The Stop & Shop Companies, Inc.

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The Stop & Shop Companies, Inc.

Post Office Box 369
Boston, Massachusetts 02101
U.S.A.
(617) 770-8000

Private Company
Incorporated: 1925 as Economy Grocery Stores Corporation
Employees: 44,000
Sales: $4.34 billion

Like all supermarketing giants, Stop & Shop Companies, Inc. has played a major role in the dramatic transformation of American food retailing in this century. Unlike most of its competitors, however, at Stop & Shop the family that oversees the nation’s ninth-largest chain of supermarkets also struggled with the company’s first growing pains after World War I, some 70 years ago. Sidney R. Rabb joined his uncle Julius in the grocery business outside Boston in 1918. When he died in 1985 his lifelong position as Stop & Shop’s chairman of the board was filled by his son-in-law, Avram Goldberg, while his daughter, Carol Goldberg, became president and chief operating officer.

When Sidney Rabb went into his uncle’s business, it was a small chain of stores known as the Economy Grocery Stores Company specializing in the sale of grocery products. Such specialization was hardly new—the Great American Tea Company (later A & P) had begun to modify the traditional general store as early as 1859, and even the practice of chain store ownership dated back into the 19th century. The chains did not begin until after 1912, however, when A & P introduced the “economy store,” using efficient management and smaller store size to offer lower prices on a cash-only basis—no credit, and no home delivery. The idea rapidly caught on across the country, and it was this merchandising trend which Julius Robbins, his brother Joseph, and his nephew Sidney Rabb followed after the war. Following a period of instability, their chain, Economy, righted itself, and, buoyed by the surging economy of the 1920s, began a program of rapid growth through acquisition in Massachusetts.

As chain store operators gained in strength they were soon able to convince manufacturers to sell to them directly instead of through the usual wholesalers, thus vastly reducing their costs and increasing the competitive advantage they already enjoyed over the traditional independent owner. Consumers preferred the lower prices of the chains—by the mid-1920s, Economy had expanded to 262 stores. In 1925 Sidney Rabb was named chairman, a post he would hold for the next 60 years; Economy issued its first shares of public stock; and Norman S. Rabb joined his brother Sidney in the business. Ten years later, Irving Rabb, youngest of the brothers, also joined. Now operating with considerable momentum, the brothers bought a chain of meat retailers and gave them space in each of their grocery stores.

Although the Great Depression brought many industries to a stand-still, the resulting need for tight household budgeting was in many respects a boon to the economy chain stores. The Rabbs continued to expand with the purchase in 1932 of 106 Grey United Stores located throughout northern New England. The supermarket, a concept that had originated in southern California, based its customer appeal on rock-bottom prices, increased product selection, self service (the customer roamed about the store while the clerk remained at a cash register), and intensive advertising. To the store owner, the new format promised streamlined operation and excellent overall profit. In 1935 the Rabbs opened New England’s first supermarket in Cambridge, Massachusetts, in a converted automobile assembly plant. First-year sales were nearly $2 million, equivalent to the revenue of 45 conventional stores.

The Rabbs built more of the new stores as fast as they could, calling them “Stop & Shop Supermarkets.” The program continued to do well until the onset of World War II in 1941, when the food industry was swept up in the war effort and had little money or manpower with which to expand. On the other hand, the labor shortage during the war years proved to be another unexpected advantage for the supermarket business, as housewives grew accustomed to serving themselves in all departments of the store, including the meat section; such total self-service meant lower labor costs and increased number of purchases per customer. When the war ended, Economy was well-positioned to proceed with the conversion of its entire chain to the supermarket format, effectively reducing its number of stores while increasing total sales and profits. By 1947 annual sales topped $47 million and the company had changed its name to Stop & Shop, Inc., signaling its total commitment to the supermarket concept.

The postwar boom years saw another period of tremendous growth for Stop & Shop. In order to distribute products more efficiently the company built, between 1948 and 1960, a central bakery, a perishable goods distribution warehouse, and a grocery distribution center in strategic Massachusetts locations. Stop & Shop also quickly established itself in Rhode Island and Connecticut, and by the end of the 1950s was nearing $200 million in sales. The company made an important decision in 1961 to diversify outside the food business with its purchase of Bradlees, a small chain of discount department stores operating largely in shopping centers which already featured a Stop & Shop supermarket. The Rabbs saw in Bradlees a company based on the same high-volume, low-margin marketing used in the food industry. Their expertise soon turned a few moribund stores into a thriving chain. Adding new outlets each year, Bradlees increased its sales from $5 to $107 million between 1962 and 1968.

Over the years Stop & Shop has tried to develop and maintain excellent relations with the communities in which it does business. The company was one of the first to unionize in the 1930s; it created the Stop & Shop Foundation in 1951 to support various civic and cultural projects; and in 1967 it initiated its Consumer Board Program in response to growing public concern about health and environmental issues. In a further move to accommodate changing customer demands, in 1971 the company gave far greater autonomy to each of its store managers, freeing them to respond more directly to the needs of local customers. On the other hand, the company has twice been sued in recent years for allegedly conspiring to fix the prices of certain grocery, meat, and dairy products. Both suits were settled.

Since the late 1960s both Stop & Shop and the Bradlees chain have continued their robust growth. Building on an ever more sophisticated network of warehouse distribution centers, the two chains have expanded geographically, in the total number of stores, and in sales dollars. In addition, in 1968 and 1969 respectively, the company established the Medi Mart Drug Store Company and acquired the Charles B. Perkins Company, a 21-unit New England retailer of tobacco and sundries. A year later all four retailing chains were brought together as divisions of a newly renamed Stop & Shop Companies, Inc., which at that point included 150 supermarkets, 52 Bradlees Department Stores, 10 Medi Marts, and 25 Perkins Tobacco Shops, together totaling about $750 million in sales. Four years later the company celebrated its first $1 billion year; it had doubled that figure by 1980.

Other acquisitions were not as successful. In 1978 Stop & Shop bought Off the Rax, a discount women’s clothing store chain, but sold it after six less-than-spectacular years. Similarly, a venture into a more upscale segment of the department store world ended in 1987 with the sale of Almys, a 19-store chain the company had purchased just two years before. And despite a history of steady growth and good profits, Medi Mart and Perkins were also put on the block in the mid-1980s as Stop & Shop decided to concentrate its resources on its two biggest and most lucrative divisions, supermarkets and Bradlees. Bradlees reached a high of 169 units in 1987, combining with the 113 supermarkets to amass $4.34 billion in sales.

In 1985 “Mr. Sidney,” Sidney R. Rabb, died and was succeeded as chairman by his son-in-law Avram J. Goldberg. Mr. Goldberg and his wife Carol, now the president of the company, have moved decisively to keep pace with the current trend toward the “superstore,” a greatly enlarged and further diversified model of the traditional supermarket. These immense stores average 55,000 to 60,000 square feet in size and are planned around the “street of shops” concept, in which each class of product receives its own well-defined and suitably decorated segment of the store and is offered to the consumer in an ever-larger variety of brands and packaging. Stop & Shop completed its first superstore in 1982 and hopes to finish converting its entire chain by the early 1990s. Thus, after a long and circuitous development, supermarket shopping in the next decade will curiously resemble that of 100 years ago, when families made their progress through a series of neighborhood stores each specializing in a different product line. The “street of shops” has simply moved indoors.

Stop & Shop recently took another step forward into the past when, for the first time since 1924, it once again became a privately owned corporation. Responding to a hostile 1988 takeover bid by the Dart Group Corporation, Stop & Shop’s board of directors enlisted the aid of Kohlberg Kravis Roberts in forming a privately held acquisition company to buy all outstanding shares for approximately $1.23 billion. The acquisition company merged with Stop & Shop, whose top management was largely unaffected. To pay down some of its debt, Stop & Shop sold 33 southern Bradless stores and plans to sell more. As it moves into the 1990s, Stop & Shop continues to focus its energy on Sidney Rabb’s original business, the retailing of food.