Schwegmann Giant Supermarkets, commonly known as Schwegmann or colloquially Schwegmann's was a supermarket based in New Orleans and was known for their very large stores before succumbing to bankruptcy in 1999.

From humble beginnings

Schwegmann was born above his father's small grocery store, Schwegmann's Grocery and Bar, located at the intersection of Burgundy and Piety streets in the Bywater neighborhood of New Orleans. His German-born grandfather had founded the store in 1869. The business was later commemorated by Schwegmann's Old Piety & Burgundy Whiskey. In the early years, the store had no heat in the winter, and the front doors were left open. This allowed cold wind to blow into the business. John Schwegman reflected that "If the clerks complained, they were told [that] heat would make them drowsy and that it would take the bloom off the fruits and vegetables, even though olive oil was freezing and breaking on the shelves. However, the real reason for keeping the doors open was to show that the store was open and ready for business."

Schwegmann's formal education was limited to grammar school, a year at Holy Cross High School, and six months at Soule College. He worked for the U.S. Post Office and as a salesman for a margarine manufacturer. He took a job with Canal Bank & Trust Company, which closed in 1933. He worked in real estate until 1939, when he joined his father's store.

Launching a supermarket chain

World War II interrupted his business career. Thereafter, on August 23, 1946, he and two brothers, Anthony Schwegmann and Paul Schwegmann, opened the first Schwegmann Brothers Giant Super Market, located on St. Claude Avenue near the intersection of Elysian Fields Avenue. The operation in time grew to eighteen stores with 5,000 employees. Schwegmann's massive modern supermarket sold everything from gourmet food to garden supplies.

The Schwegmanns revolutionized grocery shopping in New Orleans, and their outlets soon mushroomed. By 1957, there were Schwegmann stores, large in size, all over New Orleans. The largest store was the one on Old Gentilly Road. At the time, it was the biggest supermarket in the world—a staggering 155,000 square feet (14,400 m²). The supermarket attracted both customers and onlookers, who came by tour buses to see the structure.

"He was the first person to take us past the mom-and-pop business into the supermarket business", said his son, John F. Schwegmann (born 1945), the chief executive officer of the privately held chain from 1979 until the company was sold in 1997.

"Everything he's touched has turned to money", said Saul Stone, one of Schwegmann's attorneys, in a 1979 interview. "He's some lucky kind of guy." Stone added that "The best way to success was volume with a low markup. He [John Schwegmann] said [that] he would rather make $100 off $1,000 in sales than make $50 on $100 sales."

The Schwegmanns introduced New Orleans to self-service shopping, then a novelty that eventually became an ordinary feature of American life and doomed the smaller stores in which proprietors filled each customer's order. For a time, the Schwegmanns still offered full service for traditional shoppers, but they encouraged customers to gather their own items from the shelves and to take their baskets to the checkout counter. While this innovation was not initially well received, shoppers accepted the idea quickly so that they could obtain a 10 percent discount if they helped themselves.

"There are richer and smarter people in the world than I am, but they're no better", the self-confident Schwegmann said in an interview a generation after he opened his first supermarket. "We're all selling something to someone else. . . . I never look down; I always look up."

He also founded Schwegmann Bank & Trust Co., which was later purchased by Jefferson Guaranty Bank.

Schwegmann as public service litigant

In 1948, Schwegmann entered a new field of activity: litigation. The Louisiana legislature had passed a law requiring a minimum markup on alcoholic beverages at all levels of the merchandising chain. Schwegmann was convinced that stores should be able to set their own prices. He volunteered to be the plaintiff in a test case to oppose the law, and Stone agreed to represent him. "That made him a litigator", Stone said. "He liked it. He wanted to fight."

The Louisiana Supreme Court declared the markup law on alcohol unconstitutional.

Schwegmann's next fight was against the state's fair-trade law, which permitted manufacturers to set retail prices for an entire area by entering into a contract with just one retailer in that region.

The crusade was successful in the U.S. District Court, the Fifth Circuit Court of Appeals in New Orleans, and the U.S. Supreme Court. While the Supreme Court did not technically strike down the law, it held that merchants could not be forced to charge certain prices.

"The next move was to get the state's fair-trade law thrown out", Stone said. "It was. A second law was passed, but the state Supreme Court threw it out in 1965."

In 1965, state Revenue Collector Ashton J. Mouton, a former mayor of Lafayette, sued Schwegmann Brothers to collect for the state sales, use and occupational license taxes plus interest in the amount of $62,517.98. Schwegmann appealed the assessments to the Louisiana Board of Tax Appeals. Ten years later, the tax board ruled in Mouton's favor, some five years after he had left the collector's position. Thereafter, the state sued to collect another $103,290.59. Schwegmann answered and denied liability. The two cases were consolidated in the trial court by consent of the parties. In the trial, Mouton was upheld in both cases.

The fight against milk price-fixing

Perhaps Schwegmann's best-remembered fight was his battle against milk price-fixing. It pitted him against, first, the Commissioner of Agriculture and Forestry Dave L. Pearce and, later, the state Milk Commission, which could set milk prices at the processing and retail levels, said Michael R. Fontham, another Schwegmann attorney.

The federal suit, which grew out of Schwegmann's attempts to import cheaper out-of-state milk, was in litigation for eight years, Fontham said. Finally, a three-judge panel said that Schwegmann could not be barred from buying cheaper milk.

After that, the state eliminated the Milk Commission. It was replaced in 1975 by the Dairy Stabilization Board, which can prescribe a minimum price processors must pay to farmers.

One out-of-state company from which Schwegmann bought milk was Dairy Fresh Corp., an Alabama firm with a processing plant in Hattiesburg, Mississippi. Louisiana health officials tried to impound the milk, Fontham noted, but eventually Schwegmann was allowed to bring it into the state.

Such battles were "altruistic". He favored unrestricted, free competition. It's principle, nothing personal with it. He had nothing to gain at all," explained Schwegmann's attorney Saul Stone.

Turning the company over to his son

After Schwegmann suffered strokes in 1977 and 1978, he turned over control of his supermarkets to his son. He resigned from the PSC in October 1980. John F. Schwegmann was, likewise, elected public service commissioner and continued in his father's footsteps. Among the PSC colleagues of the Schwegmanns was the developer Francis Edward Kennon, Jr., originally of Minden in Webster Parish, whose father had also been in the supermarket business.

Growth continued. In fall 1984, Schwegmann opened its first store in the Baton Rouge area ^[1] and continued to expand into the suburbs. Schwegmann stores were not true hypermarkets or supercenters, despite their large square footage, they did not sell jewelry ^[2] or apparel beyond hosiery and accessories, save for a full apparel department concept tested in 1989 ^[3].

In 1995, Schnucks bought National Supermarkets and sold the 28 store New Orleans division to Schwegmann, which had 18 stores at the time. The FTC ordered Schwegmann to divest seven. ^[4]. The deal also included a leased distribution center. The National buyout was the beginning of the end of the company, by 1996, Schnucks and Schwegmann were being sued by National (now having sold its stores but still a legal entity) for breach of contract ^[5].

John F. Schwegmann bought the twenty-eight stores of the Louisiana division of the National Tea Company owned by Loblaw of Canada. He added these stores to the eighteen other Schwegmann locations in 1995. However, a year later, after much financial trouble, the Schwegmann chain was sold. Schwegmann's relatives, including his half sister, sued him for damages because of his alleged mismanagement.

Kohlberg ownership and bankruptcy

By late 1996, Schwegmann was on the sale block. The buyout had put a lot of strain on the company and a sales boost from the acquired companies did not materialize. ^[6] Many believed the sale signaled the end of the Schwegmann era. While the stores would continue, they would no longer be family owned. In early 1997, Kohlberg & Company took control of the stores. Schwegmann would still own the real estate and lease out operations. Kohlberg would try to steer the company back into profitability by leasing the distribution center to SuperValu. Kohlberg & Company would start closing their non-New Orleans locations, including the Real Superstore and Schwegmann stores in Baton Rouge. The Hammond store was also closed.

In 1999, Schwegmann agreed to sell six stores to A&P Sav-A-Center, which would keep the stores open as it converted to them to their name and operations. Instead, Schwegmann declared bankruptcy and closed all of its stores, save for the six sold to A&P.

References