Cheap, cheap, cheap: The incredible story of Ralph Ketner
By any measure, Ralph Ketner was one of the most amazing and colorful businessmen in North Carolina history. Starting with one Salisbury store in 1957, Ketner built a chain that had more than 680 stores when Ketner retired as chairman of the board in 1991. Business North Carolina’s Martin Donsky wrote the definitive magazine story on Ketner in April 1990. Combining that story with Mark Wineka’s excellent reporting in the Salisbury Post and a few personal memories of my encounters with Ketner, here are a few things to know about Ketner, who died May 29 at age 95.
- Ketner was not a notable business success before Food Lion, which he started at age 37. He had served in the U.S. Army in Africa and Italy during World War II. He worked as a Cannon Mills accountant and as an agent for the IRS and N.C. Department of Revenue. His family had been in the grocery business since the 1920s, but it took awhile for Ralph to enter the business.
- Food Lion had limited success during its first decade. His seven stores made a combined $36,000 in 1967; he had previously closed or sold 10 others. “Had we been smart, we would have known we were bankrupt,” he told BNC.
- Ketner’s mathematical skills were legendary and played a critical role in reversing Food Lion’s fortunes. The best, probably mythical story: he could accurately add the numbers listed on railroad cars as they rambled through Salisbury. (Not an easy trick – try it some time.) His math skills played a key role in his landmark decision to reduce prices at Food Lion in 1967 with a goal of selling many staples at cost or less, while marking the rest of his groceries as much as 10% cheaper than his competitors. Consultants would receive millions of dollars for the strategy that Ketner cooked up during a storied three-day weekend at Charlotte’s old Manger Hotel, poring over six months of warehouse receipts to devise the pricing model.
- Promoting Food Lion as the low-price alternative proved a brilliant strategy for more than 20 years. Its success particular hammered Southern powerhouse Winn-Dixie Stores, which at its peak operated more than 1,000 stores. Winn–Dixie couldn’t match Food Lion’s low prices; it filed for bankruptcy in 2005 and soon pulled out of North Carolina, South Carolina and Virginia. Food Lion’s success also helped push Charlotte-based Harris Teeter to focus on middle- and higher-income shoppers, a strategy that continues to this day.
- Long before anyone heard of crowd funding, Ketner and his brother, Brown, and friend Wilson Smith raised $65,000 from 125 folks in the Salisbury area to start the company. That is the equivalent of about $533,000 today. Several dozen investors smart enough to trust Ketner and hang on to their shares became millionaires, as Food Lion was among the hottest U.S. stocks in the late ‘70s and ‘80s. (Fortune says the number is 87 Food Lion-minted millionaires.) The gains, which were enjoyed by textile and postal workers in addition to doctors and lawyers, helped make Salisbury one of North Carolina’s most prosperous small cities, even as Rowan County’s economy crumbled.
- Ketner had an old-school view of the purpose of business. He didn’t want his executives or store managers to get involved in outside interests that interfered with their Food Lion work. In a speech to food brokers in Charlotte, he said that corporations have no obligation to contribute to philanthropies; their focus needed to be entirely on creating shareholder profits. In the BNC story, he said, “I don’t read the Wall Street Journal or Barron’s or U.S. News. I look at Food Lion’s sales on Monday morning and if sales are up, then the world’s in good shape, and if sales are down, then the world’s in a hell of a mess, and I’m just about that narrow-minded, and I want everybody working for me to be that way.”
- Belgian grocer Delhaize bought 51% of Food Lion by 1976, but let Ketner and his successor, Tom Smith, run the business for most of the next three decades. Ketner retired at the right time because Food Lion was expanding too fast by the early 1990s, a common problem for retailers.
- ABC’s Prime Time Live in 1992 did a devastating report that showed unsanitary handling of meat at Food Lion delis, denting its ability to expand into new markets in the North and Midwest that were dominated by groceries with union workers. Ketner was aggressively anti-union. Neel Lattimore, a brilliant PR guy who grew up in North Carolina and had ties to the grocery industry unions, fed the story to ABC, which sensationalized several incidents in classic network-TV fashion. Later scandals followed over unpaid overtime and other wage issues, leading to a $16 million settlement with the U.S. Department of Labor in 1993.
- In retirement, Ketner repeatedly criticized the company for various decisions and stepped down from the board in 1993. Delhaize shares now trade about 75% lower than their peak price in 2007. Freed from his obsessive work style, Ketner became one of Salisbury’s biggest champions, making significant contributions to many civic groups including $3 million to Catawba College, where the business school bears his name.
- For decades, stockbrokers in North Carolina advised their clients that various investments promised to be “the next Food Lion,” promising enormous gains. But one suspects there will never be another Ralph Ketner.