Brandon Baker

1

• Brandon Baker
• Justin Stout
• David Harder
• Darrel Lanzrath

2
Introduction

• Business formed from Stew Leonards father Leo
  Leonard who owned and operated small dairy route
  with four milk trucks
• In 1968 he took out a loan for 500,000 and
  started partnership in the dairy retail store
  industry with his wife Marianne
• Mission Statement
• Rule 1- The customer is always right.
• Rule 2- If the customer is ever
  wrong, reread Rule1 !
  

3
Marketing

• Eliminate the middleman
• Freshness
• In house processing
• Free Samples and Recipes

4
Customer Relations

• Petting Zoo with farm animals for children
• Liberal return Policy
• Animated singing animals filled the store
• Employees roamed aisles in cow, chicken, and duck
  costumes

5
Customer Relations

• Customer feedback is gathered through in-store
  focus groups.
• Every month 10 customers were given 20 store
  gift certificates for meeting with managers and
  offering suggestions.
• Elderly customers were given free rides to the
  dairy in a bus provided by the store

6
Employee Relations

• Employees were referred to as team members
• Stew believed in nepotism.
• Offered incentive programs for the team members
• The store had only a 64 percent turnover
  rate-supermarket industry had an average of 82
  percent.
• Company became so successful that it started its
  Stew U training program for new employees

7
The Organization

• All four of Stew Leonards children were involved
  in the Business
• Because the business was a partnership there was
  no Board of Directors, shareholders, and no
  annual reports
• Customers were encouraged to pay cash for
  purchases
• Over the years, received many awards for overall
  store performance

8
Shit Hits the Fan

• Stew Leonard was questioned by the IRS for trying
  to take 80,00 to his second home in Saint
  Martin.
• IRS confiscated store records.
• Stew and his son Tom told the public that the IRS
  was just doing a routine audit.
• On July 22, 1993, the Department of Justice
  announced that Stew and others had pleaded guilty
  to federal tax conspiracy.
• He avoided 6.7 million in taxes between 1981 and
  1991 by not reporting 17 million in sales.

9
The Equity Program

• The IRS found the computer program written by
  Jeffery Pirhalla, Stews computer programmer.
• The computer program systematically discounted
  sales and bank deposit data.
• Typical cash diversions were10,000 to 15,000
  per day.
• Dual books were kept to disclose actual and
  reported sales.

10
Shortweighting

• On July 23, 1993, a day after Stew Leonard
  pleaded guilty to tax evasion the Dairy was
  charged with violating state labeling laws.
• 46.3 percent of their products were improperly
  labeled compared to the state wide average of 5
  percent.
• Industry experts say some of this could be a
  cause of handpacked and precooked items.
• 1,230 violations each subject to a 500 maximum
  fine.

11
The Aftermath

• Although it was drew harsh criticism, it caused
  minor decline in sales.
• Stew was sentenced to 52 months in jail and had
  to pay a fine of 15 million.
• He gave no reason for committing the crime but
  apologized to customers and employees.
• After this incident, the company continued to
  grow and was planning for a third store.

12
Damage Control

• Stew Jr. stepped up and became the leader.
• To make matters worse, in 1996, it was reported
  that Tom was under investigation for skimming
  cash from the store vending machines