Two-way loyalty

In 1934, Merton Rosauer borrowed $1,000 from his parents to buy a grocery store in Spokane’s East Central neighborhood.

When he retired five decades later, he sold the business to URM, his local food distributor.

In 1990, URM sold it to 1,250 Rosauers employees. Ten years later, the employees sold the grocery chain back to URM for a substantial profit.

Today, Rosauers serves customers in four states, and the privately held business has an estimated worth of about $100 million.

Jeff Philipps became Rosauers president and CEO when URM bought the chain back. During a recent interview at the company’s North Side headquarters, he discussed the industry’s evolution, where he sees it headed, and how to shop for food efficiently.

S-R: Where did you grow up?

Philipps: In Great Falls.

S-R: What were your interests?

Philipps: I liked music. I’ve sung in church choirs since I was 12 years old, and at one point planned to major in music. But I ended up earning degrees in business, economics and accounting.

S-R: What was your first job?

P hilipps: My very first one was teaching little guys how to play baseball. I was about 14, and I don’t have an athletic bone in my body, so it was a real challenge. I also had routes for both the morning and afternoon newspapers. I enjoyed the entrepreneurial part of that, and having money in my pocket.

S-R: What was your first grocery job?

Philipps: Two days after I turned 16, I went to work for Buttrey Food and Drug as a bag boy, carrying out groceries. I absolutely loved it. My first big promotion was to bottle boy. That was back when soda came in glass bottles. When customers returned the bottles, they had to be sorted by vendor. My goal was to be the fastest when it came to sorting bottles.

S-R: How about your first job after college?

Philipps: During my senior year, I interviewed at a number of banks. But just before I graduated, the assistant manager of the Buttrey store in Helena where I was working quit, and my boss encouraged me to apply for the job. I was just 21 and figured I didn’t have a chance. But I applied anyway, and they made me an offer that was better than the banks’. So I took it, and have been in the grocery business now 43 years.

S-R: How has the industry evolved during the past four decades?

Philipps: When I first started, we marked prices with a stick pen, and erased prices with a shot of hairspray. The advent of the scanner and electronic check stand changed our industry dramatically. The other big change is the amount of regulation – food safety, employee safety, wage-hour kinds of regulations.

S-R: Are the regulations good, a headache, or both?

Philipps: Both. Certainly we need to protect people and the food supply. But it’s also a hassle. There needs to be a balance.

S-R: How much did the recession affect Rosauers?

Philipps: It didn’t have a huge impact. We have very loyal customers, and they have to eat. What we noticed was some people switching from expensive cuts of steak to less expensive ones. Those buying cheaper cuts of steak switched to ground beef. The ground beef people went to chicken, and the chicken eaters moved to macaroni and cheese.

S-R: How about liquor sales?

Philipps: They’re adding a little bit to our bottom line. But the tax regulations are a nightmare. And then there’s theft, particularly by younger kids. We didn’t see the problem with beer and wine that we’re seeing with hard alcohol. We’re evaluating whether to put spirits behind glass.

S-R: What do you like most about your job?

Philipps: The people. We have 1,900-plus employees, which is small enough that I know many of them by name.

S-R: What’s the trick to remembering hundreds of names?

Philipps: Early on, I tried to associate some strange coincidence in my head – maybe a word that rhymed with their name. Now I don’t even have to think about it. It just happens.

S-R: How do you remember “best bagger” David Tochinskiy’s last name?

Philipps: Toe. Chin. Ski. It’s all about the visuals.

S-R: What change are you most proud of?

Philipps: One of the best things we’ve done is invest in upgrades to keep our stores relevant to our shoppers and employees.

S-R: Have there been any missteps?

Philipps: Maybe our eagerness to expand without having done enough homework. Numbers can confirm all sorts of things, depending on who’s telling the story.

S-R: Will the consolidation of Safeway and Albertsons affect this market?

Philipps: I don’t think so. Obviously when you merge two businesses, you also merge their cultures. Safeway and Albertsons are two very different operations, so it will be interesting to see how their two cultures come together, and whether it provides an opportunity for us.

S-R: What distinguishes Rosauers from its competition?

Philipps: Our people. Seventy percent of our employees are full time. If you take out service clerks – teenagers working after school – that number jumps to 84 percent. The fact that we provide full-time employment and a living wage is radically different from many of our competitors. As a result, we have employees who have been with us 30, 35, 40 years. One employee just retired after 46 years.

S-R: How much do they earn?

Philipps: Our journeyman cashiers in Spokane earn $17.26 an hour.

S-R: How do you keep up with trends?

Philipps: Members of our merchandising staff tour the country every two or three years. We just finished visiting Phoenix and Southern California, looking for good ideas that we can put our own twist on.

S-R: How many people go on those trips?

Philipps: Usually five or six.

S-R: So six people who look like you …

Philipps: (laugh) Walk into a store.

S-R: Do you tell them who you are?

Philipps: They can spot us right away. But we tell them where we’re from – that we’re definitely not their competitor – and once we start talking about all the wonderful things we’ve observed about their operation, they’re usually pretty good about sharing information with us. Not all their secrets, but enough to get us thinking about possibilities.

S-R: Do you recall the grocery business before Costco and Walmart?

Philipps: I was working for Buttrey when a Walmart opened just down the street from our Laramie, Wyoming, store and took 35 percent of our volume overnight. Eventually we figured out how to compete. At Rosauers, we differentiate ourselves with people, the quality of our perishables – particularly meat and produce – and our organic and specialty foods selection.

S-R: What trends do you anticipate now?

Philipps: Definitely more organic and natural foods. We started the Huckleberry’s store-within-a-store concept in Hood River, Oregon, in 2001. Since then, we’ve expanded that concept to 16 stores, and demand continues to grow.

S-R: Any big changes ahead for Rosauers?

Philipps: We just opened our 22nd store, in Suncrest. It’s a smaller store – 32,000 square feet, compared with 60,000 square feet in our larger stores. We’re experimenting with using cases that allow us to squeeze in more product. Large communities are already saturated with competitors, but this format may allow us to enter smaller markets.

S-R: What’s the career outlook?

Philipps: Pretty good. We have an older workforce, so as retirements occur there are more opportunities to become department heads. Since 2000, we’ve had 10 or 11 store managers retire or choose to go off and do something else.

S-R: What qualities do you look for when hiring?

Philipps: Mostly a work ethic and personality traits. I can teach people a skill. I can’t teach them to be kind and get along.

S-R: If you had a teenager about to set out on her own, what grocery-shopping advice would you offer?

Philipps: I have one of those, so I would say this: The vast majority of nutrients that you need are found around the perimeter of the store, where the food is fresh. That’s where you’re going to get the best bang for your buck.

S-R: Where should shoppers put on blinders?

Philipps: In the chip aisle. (laugh)