Retail Executive of the Year

Steve Smith, K-VA-T’s president and CEO, follows his father’s example of community involvement.

By John Karolefski

Steve Smith, president and chief executive officer of K-VA-T Food Stores, grew up in the grocery business. His father, Jack C. Smith, operated an 8,800-square-foot supermarket that was a gathering place for the locals in the small town of Grundy, Va. He watched his dad and the store become an integral part of the community by donating to the Little League, local schools and organizations that provided assistance to residents.

“That was part of our culture,” says Smith, who has thrived professionally along with the family business.

His father’s single store became the launching pad for Abingdon, Va.-based K-VA-T Food Stores, which today operates 93 Food City supermarkets throughout the tri-state region of southeast Kentucky, southwest Virginia and northeast Tennessee, in addition to 12 Super Dollar Discount Foods stores.

Along the way to the executive suite, Smith held such positions as district manager, director of meat operations and director of advertising. He was executive vice president of store operations in 1993 when he was promoted to president/chief operating officer. He became CEO in 2001. He is the only executive to be chairman of the board of directors of both the Food Marketing Institute (FMI) and the National Grocers Association.

Throughout his career, Smith never forgot the foundational principles of his father. He has served on the boards of local hospitals, United Way and the Boy Scouts and has donated to scores of other organizations.

“We’re only successful when communities are successful,” he says. “Tying back to the community helps it be a better place to live, work and raise kids. It helps us be more successful business people and more successful grocers.”

So what distinguishes Smith is clearly more than business success under his leadership.

This 55-year-old son of a single-store operator has earned a place in the pantheon of the supermarket industry because of his exceptional service to the local community and his support of many charities and service organizations.

For those reasons, Grocery Headquarters honors Steve Smith as its 2012 Retail Executive of the Year.

“If you like people, you like to be a part of communities and organizations that are involved. That’s the way we’ve structured our company,” he says.

Built into the budget

Smith has always encouraged his store managers and other executives in the company to get involved with their local communities. In fact, every store manager has a budget that they are expected to spend on community activities. They will not get in trouble for going over budget, but Smith says they may be criticized for not spending enough.

“It’s their money to spend,” Smith stresses. “They don’t have to ask anybody. They don’t have to ask their district manager or they don’t have to ask corporate headquarters. They just write the checks to the local organizations that come in and need a little bit of help.”
When disasters such as tornados and floods strike, the company provides both money and food to aid the families who were affected. Smith recognizes and appreciates the many Food City associates for their hard work, long hours and dedication to the charities and communities were they serve.

Regular visits to the stores

“He is the kind of leader who regularly visits all of the stores, speaking to all associates and getting involved in any community event when his time permits,” says Ron Bonacci, vice president of marketing for K-VA-T. “Steve has lived by the philosophy that running the best store in town means giving back and supporting the community where we live and serve. Steve has spent his entire life helping charities, supporting the food banks and giving his time and money to support worthy causes such as the United Way, Feeding America, Second Harvest Food Banks, Wounded Warriors and Paralyzed Veterans of America, to name a few. I do not think that there is a single community where we have our stores that Steve Smith has not helped in some way to support the area where we live and work.”

Smith’s stellar reputation is not confined to the areas where his stores do business. His record of community service has reached the national level in the supermarket industry. Earlier this year, FMI presented Smith with its Sidney R. Raab Award for exceptional service to the consumer, the community and the supermarket industry.

“The reputation supermarkets enjoy as being the cornerstones of their communities is—in part—deserved because industry leaders like Steve Smith work so very hard to make it true,” says Leslie G. Sarasin, president and CEO of FMI. “The dedicated and faithful service he offers to his customers, his community and his country creates a halo effect that illumines and elevates the entire food retail industry.

“His commitment to social responsibility and corporate giving is well documented, reverberating throughout the industry. While the world often rewards those who are ‘go-getters,’ Steve has helped a whole generation of K-VA-T Food Store employees witness first-hand the true value of being a ‘go-giver,’” she says.

Smith is also giving back to his employees who obviously are part of the local community. An ESOP program was created to give all associates part ownership in the company. In other words, hard work and dedication earn profit sharing. “About 14% of the company is owned by our associates, and that continues to grow every year through our profit-sharing plan,” Smith says.

Also, about 70% of employees take part in confidential health screenings that the company started five years ago. “We saw that our folks really weren’t as prepared or knowledgeable about health care. Quite honestly, what they put in their body makes a difference over the long run,” says Smith.

So he hired Laurie Hamilton to be the company’s first director of health initiatives to deploy a three-step process. The first goal was to help employees by educating them about how to take care of themselves, how use their health care, and how to get health screenings and annual physicals.

As one company executive says: “Steve sees our associates as our greatest asset. For him, it is not just a catch phrase; it is a way of life. From training our entry-level associates to leadership training for our executives, Steve Smith’s philosophy has always been to give our associates the tools they need to do the best job possible.”

The next step was to move into the stores and begin to educate shoppers. Two years ago, the retailer deployed the NuVal nutritional scoring system that flags products on the shelf. The goal was to let shoppers know they can buy the right items in the supermarket that will give them a healthier life.

Partners in health

The final step involved going to the community. The company created partnerships with area colleges and hospitals to bring healthy living education to the local areas and to stage free cooking demonstration to assist the schools and communities in learning about choices for food, health and wellness.

“We’re in our infancy of that stage,” Smith explains. “We’ve partnered with the University of Tennessee Medical Center in Knoxville where we have many stores. We do a Healthy Living Kitchen program that teaches people how to cook healthy meals. We use their folks and some of our chefs to put on cooking seminars and demonstrations. You can actually get it on video or you can come to the store. And it helps folks understand how they can eat healthier.

“It’s the right thing to do for our communities and we’ve had a lot of success,” he adds. “I’m probably as proud of that as anything we’ve been able to do. We get lots of neat emails and letters and comments when you’re in the store. One person told me, ‘This made a huge difference in my family’s life. I was a diabetic and didn’t know it. And now I’m losing weight. I’m able to exercise. I’m doing the right things. And I’m healthier and I feel better.’”

Another way to make the local folks feel better is to sponsor race car events in a community that relishes such entertainment. The company is the primary sponsor for two NASCAR races: the “Food City 250” in the autumn and the “Food City 500” in the spring. This year is the 20th anniversary of its sponsorship, second only to Coca-Cola in longevity.
The Food City 250 took place last month and drew an estimated crowd of 160,000 race car enthusiasts. It is the fourth largest racing car event in the U.S. and goes a long way in branding Food City as a supporter of the community. In addition to these races, the retailer holds the Food City Family Race Nights in Knoxville and Bristol, Tenn. the week before the NASCAR events.

Smith recently made a TV commercial with racing icon Richard Petty and three paralyzed veterans. They talked about what their service meant to themselves and to the country. They explained how business, corporations and individuals can work together to support them. K-VA-T made a sizeable donation to the Paralyzed Veterans of America Association and also collected donations in the stores.

“We give our customers a chance to participate,” says Smith. “Whether it’s 50 cents or a dollar or whatever they round up on their grocery order. We do it for the right causes.”

For Smith, the “right causes” form a long list of charitable organizations and fundraising campaigns in-store in times of tragedy and disaster. These efforts collectively underscore Smith as a leader in his community.

“I think that sometimes you can be the leader,” he says. “If we take the lead, I think we can get other people to use us as an example. For years, we were a relatively small company. We’ve been fortunate enough to grow and to prosper. And we participated in the community. A lot of people now look at us as an example of what to do. That puts more of the emphasis on doing the right thing, being in the right place, and being there for the right reasons.”


Who’s Who of Charities

Which charities and community organizations does K-VA-T support?

Does the retailer provide money, time or other assistance? The answer is different for each store.

“What we do for them would be all over the board,” says Steve Smith. “Our folks decide that’s the right thing to do because it varies from community to community. Our store management team and our leadership team make that decision; they hear first-hand what the needs are in communities.”

For example, it may be Big Brothers/Big Sisters in one community, but not in another. Juvenile diabetes is a corporate program that is supported by all of the stores. Paralyzed Veterans get a corporate donation, but donations are also solicited from shoppers in the stores. The company will do fundraisers for a children’s hospital or for Ronald McDonald House in a particular community. Since 1987, Food City has been the official sponsor of the Tim Irwin/Food City Bass Tournament held in Lenoir City, Tenn. Proceeds from the tournament benefit the Boys & Girls Clubs of the Tennessee Valley.

Other groups that get a boost from K-VA-T include the Boy Scouts, United Way, American Cancer Society, Muscular Dystrophy, East Tennessee Children’s Hospital, YWCA, American Diabetes Association, Santa Pals, Second Harvest Food Bank and School Bucks.

“Beyond corporate and social responsibility, Steve Smith represents the true meaning of community commitment,” says Travis Staton, CEO of United Way of Russell and Washington Counties. “From buying from local farmers to giving back to area schools, Steve is improving lives within the communities he serves. Thanks to his hard work and dedication, many have been given the opportunity to have a better place to live, work and raise a family.”

Israel Quinn, one of Smith’s long-time associates, says, “Steve Smith believes that as a good corporate citizen, we have a responsibility to leave our community a better place than we found it…Steve Smith’s commitment to our region is unsurpassed.” —John Karolefski

 

Success: More Than Money

Steve Smith admits that it’s easy to get caught up with the financials of operating supermarkets in a trading area with formidable competitors. “But there are things that are more important than those numbers. It’s having a clean store, a fresh store, and a pleasant store,” he says.

Those are the fundamental attributes behind K-VA-T since its founding in 1955. And the same philosophy is behind the 93 Food City supermarkets throughout the tri-state region of southeast Kentucky, southwest Virginia, and northeast Tennessee, in addition to 12 Super Dollar Discount Foods stores.

“We’re either No. 1 or  No. 2 in all our markets,” Smith reports. “And I’ll say a strong No. 2 even in the weakest markets.”

Kroger and Walmart super centers are his two biggest competitors—the former in 60% of the trading areas and the latter in 95%. Publix Super Markets opened its first store in the Knoxville, Tenn. market, and the Florida-based powerhouse has two more stores planned for the same area. Save-a-Lot and Aldi offer competition in the price-impact segment. A smattering of stores from Food Lion, Costco and Trader Joe’s completes the assortment of grocery alternatives for shoppers in K-VA-T’s region.

To remain competitive and continue growth, Smith aims to spend some $60 million this year on remodeling eight stores and building six others either as replacements or new units. Next year’s investment will be more like $70 million for a half-dozen remodels and probably about three to five new stores as replacements or new facilities.

The company employs about 13,000 people. “I’m awfully proud of our folks, and I tell them there are more important things in business than making money,” Smith says. “It’s doing the right thing. It’s running the right stores. You do have to be a numbers guy in this business because we operate on a razor-thin margin. But it’s still more important to do the right things on a consistent basis. If you focus on taking care of your associates and your customers, a lot of times the bottom line takes care of itself.”  —John Karolefski

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