85 years on, Harps still finding room to grow

The first Harps supermarket at U.S. 71 and U.S. 412 in Springdale is shown in 1960. While the supermarket opened in 1956, the company’s roots can be traced to 1930 when Harvard and Floy Harp opened Harps Cash Grocery.
The first Harps supermarket at U.S. 71 and U.S. 412 in Springdale is shown in 1960. While the supermarket opened in 1956, the company’s roots can be traced to 1930 when Harvard and Floy Harp opened Harps Cash Grocery.

SPRINGDALE -- Eggs were 29 cents a dozen, bread was a nickel a loaf, and milk fetched a dime for a quart when Harvard and Floy Harp used $500 to open Harps Cash Grocery in 1930.

photo

Arkansas Democrat-Gazette

A map showing Harps locations in Arkansas.

Today the company operates 79 stores in three states with gross sales of $715 million last year. Roger Collins, Harps CEO and chairman of the board of directors, says the company tries to open about five new stores a year and has designs on landing its first spot in c̶e̶n̶t̶r̶a̶l̶ ̶A̶r̶k̶a̶n̶s̶a̶s Pulaski County*.

The Springdale-based grocer operated under Harps family leadership for the next 71 years before becoming 100 percent employee-owned in 2001.

Harps added a handful of new stores during its early years, but accelerated its growth after shifting to the employee-ownership model. To be successful, the grocer had to find the right locations to open stores that were the right size to meet customer needs. It also had to find a way to differentiate itself from the competition, finding success in fresh and organic foods and customer service, Collins said.

"When you treat people the right way and develop people, they will want to stay and do a good job," Collins said. "We have many people who don't feel like an employee, but like an owner. They have a vested interest in how we do."

NEW LOCATIONS

A store under construction in Bellefonte, near Harrison in Boone County, will open Dec. 6 and a replacement store in a new location will open next spring in Waldron. The company has purchased land just off Interstate 49 in Lowell for future expansion.

Harps plans to enter a fourth state by opening a store in De Soto, Kan., in the next few years. It is still in the development stage. Expansion into Tennessee and Texas also is possible, Collins said.

Kim Eskew, Harps president and chief operating officer, said store acquisitions help speed growth. Harps purchased eight existing stores in southeast Missouri in 2008. It would have taken several years to build eight stores from the ground up, he said.

Collins said Wal-Mart and other grocery competitors are part of the company's growth strategy.

"Wal-Mart has built stores across the street from our stores, and we have to look to make sure there is enough business to support both stores," he said.

Harps recently put store plans on hold in Sherwood after design changes slowed down the development process, and Collins heard Kroger may be looking at opening a store nearby. A Kroger spokesman said she had no store-development plans to share about Sherwood at this time.

Barry Sellers, Sherwood's economic development director, said the area around Arkansas 107 and Brockington Road, known as Gravel Ridge, was annexed into town a few years ago. Wal-Mart has a supercenter and neighborhood market about 3 miles south of the area.

About 1,000 new homes are planned within a mile of Gravel Ridge over the next five years and about 20 companies have looked into the area, Sellers said.

"We're looking at changing the size of the store and waiting to see how things shake out," Collins said.

The typical Harps store is 32,000 square feet but varies from 22,000 to 38,000 square feet, he said.

Harps opened a remodeled 60,000-square-foot store at 2894 W. Sunset Ave. in Springdale in August 2014 that has about 2,500 new products on the shelves, including many organic and specialty items. That store was built in 1974 and now also has a sushi station, an expanded deli and a Dunkin' Donuts with a drive-thru window.

"We ask ourselves, 'How can we be different than Wal-Mart?'" Collins said, pointing to areas such as sushi and specialty cake designers. "If you do those things, people will come."

LITTLE GUYS VERSUS WAL-MART

Carol Spieckerman, a retail expert and CEO of newmarketbuilders in Bentonville, said Harps has done a good job of bringing in specialty products, but faces an increasing amount of competition in that arena. Wal-Mart is working on diversifying its selection of products, she said.

"It's not easy to stay ahead of Wal-Mart," Spieckerman said.

She said the opening of a Northwest Arkansas Whole Foods also will create new competition close to home for Harps. Whole Foods is set to open next spring in Fayetteville.

Store size was one way Harps stood out from mass merchandisers for years, but Wal-Mart opened more than 350 of its smaller Neighborhood Market stores in the past few years, taking its total to 650.

Wal-Mart Stores Inc. is the nation's largest grocery seller, claiming about 21 percent of sales, according to the U.S. Department of Agriculture.

Nearly 79 percent of independent grocery chains have a Wal-Mart in their market area, the National Grocers Association reports. The association defines independent stores as privately owned companies; publicly traded companies where the controlling shares are held by a family; and companies owned by employees.

Collins also points to Harps' culture and employee stock ownership plan as keys to the company's longevity. He has a long history with Harps, starting in 1986 as chief financial office and vice president of finance. He became CEO in 2000, a year before company employees bought the family's remaining stock.

Eskew said many of Harps' employees have 25-50 years of service with the company. He started working part time with Harps in 1977, doing a little bit of everything including checking, stocking and cleaning the bathrooms. He was an engineering major at the University of Arkansas, but decided he knew more about the grocery industry and changed his major to administrative management.

"I landed at Harps, and it was a good fit," he said.

Harps has about about 4,200 employees, including about 90 who work at the company headquarters.

Huey Couch started working at Harps right out of high school and has been with the company for 52 years. He began as a sacker and worked his way up to advertising manager.

"It just feels at home," he said.

The business was home for a generation of Harps. Don Harp joined the family business in 1953, and his brothers Reland and Gerald became full partners in 1964. Gerald Harp was the last brother to run the business, retiring as chairman of the board in 2001.

A few Harps still work for the grocer, including Randall Harp, Reland's son. He is a merchandiser and has worked for the company for 28 years.

"I always knew I would work here," he said. "It started at the age of 5 when I was picking weeds in the parking lot."

Collins said the company decided to introduce an employee-owned stock plan after a number of family members wanted to sell their stock in 2001. He said the management team did not want to sell to another company and risk employees' futures.

"We didn't want to see someone come in and let a bunch of people go," he said. "We already had people in place who could run the company."

Harps' stock is $277 a share, 10 times the original price.

Michael Keeling, president of the national ESOP Association, said law dictates that an employee-owned company's stock price is determined by an independent organization each year. ESOP stands for employee stock ownership plan.

There are about 10,000 employee stock ownership plans in the United States, covering about 10.3 million employees, or about 10 percent of the private sector workforce, he said. About 4,000 are like Harps and are 100 percent employee owned.

"ESOPs are kissing cousins of the 401k plan, which more people are aware of," Keeling said. "An employer makes contributions and each person has an account they can cash out when fully vested and leave the company."

Most employee-owned firms are private companies and nearly all were created by existing owner-founders or second generations looking to exit the business, he said.

"Data show they tend to more sustainable businesses and in existence longer than other companies," he said.

The biggest negatives people see in creating an employee stock ownership plan are the costs of paying for an outside appraisal, establishment and upkeep, Keeling said. The tax savings can easily make up those costs he said. Companies that are 100 percent employee owned do not pay taxes on taxable income.

"To me it's about wealth and equality," he said. "Having ownership is a way to accumulate wealth."

SundayMonday Business on 09/20/2015

*CORRECTION: Harps has grocery store locations in central Arkansas but not in Pulaski County. A story Monday incorrectly described the corporation's locations.

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