Charles C. Butt, W’59: Minding the Store in Texas

The most important place for a retailer to be is in the stores,” says Charles Butt. “That’s where you can talk to customers personally and find out what they like.”

What Butt’s customers clearly like is the H.E. Butt Grocery Co. itself, a string of 235 supermarkets with anticipated sales this year of $6.5 billion and a reputation for competitive prices, excellent service and high quality food.

The combination of low prices and distinctive products is a difficult target to hit, acknowledges Butt, chairman and CEO of the San Antonio, Tex., company founded in 1905. And it’s especially difficult in a business known for slim profit margins and finicky customers. “It all depends on how well the management team is able to perform,” Butt says. “Our strategy is to be excellent in food and drug and stick to our mission.”

That strategy helped H.E.B. survive what is perhaps the ultimate test for a retailer — competition from Wal-Mart. The Arkansas-based discount chain has, over the past five years, opened up 41 different supermarkets in Texas that compete head to head with H.E.B.

“Of course Wal-Mart’s balance sheet is larger than many companies in the food industry combined, and it has achieved a low-price reputation, deservedly so, in most product categories,” notes Butt. “Our response has been that we won’t allow Wal-Mart to gain a price reputation over us in food. If necessary, we will make real sacrifices to be price competitive.”

Although not at the expense of H.E.B.’s reputation for innovation and high quality products, Butt would add. In 1993, H.E.B. opened up Central Market, a 63,000-square-foot grocery store in Austin, Tex., devoted to fresh and prepared foods — such as 489 varieties of cheese and 60 different produce items. “We have used Central Market as an idea generator, a kind of R&D operation,” Butt says. “It has enhanced our company’s image as the place to shop for fresh products in Texas.”

The store was expensive to build ($12 million) and lost money its first two years. “We achieve about half the return on assets in Central Market that we do in the rest of the business but its earnings level is advancing steadily.”

Butt has been living and breathing the grocery business since childhood. At age eight, he was bagging groceries; at age 12 he was behind the check-out counter. As a teen-ager, he worked in the family business every Saturday and every summer until he graduated from Wharton and joined up fulltime. “I think anyone working in a business established by a family member stops at some point and wonders if this is where he wants to be. But after just a few years I was hooked on building up the business.”

Build it he did. The company’s opening of a supermarket in a high income area of Monterrey, Mexico, this spring is just the latest step in an expansion that started when Butt took over from his father in 1971. At that time, the company had annual sales of $250 million and 4,500 employees compared to 45,000 today. In 1996, Butt was on Forbes list of the 400 richest people in America, with a net worth of $600 million.

An important ingredient in the success of H.E. Butt Grocery Co. has been technological innovation. In 1992, the company instituted a PC-based point-of-sale system and later combined it with on-the-sales-floor use of radio frequency devices. “Our category manager information system is store sales specific and adds greatly to better communication with our suppliers,” Butt notes. The company has two web sites and is preparing for future implementation of home shopping.

Butt also points to H.E.B.’s community relations program, which includes donating five percent of pretax income to public causes and supplying approximately 15,000 pounds of food to food banks in their area, the “largest program for the hungry of any retailer in the country.”

In addition, under the auspices of Education 2000, individual H.E.B. stores provide funds, volunteer services and other resources to about 1,500 individual schools. Close to one-third of those schools have received satellites from the company that give teachers access to academic-based television programs.

Butt is equally clear on his commitment to employees. H.E.B. is a market leader in compensation programs. “We pay more than our competition because we feel it brings us benefits in terms of quality people and focus on the customer,” says Butt. “We work hard to be the employer of choice.”

Marc Belton, WG’83: A Healthy Performance From Snacks

A recent news article in the Minneapolis Star Tribune on General Mills’ strong financial performance in fiscal 1996 had this to say about the $6.1 billion company’s operations:

“The importance of innovation is felt perhaps nowhere as much as the snack division.” Marc Belton, president of Snacks Unlimited since 1994, couldn’t agree more.

“New products are critical for us,” notes Belton. “About 60 percent of our volume comes from items that weren’t around five years ago. So if you have a large division with incredible churn, you have to be good at coming up with new ideas.”

Apparently Belton is. His division, which accounts for almost $1 billion of General Mills’ sales, had a two percent increase in volume for 1996, following two flat years in 1994 and 1995. And 1996/97 is even more encouraging, with sales growth of over 7 percent during this fiscal year. The division’s newest product, Golden Grahams, is already the third fastest turning item in the wholesome snacks category, giving rival Rice Krispie treats a run for its money. Strong existing performers in the snack division include Pop Secret microwave popcorn and Peel/n Build Fruit Roll-ups.

So how do you motivate people to come up with good ideas? “Your job as a leader is to leverage the capabilities of every person in your unit,” Belton says.

“Make sure you ask employees throughout the organization for their ideas. Provide the kind of freedom that allows people to fail. An error is not a mistake unless you refuse to correct it.”

For Belton, it’s all part of a management philosophy based on “making people feel that what they do is important and that their efforts are valued. You must show employees respect and create relationships of trust, care and cooperation. You have to love people. I know it sounds soapy and campy and goofball, but it’s real. We have people who want to come to work in this division and we have good business results.”

His approach to management “comes out of my own Christian faith and upbringing,” says Belton, who was born in West Hempstead, N.Y., and earned his undergraduate degree at Dartmouth before entering Wharton at age 22. “Everyone talks about empowerment, but if you are not serving people and developing a mission for your whole unit, you are not empowering them.”

Belton’s division includes fruit snacks, grain snacks, popcorn, beverages and Chex Mix (the result of General Mills’ recent acquisition of the Chex cereal and snack lines of Ralcorp Holdings). In addition, he serves on the board of Snack Ventures Europe, a joint enterprise of General Mills and PepsiCo that is currently continental Europe’s largest snack company.

Belton came to General Mills in 1983 as an assistant marketing manager working with Total, Yoplait and Betty Crocker Potatoes. His positions up the corporate ladder included marketing manager; general manager of grain snacks; vice president, general manager of Betty Crocker Snacks; and vice president, business unit director in the child/all family business unit. In December 1994 he was named president of the snack division.

“I wanted to work with one of the best companies in the industry,” says Belton who is an avid skier and golfer, a loyal Philadelphia Eagles and New York Jets fan, and an enthusiastic consumer of Microwave Pop Secret popcorn. “When I graduated from Wharton, I had offers from the top consumer products companies. I chose General Mills. I had an instinctive sense that I could do well here.”

Nadya Shmavonian, WG’86: Grant-Giving at the Executive Level

The journey from the sanitation trenches of a Cambodian refugee camp to the executive offices of the Pew Charitable Trusts in Philadelphia ties together the interests of Nadya Shmavonian in an unusually effective way.

Shmavonian, executive vice president of the Trusts, oversees the organization’s $15 million administrative budget, $182 million grants budget and 126-member staff. But she also retains a hands-on role in several grant making areas, primarily those that reflect her own interests in humanitarian relief, refugee populations and displaced persons. “On the local level, for example, we are currently working to better document the implications of welfare reform on this region, especially from the point of view of health care deliverers and human services providers,” she says. “A foundation like this has a very strong role to play in helping to bring together sometimes contentious groups in ways that will increase understanding of complex social changes.”

Although Shmavonian was a history major at the University of Chicago, it was a senior-year course in medical ethics that ignited her interest in the inequities of health care delivery systems. A year after graduation, while working as a research assistant at Temple University Hospital in Philadelphia, she signed on as a volunteer with the International Rescue committee. Her assignment was a Cambodian refugee camp.

“When I found out that I would be working in sanitation, I almost got back on the plane and came home,” Shmavonian says. “But it turned out to be one of the best possible windows into what is a real public health concern. We dug trenches, managed a cadre of Khmer workers, provided safe water and dealt with issues of human refuse. The camp had 100,000 refugees. It was like a small city. My nickname there was ‘Sister Sludge.’”

The experience in the camp influenced her decision to concentrate in health care management at Wharton. “While I was there I met Rebecca Rimel (president of the Pew Trusts) who was auditing a class in health care management. Although I had never considered a career in philanthropy, she had a position available that she thought would interest me.”

It did. Shmavonian became a program officer and then acting director in the Health and Human Services Program responsible for directing grants in the areas of international health, medical ethics, education of health professionals and substance abuse. The Trusts, established between 1948 and 1979 by heirs of Joseph N. Pew, founder of the Sun Oil Company, is the fifth largest philanthropy in the U.S. with assets of about $4 billion. Three of the grants Shmavonian was involved in during the late 1980s included:

–          The launch of an International Health Policy Program, in partnership with the World Bank and the World Health Organization, to assist health policy researchers in developing countries throughout Africa and Asia.

–          A “health care for the homeless” initiative that sponsored programs in 19 cities, including Philadelphia, aimed at delivering health care services to homeless people.

–          A program to educate health professionals nationally, including those in the fields of nursing, dentistry, nutrition and veterinary medicine, on how to address changing trends in their professions.

In 1989, Shmavonian became the Trusts’ director of administrative services, and in 1995 was named executive vice president.

She is well aware of the challenges of running a non-profit organization that is actively involved in grant-making on both the local and national level and that is known for aggressively and proactively promoting its agendas.

“For me, what I find so compelling about my current role is that I am responsible for ensuring that our people are well trained, qualified in what they do, supported in asking questions and open to learning from a broader array of external agencies,” says Shmavonian, who lives in a Philadelphia suburb with her husband — a partner in a local law firm — and three children, ages 7, 5 and 3. “We have a wonderful vantage point for knowledge and information. Part of our challenge going forward is how we do better at using and sharing that information, developing new knowledge and disseminating what we have learned in ways that can make a difference.”