Q&A with Affiliated Foods president
Froehlich: Small-town grocery stores require support of entire community.

By CHRIS AMUNDSON
News Business Editor

This weekend some 2,000 food vendors, grocery store owners and their employees are in Norfolk for the Affiliated Foods Midwest annual Fall Food Show and stockholders' meeting.
A majority of the visitors are small-town independent grocery owners. Many of them make the annual pilgrimage to Norfolk to learn about new products, attend seminars and meet with "Coach" Virgil Froehlich, president and 55-year veteran of Affiliated Foods Midwest.
Of there's one man who knows about the small-town grocery industry, it's Froehlich. He spent his adult life working for the food cooperative — helping to build it from $76 million in annual sales when he became president in 1976 to nearly $800 million annually now.
The company serves 800 independent grocery stores in 10 Midwestern states.
But while the cooperative that Froehlich leads has prospered, small-town America has changed drastically. In many cases, not favorably.
Froehlich has concerns. He has criticisms. He has solutions.
This week, the Daily News sat down with Froehlich to talk about Affiliated Foods Midwest and small-town America. Here is a portion of that interview:

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Daily News: "What percentage of Affiliated's grocery store owners are making the trek to Norfolk this year?"
Froehlich: "Probably about 65 percent. Then they'll also bring their department heads with them, so more than half of the visitors are directly related to the retail stores."

Daily News: "Current economic indicators are telling us that the economy is slowing down. How is this affecting small town grocery stores?"
Froehlich: "We see several of our independent, small-town retailers either flat or showing a little decline (in sales). That really concerns us. The national average says it's about a 2.2 percent decline. That doesn't pay the bills.
"These individual retailers need to find a way to increase sales."

Daily News: "How can they do that?"
Froehlich: "By offering more services, getting more involved in the ready-to-eat foods, being a stronger competitor to fast-food outlets, and doing a better job of remodeling and expanding their stores. The biggest concern I have is how (retailers) can keep customers home — how to keep them from traveling 30, 40, 50 miles to buy groceries."

Daily News: "How are the small-town grocery store owners doing at winning over and retaining customers?"
Froehlich: "On an individual basis, you see some great strides, but I think there's also a concern that retailers get depressed — their expenses are higher every year, their bottom line gets smaller every year so they have a tendency to quit trying.
"They quit trying to compete with the competition. It's easy to walk away from it."

Daily News: "What happens then?"
Froehlich: "There are businesses for sale, but sometimes there's no market for the stores.
"Some towns recently had two or three stores. Today, those towns are lucky if they have one. Recently we just had Tilden close one store… Verdigre went from two to one. That's what we are seeing — the grassroots that really built this country, there's going to be very thin grass for people to harvest."

Daily News: "For the retailers to harvest?"
Froehlich: "Yes. Not only in the grocery business. Whether it be hardware or pharmacy, it's happening in a lot of different industries. It's not just food. The big mass merchandisers are offering a tremendous amount of merchandise that competes with and beats a lot of the independents."

Daily News: "How are the small-town retailers who are successful at retaining their customers doing it?"
Froehlich: "By offering more services, expanding their stores, putting in new equipment, adding new items — constantly being aware what the customer is looking for."

Daily News: "The picture that you've painted of business in rural America is somewhat dismal, yet Affiliated Foods Midwest continues to grow as we've seen through plant expansions and the bottom line. How has Affiliated been able to do that?"
Froehlich: "Each year, our overcharges — our patronages — go back to the stores. We aren't a public company, so we don't have outside stockholders. Our money goes back to the individual retailers.
"That gives them the encouragement to do the enhancements to their stores. It allows them to plan a year, two or five years ahead. They have their goals put together so if a vacant building comes available next to them, they can acquire it and expand."

Daily News: "For example?"
Froehlich: "Bloomfield is a perfect example. The owner is going to double the size of his store because the store next to him went out of business.
"We have a lot of those that expand when the building or the lot next to them becomes available… that's where Affiliated is getting it's growth."

Daily News: "Would Affiliated's success be possible if it were a publicly held company instead of a cooperative?"
Froehlich: "What we see in publicly held companies is they hold ownership so the independent is not there. An outside corporation actually manages the store.
"That, in turn, dilutes the activity in the community… whether it be Norfolk or any community like that where these outside companies locate within a community.
"I don't see the commitment. I don't see them on the street making calls and trying to make this system work in the community — whether it be the arts center, the Elkhorn Valley Museum, the United Way or the chamber of commerce.
"I think it's a one-way street. Within a minute, that money leaves town."

Daily News: "What are the top issues affecting the small-town grocer this year?"
Froehlich: "This year and into the future, you see these larger corporations putting in these mammoth retail outlets. It's going to have a tremendous drain on all these communities.
"I often say, we ought to be selling gates, like cattle gates, only road gates so the customers can't leave town. There are advantages for customers who support their community.
"Sometimes I think it's shortsighted that after a community loses a retail outlet, they see the importance of that business in that community. We take for granted that it's going to be there while it's there.

Daily News: "There's no doubt that the American consumer prefers variety and one-stop shopping. How can small-town merchants compete with the mega-chain stores that offer that?"
Froehlich: "Well, they have to have a strong network within their community — within their chamber.
"When a nursing home shows up on the main street and the grocery stores are going, when the pharmacy is gone — what really is there for people to stay for?
"How can you attract young people to come into that community who will make investments for business?
"The whole community has got to be involved. It isn't a one-man grocery store or banker. It's got to be more than that.
"Do you care about your community? That's the big question."

Daily News: "You've been an employee of Affiliated Foods for 55 years and have been the "coach" for 25 years. How much longer will you be at the helm?"
Froehlich: "That's kind of a personal question that I can't answer for you today. As long as my health stays with me, I believe in being active. I'm not a 'crouch' potato guy, nor can I play golf every day, so I'd like to stay active as long as I can be of value to the company to train other people.
"Marty Arter is the individual to take my place. Marty has been here a little over 20 years. He understands the company and understands the philosophy, and I'd like to just sort of be a dad to him or to anybody around here.
"If they need some advice, hey, I can give out advice if they want to listen to it."