program. A total of 18 events were held, with each culminating in naming a Local Store Manager of the Year. An overall winner for the company will be named in a January celebration in Bowling Green.
Rush said the idea for the SMAAs came about through discussions with corporate leadership.
“As a leadership team, we had been talking internally about the importance of the store manager to our financial results, to the health of our company. We rely tremendously upon the store manager,” he said.
“When you operate 400 retail locations across 15 states, you’re putting the keys of our business into 400 store managers’ hands. And with the structure that we have being an ESOP, they literally own that store’s results and are responsible for that small business.
“We’re ultimately a group of 400 small businesses, and it’s easy in a company this size to neglect the importance of that role.”
During these discussions, an increase in employee turnover was noted.
“It’s been more difficult to retain talent post- COVID at the store level. From this conversation about the importance of the store manager, we were challenged on how we adjust our budgets and invest more in our store managers,” Rush said.
“We need to invest in more training; we need to provide them with all the tools that they need to successfully operate these businesses. But also, it’s important for employees to know how important they are to our business.
“From those conversations the idea of SMAAs sparked to life and we went to Jimmy [Nichols, former HFG president] and sketched out a playbook on what we could do. He was immediately on board and encouraged us to take this ball and run with it. So that’s what we’ve done.”
The events began with the division VP of operations letting the store managers know why their role is vital to the health of the company, how important they are from his perspective and how much HFG appreciates the work they do each day, Rush said.
Two industry speakers addressed those gathered, sharing their backgrounds and history and providing motivational and leadership lessons. They also talked about the importance of store managers. Shelby Publishing’s President and COO Stephanie Reid committed to speaking at 17 of the 18 events.
After lunch, the HFG district manager had an opportunity “to brag on their store managers,” Rush said. “They talked about them and what makes them so special as a store manager.”
[RELATED: Houchens Food Group Honoring Top Store Managers]
For Rush, those are the most impactful moments, “hearing those district managers tell about their relationship and the importance of each and every manager that works within their district. It’s really very honorable and so meaningful to have that person recognized in that way.”
A number of awards are presented, in addition to the Store Manager of the Year. These are decided by the operations team to recognize multiple store managers for their skills and strengths.
“We have the Hometown Hero that gets awarded to store managers who are going above and beyond and being active in our communities,” Rush said. “As an independent grocer, we value being part of a community – supporting the local sports teams, being active in local chamber events or local fairs or just different community gatherings.”
Emerging Leader awards also are presented. These typically go to younger store managers, but also maybe to someone “growing in their position,” Rush said.
The high point of each event is naming the local Store Manager of the Year. Rush said HFG has a scorecard that looks at the metrics store managers are graded on as part of their review process – sales, payroll and EBITDA.
Also included are subjective measures the company values – store culture, people development, merchandising and community involvement.
The Store Manager of the Year is the one who has the highest scores on their scorecard for the first two fiscal periods of HFG’s fiscal year, which runs from October to September.
All Store Managers of the Year receive a trophy. Also, Reid is presenting each of those honorees with a Shelby Publishing Exceptional Independents Award.
The overall Houchens Food Group Store Manager of the Year will be selected on Jan. 16. “We’re going to have a celebration in Bowling Green at Houchens Industries
L.T. Smith Stadium on the campus of Western Kentucky University, where we will recognize the HFG Store Manager of the Year.”
The winner also will be HFG’s IGA Retailer of the Year nominee. He or she will attend The NGA Show in Las Vegas, co-located in February with the Independent Grocers Alliance, and also will be recognized at The NGA Show by Shelby Publishing.
Rush said the SMAAs have been a success. “We have had overwhelming positive feedback on the SMAAs from all levels of management. The store managers are highly appreciative.”
Ongoing event
Rush said HFG plans to make the SMAAs an annual event. “We’re already talking about how to elevate this in 2025. How do we continue to make it special year after year?”
He said that the awards program has fired up the competitive spirits of the store managers.
“They want that scorecard. They want to win … This year, it was a surprise to everyone, and everyone got caught off guard. But next year it won’t be.
“They’re going to be working toward being that Store Manager of the Year. I think it’ll have a very positive impact on our businesses … It’s engaging a competitive spirit among our store managers at a local level and at a total company level.”
Although each event “feels a little different,” depending on the geography or the district leadership, Rush said it’s “weaving a common thread throughout Houchens Food Group of competitive spirit, of a positive and appreciative culture in regard to our store management team.”
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