Stater Bros. has no shortage of major-league rivals, operating in the same crowded Southern California markets as Kroger-owned Ralphs and Safeway-owned Vons. Stater Bros. Holdings operates more than 165 full-service Stater Bros. Markets in six counties, primarily in the Riverside and San Bernardino areas. Most of the grocery chain's stores have deli department, about 45% house bakeries, while another 25 host Super Rx Pharmacies. The Southern California grocery operator builds and remodels its own stores through its Stater Bros. Development subsidiary. Founded in 1936 by twin brothers Leo and Cleo Stater, Stater Bros. is owned by chairman and CEO Jack Brown through La Cadena Investments.
San Bernardino-based Stater Bros. operates supermarkets in the Southern California counties of San Bernardino, Riverside, Orange, Los Angeles, San Diego, and Kern.
Sales and Marketing
Stater Bros. relies on a variety of media, including local and regional newspapers, direct mail, and printed circulars, and radio and television to reach consumers. The company reported advertising costs (net of vendor allowances) of $17.8 million in fiscal 2013 (ended September), versus $18.9 million and $18.3 million in fiscal 2012 and 2011, respectively.
Stater Bros. rang up about $3.86 billion in sales in fiscal 2013 (ended September), a decline of $13.4 million versus the prior year. The dip in sales (less than 1%) resulted from the inclusion of an extra week in fiscal 2012 and the closure of one store. The grocery chain's gross profit declined 2% to about $1 billion over the same period. Gross margins have come under pressure from increased price competition, as economic malaise in the region continues in the aftermath of the recession, and Stater Bros. declines to fully pass on the effect of cost inflation.
With more than 50 Wal-Mart supercenters and Target discount stores in the area expanding their grocery offerings, Stater Bros. has little choice but to keep prices low. To distinguish itself from rivals, it refuses to offer promotional games and frequent shopper cards. Instead, the supermarket operator adheres to an "Aggressive Everyday Low Price" strategy, supplemented by temporary price reductions, called Stater Savers, on select food and nonfood items. The company's chairman and CEO Jack Brown says the price-focused grocery chain is willing to take a short-term hit to its bottom line in order to hold on to customers for the long term. To that end, Stater Bros. refinanced its debt in 2011 to allow it to continue to keep grocery prices low.
Stater Bros. is holding the line on new store growth. Instead, it's focusing on remodels and replacement stores. Stater Bros. is also waiting for unemployment to begin trending down and sales to trend up before deciding how to invest some $250 million in surplus cash.
Stater Bros. Holdings is owned by La Cadena Investments, which holds 100% of its Class A common stock. Chairman and CEO Jack Brown is the firm's only voting partner.