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The new crop at Harvest.

Harry Janson Attempts To Restructure And Revive A $500-Million Arkansas Grocery Store Chain

It was a move even insiders claim they didn't see coming.

On the evening of Sept. 26, Donald B. Pennington resigned as chairman and chief executive officer of Little Rock-based Harvest Foods Inc.

Present at the time of the resignation were Harvest's chief operating officer, Harry Janson, and its executive vice president and chief financial officer, Robert Rough.

There was a conference call to some out-of-state board members.

Pennington had been at the helm of Harvest's predecessor, Safeway Stores Inc.'s Arkansas division.

It was a high-stress position during a high-stress period as Safeway changed to Harvest and then suffered subsequent financial strains.

While at Harvest, Pennington developed a project he was proud of, the visible and successful "Apples For The Students" campaign.

But Pennington didn't show up for this year's "Apples For The Students" kickoff news conference, which was held one day prior to his resignation.

Was that a sign?

Watty Wills, whose Frank J. Wills Co. of Little Rock handles Harvest's advertising and public relations, says Pennington was not scheduled to handle the kickoff.

Janson was.

Janson, 43, came to Harvest in March as president and the company's first COO. He soon began handling an increasing number of the public relations events.

What was the real reason for Pennington's departure?

There's mention of personal problems and the stress on Pennington, a native of Friendship in Hot Spring County.

Perhaps it was simply an ousting of the company's good-old-boy network.

The man who hired Pennington more than 20 years ago was surprised by the news.

Gerald Mauldin of North Little Rock, a retired manager of human resources and public affairs, always viewed Pennington as management material.

But Mauldin also remembers the stress.

"We had been in a stressful position for two years before the sale, knowing we were on the block," he says. "We were the last one |Safeway division~ to be sold."

Eight thousand people lost jobs when the Dallas division was sold.

Mauldin is proud that not one job in Little Rock was lost.

Harvest officials, sticking to company policy, will say nothing about Pennington's resignation.

Pennington is out of sight and unavailable for comment.

As the company celebrates its second anniversary this month and lawyers cross their T's in the restructuring of a $155-million debt to improve cash flow, one thing is clear.

Harvest, with 54 stores in Arkansas and an annual payroll of $45 million, is growing a new crop of ideas and leadership.

Fresh Ideas

Janson speaks from an office just across the hall from his old office at the Harvest headquarters near Interstate 30 in southwest Little Rock.

The office has elegant furnishings that don't seem to fit the burly New Jersey native.

"It's all props," he jokes. "They're coming to get the couch in 15 minutes. I'm not really here. I'm a blow-up doll."

A reporter and the ever-present public relations representative laugh.

"Seriously, it's paid for so I'm not going to change it," Janson continues.

One of the first things you notice about the Vietnam veteran -- he served in the famed 101st Airborne Division -- is he still wears a POW bracelet.

As Janson speaks, one idea seems to remind him of another.

He knows the grocery business.

He knows its players.

And he talks at a fast clip.

It is hard to imagine he is married to a Southerner.

Janson mentions that Harvest is about to begin a quality private-label program. There will be three labels -- Harvest, Thoroughfare and Grocer's Pride.

In an effort to cut expenses, Harvest management and employees have come up with other ideas.

A sack redemption program, an employee suggestion, is saving the company money and helping customers recycle paper and plastic bags.

A committee headed by Rough meets once a month to review an average of 30 to 35 employee suggestions.

The store's trucks are doing more "backhauling." After dropping off goods at out-of-town stores, the trucks visit wholesalers and fill up before returning to the Harvest warehouse.

Harvest also is looking at entering the wholesale business as a way to increase its warehouse efficiency.

"Affiliated |Food Stores Inc. of Little Rock~ operates stores and is also a wholesaler," Janson says.

Harvest stores would remain a core business. But the wholesaling could lead to better buying.

Harvest also would wholesale its data systems, store engineering, etc.

"We have talked to people," Janson says. "We'll try to stay in non-compete areas."

Harvest also makes an effort to buy Arkansas products, a reported $116 million worth last year.

Another focus for the chain is its commitment to perishable products such as meat and produce. The chain has re-evaluated its buying, presentation and handling of such goods.

Harvest now offers a "double your money back" guarantee. It plans to begin an advertising campaign later this month to tout the guarantee.

Then, there's the "Economiser" program, an aggressive pricing campaign introduced earlier this year.

A bulk packaging program was introduced last month.

Other moves?

Well, Janson's new title and office came without a pay raise.

"You can quote me on that," he says.

Meanwhile, the company continues its "Apples For The Students" program, expanding offerings this year to include musical instruments, video equipment and more.

Since the program's inception in 1988, the company has given away more than $2 million worth of computers.

It recently hosted a golf tournament at west Little Rock's Chenal Country Club that raised $39,000 for the Arkansas Easter Seal Society.

Debt Load

It may sound like things are going well at Harvest. But no one denies there is much work to be done.

The restructuring of that massive $155-million debt load will come as a relief to Harvest officials. An announcement that the restructuring is complete is expected soon. It will cut annual interest payments in half, freeing up cash to make store improvements and invest in other ways.

"There's equity here for the Bank of Boston, Acadia |Markets Corp. of New York, the parent firm~ and bondholders," Janson says. "You have to believe that because they could have put it on the block."

"Cash flow is what counts," Rough says.

The Harvard MBA estimates the average restructuring takes one and a half years. The Harvest deal should be completed in 13 months. It involved the complicated sale-lease-back of some store properties.

"It's a great company with a lousy financial structure," Rough says.

Rough came to Harvest in May 1989. His first job was to evaluate the acquisition of 12 Skaggs Alpha Beta stores.

Rough admits the period didn't go as well as Harvest had hoped. He also points out that Kroger Food Stores became more competitive and Megamarket entered the central Arkansas market.

"Hey, this may not be a storm," Rough remembers thinking. "It may be the new landscape."

He believes the restructuring will work because "now we know what the operations are and know what the cash flow and cash needs are."

The Big Picture

"I had to pull my head out of the hole and see some other things," Janson says of his recent change in responsibilities.

He and Pennington had attempted to divide duties before.

Janson says he is more involved now with personnel, the data system and store engineering.

There are no plans to fill the vacated position of COO.

Janson says, "There is no daylight when I leave the office. And when I go home, I feel like I haven't finished."

The Rutgers University graduate brings more than 20 years of grocery experience to Harvest. He began his career in 1970 with Great Eastern Supermarkets, working his way up the management ladder.

In 1975, Janson and his wife, Elizabeth, an Alabama native, bought an independent grocery store in Montgomery, Ala.

Big Harry's?

No, it was called Super Food. He ran the 22,000-SF store, which had about 100 employees, until 1980.

Janson then worked for Mayfair's Supermarket chain before going to Wakefern Food Corp. Wakefern is the nation's largest grocery co-op with 34 owners and more than 180 stores. It does about $3.5 billion in annual sales. It is considered the most aggressive pricer in the nation and reportedly has the highest sales volume per store.

"I learned a lot," says Janson of his six years with Wakefern.

The next stop proved to be another learning experience for Janson. In 1988, he joined Foodarama/Basics Supermarkets of Maryland.

"They were alive but not doing well," he says.

It was Janson's job to evaluate the company's 49 stores and determine which ones needed to be closed.

Janson reduced the chain to 34 stores and helped turn its fortunes around. After consistently losing money, it showed a profit in each of the three years Janson was there.

Will that golden touch, combined with the debt restructuring, be what Harvest needs to increase its Arkansas market share (about 30 percent) and prosper?

The answer is yet to come, but don't be surprised to see the chain go public soon.

"I think Harry can do everything this company needs to go forward," Rough says. "He brings a different set of skills |than Pennington~. Not better or worse, just different. He has different experiences.

"There has been a lot of change here, but some people see change as opportunity."

A Harvest History

* November 1986 -- Safeway Stores Inc. of Oakland, Calif., is taken private in a leveraged buyout by Kohlberg Kravis Roberts & Co. Safeway's less profitable divisions are put on the block.

* April 1988 -- Acadia Partners Limited Partnership purchases 51 of Safeway's Arkansas division stores through a holding company, Acadia Markets Corp. of New York. Reports vary on the sales price, but it is estimated the Robert M. Bass-led group paid about $57 million. Robert Rough, the current chief financial officer, says it was "a fair price." Other partners include American Express Co. and Equitable Life Assurance Society of the U.S.

* September 1988 -- Arkansas Safeway stores begin the highly successful "Apples For The Students" promotion. The chain was the first in the country to provide computer hardware and software to public schools. Similar programs now operate across the country.

* January 1989 -- Safeway, the state's largest chain with 48 stores, announces it will merge with Homeland Stores Inc. of Oklahoma, a chain of 106 former Safeways.

* March 1989 -- The merger with Homeland Stores falls apart.

* August 1989 -- Acadia Markets completes its purchase of 12 Skaggs Alph Beta stores, six in Arkansas and six in Kansas and Oklahoma. The Skaggs stores were owned by American Stores Co. of Salt Lake City. Acadia refinances the company. "It wasn't a sweetheart deal |for American Stores~," Rough says.

* October 1989 -- Harvest Foods Inc. is the name selected for Safeway and Skaggs stores after more than 1,000 suggestions are considered. Acadia makes the change just under the 18-month deadline that was set when it purchased Arkansas Safeway stores. Chief Executive Officer Don Pennington says, "New name, new face, new attitude and new commitments."

* March 1991 -- Harry Janson joins Harvest as president and chief operating officer. The company announces it has reached an agreement with banks and bondholders that will cut its $155 million debt servicing payments of about $20 million per year in half and free up cash for capital expenditures.

* September 1991 -- Pennington resigns as Harvest chairman and CEO. His job goes to Janson.

* October 1991 -- Harvest operates 54 stores in Arkansas and surrounding states, employing about 3,500 people with an annual payroll of $45 million. It has estimated annual revenues of almost $500 million. Harvest is expected to announce soon the completion of the restructuring of its debt load.
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Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:Harry Janson's appointment as Harvest Foods Inc.'s new chief executive officer
Author:Ford, Kelly
Publication:Arkansas Business
Article Type:Company Profile
Date:Oct 14, 1991
Previous Article:Mad at city hall.
Next Article:Something is going on.

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