Staters Bros. has achieved remarkable success in recent years due to competitors imploding (SoCal grocery workers' lockout/strike) and by the company keeping focused on its own workers and customers.
Over the years, the company has grown by acquiring locations from others and also building its own locations. To supply those stores, Stater Bros. has used a number of distribution centers (13 buildings in seven locations).
Now, the company has decided that a single point of distribution will help it better compete against its long-time rivals in California as well as Wal-Mart's Supercenters. The new facility is being built on 160 acres in San Bernadino. It will include a 2.1 million-square-foot distribution center and headquarters and cost more than $300 million. In short, it will be the single largest capital expenditure in Stater Bros.' history.
Mr. Brown believes the new facility will help Stater Bros. to reduce its costs, improve its ability to supply stores quickly and efficiently, and make it a tougher competitor.
Ultimately, Stater Bros.' chief knows what will make the difference for his company. "My people have always been the head of my spear," he told The Press Enterprise.
"They can't match Wal-Mart on price, but they can make it up somewhere else, and often that's in their people, customer service," said David Livingston, principal at DJL Research and a RetailWire BrainTrust panelist. "Where's Wal-Mart the weakest? It's their perishables, fruits and vegetables. Stater can beat them there, too."
Carla Casella, an analyst for J.P. Morgan, is also a believer in Stater Bros. "When Wal-Mart came into Florida, Winn-Dixie had to close more than 300 stores, and Albertsons closed some as well," he said. "But Publix did really well. Any revenue they lost from Wal-Mart, they regained from the other stores closing."
Bryan Hunt, a senior high-yield securities analyst for Wachovia Securities, is of the belief that Stater Bros. can do something akin to what Publix has done in Florida.
"Stater also has the reputation and brand position in that market to outmaneuver Ralphs, Vons and Albertsons against Wal-Mart," he said.
There is another factor that has always seemed to help Stater Bros. and that is the relationship the company has with its unionized workforce. Three years ago, when the industry was involved in the lockout/strike taking place in southern California, customers were looking for other options where they could shop without the strife. For many, that place was Stater Bros.
Discussion Questions: What is your reaction to the capital investment Stater Bros. is making to combine all its distribution facilities into one location? How is it positioned to compete against its traditional grocery competitors, as well as others such as Wal-Mart, Tesco, etc.?