The Great A&P and the Struggle for Small Business in America by Marc Levinson (review)

This is a highly readable and well-researched introduction to the transformation of America’s food distribution system between about 1870 and 1960 and how this change contributed to competing visions of opportunity, fairness, and efficiency in America’s modernizing political economy. Between roughly 1915 and 1960, the Great Atlantic and Pacific Tea Company (A&P) was the largest retailer in the world. During this time, the way Americans bought food changed from an extremely fragmented and inefficient system based on low volume and high margins to a much more consolidated one based on high volume and low margins. That consumers benefited from this change is undeniable but in the process the niche for hundreds of thousands of small independent “mom and pop” bakers, butchers, grocers, jobbers, pushcart vendors, and wholesalers evaporated. A&P didn’t cause this change, but Marc Levinson shows clearly how its great size and success put the company at the center of debates over the value of small business and the dangers of monopoly in the United States.

George Gilman founded what would become A&P in New York city when around 1860 he diversified from the leather business into tea sales. Gilman’s tea business prospered in part because he had the good fortune to hire George Hartford, a meticulous manager whose skills meshed well with the more outgoing but less detail oriented Gilman. It quickly became apparent the company’s future was in tea not leather. Gilman introduced the Great Atlantic and Pacific Tea Company name in 1869, and in 1878, the year Hartford officially became a partner and principle manager, sales reached one million dollars.

Hartford’s sons, George and John, entered the business in the 1880s and remained actively involved with managing the company until the 1950s. Known to employees as “Mr. George” and “Mr. John,” the brothers had uniquely well-balanced strengths that contributed greatly to A&Ps rapid rise to the top in the grocery trade. George was financially conservative with an eye for squeezing costs out of every phase of the company’s operation. For example, he mandated the recycling of boxes and bags, which, in the mid-1920s, brought $1.2 million a year back to the company.

John’s fundamental insight was to recognize that even with very small stores, a typical urban grocery of the time might have only fifty or so regular customers, it was still possible to profit using a strategy of high volume and low margins. This led to the development of the economy store in 1912. These small stores offered limited stock, no delivery service, and no premiums but sold at prices noticeably lower than competitors and quickly established A&P as the low-cost leader in the grocery trade. The economy store was also apparently easy to replicate. A&P expanded from 480 stores in 1912 to 1,817 by the end of 1915 and then doubled that number by the end of 1917. Initially, it seems the Hartford’s were able to undersell competitors using careful management and no frills, essentially methods open to anyone, but by the 1920s when A&P had several thousand outlets, they had gained significant cost advantages over competitors through vertical integration, price concessions from suppliers, and similar methods only available to large operators.

It was these advantages that brought A&P into conflict first with antichain store laws at the state level and beginning in the 1930s with the Justice Department. Ironically the Justice Department abandoned its case against A&P in the mid-1950s when it was still the world’s largest retailer but when the world was changing rapidly in ways that A&P failed to recognize and would soon leave the company where it remains today—a struggling regional chain.

Like Levinson’s best-known work, The Box, where he presented a fascinating description of the...