Foodarama Supermarkets, Inc. History

922 Highway 33
Building 6, Suite 1
Freehold, New Jersey 07728

Telephone: (732) 462-4700
Fax: (732) 294-2347

Public Company
Incorporated: 1958
Employees: 4,550
Sales: $697.4 million (fiscal 1998)
Stock Exchanges: American
Ticker Symbol: FSM
NAIC: 311812 Commercial Bakeries; 311821 Cookie & Cracker Manufacturing; 311615 Meat Products; 44422 Nursery & Garden Centers; 44511 Supermarkets & Other Grocery Stores; 44531 Beer, Wine, & Liquor Stores

Company History:

Foodarama Supermarkets, Inc. was operating 21 grocery stores, two liquor stores, and two garden centers in central New Jersey in 1998, all licensed under the ShopRite name. Most of the supermarkets were significantly larger than conventional ones, with in-store premium departments such as salad bars, snack bars, and pharmacies. Foodarama also owned a central meat- and food-processing facility and a bakery. It was a member of Wakefern Food Corporation, the largest retailer-owned food cooperative in the United States and the owner of the ShopRite name.

Foodarama Supermarkets to 1980

The business began as a single grocery store in 1916. It was owned by Joseph Saker's parents when he graduated from high school in 1946. He took an entry level job at a local Nescafé factory, loading and unloading coffee beans. According to Saker, after two years of hard work he was demoted in favor of a brother-in-law of the supervisor, an experience he called his "first lesson in politics." Saker then joined the family store, which was grossing about $900 a week. He got his parents to spend $3,000 to remodel the store and, in 1950, to lay out $20,000 for a self-service "superette" employing about 12 people. He also helped found Wakefern Food Corporation, which made it possible for its members to compete with the superchains by providing purchasing, warehousing, and distribution services on a cooperative basis.

Saker opened his first supermarket, ten times the size of the superette, in 1956, and incorporated Foodarama Supermarkets in 1958. By August 1965 the company was operating 14 stores--two of which it owned--within a 30-mile radius of headquarters in Freehold, New Jersey. These stores operated under the Shop-Rite (later ShopRite) name and carried nonfood items such as housewares and health and beauty aids as well as a full range of groceries. The company also owned seven parcels of land in central New Jersey and one parcel in Warmington, Pennsylvania, and it was leasing office and storage space in Freehold and Manville, New Jersey. Sales came to $43.3 million in fiscal 1963 (the year ended February 2, 1964), and net income was $387,000. These totals rose to $48.4 million and $653,000 in fiscal 1964.

Foodarama Supermarkets became a public corporation in 1965, when it collected about $2 million by selling stock at $12.75 a share. Joseph and his brother John, the treasurer, retained almost 56 percent of the shares. The infusion of fresh funds enabled Foodarama to acquire seven Shop-Rite stores in the next two years, one of which was closed, and also to open seven new stores. By October 1967 the company had 22 stores, in Pennsylvania, Connecticut, and Maryland as well as New Jersey. The following year it acquired four more supermarkets in New Jersey and Pennsylvania, plus a fifth under construction, for $3 million in cash and notes. Sales volume increased by more than fourfold between fiscal 1962 and 1968, and earnings rose by 750 percent. In 1968 the company raised over $40 million by selling more stock at $23.50 a share.

Foodarama Supermarkets, during 1969-70, acquired Big Apple Supermarkets, a chain of 48 stores mainly on Long Island. With the defection of Supermarkets General Corporation in 1968, which took the Pathmark name for its stores, Foodarama now was the largest member of Wakefern. A number of its units had in-store pharmacies, and it also had successfully opened tobacco and record shops in a few stores. The 78 Foodaramas were large suburban stores in the range of 20,000 to 35,000 square feet. Net income reached $2.5 million in fiscal 1970 (the year ended November 1, 1970) on sales of $302.9 million. There were plans not only for more supermarkets but also for chains of private-brand gas stations and discount drug stores adjacent to the supermarkets.

Foodarama Supermarkets' sales volume reached a record $321 million in fiscal 1971, but its profit dropped by about 50 percent. By 1972 it was clear that the company had swallowed more than it could comfortably digest. Fourteen stores were sold in fiscal 1972 and 11 more during the three months ended January 31, 1973, leaving Foodarama with 41. The company also was operating six Shop-Rite gas stations contiguous or close to its supermarkets. It lost $8.2 million in fiscal 1972, including a charge of $5.3 million for discontinued operations, and then returned to profitability. It acquired two liquor stores and two garden centers adjacent to its stores in 1975 and 1976, respectively, and disposed of the gasoline stations in 1975.

Foodarama Supermarkets also was locked in a bitter dispute with Wakefern in the 1970s, filing lawsuits in 1971 alleging that certain of Wakefern's directors and members had illegally removed stock purchased from Supermarkets General from the cooperative's treasury, an action that led to the ouster of the existing officers, including Saker, who was secretary. Because of the change in control, Saker contended, nonmembers of Wakefern were barred from using the former Big Apple warehouse in Central Islip, New York, and as a result the warehouse lost money and was eventually sold. Saker lost his lawsuit in 1979 but remained the largest shareholder in Wakefern.

Competitive Challenges: 1980-92

Foodarama Supermarkets had 38 supermarkets in four states in fiscal 1980. Sales came to $412.9 million that year, but net income was only $1.3 million. The company's stock dipped as low as $3.25 a share in 1981, the first of three years out of the next four in which its net income fell below $1 million. Foodarama began paring its holdings, disposing of some of its smaller stores. Others were renovated and enlarged, with service centers added for specialties such as salad bars and cheese counters. In December 1982 the company opened the first of what it called World Class stores, in Bricktown, New Jersey.

After a strong fiscal 1985 Saker who, with close allies, controlled 48 percent of Foodarama Supermarkets' stock, proposed a leveraged buyout of the company. The offer of $20.50 in cash and notes was scorned as inadequate by other shareholders, however, and only passed by a narrow margin. A December 1986 New Jersey court decision voided the proposal. Foodarama disposed of its Connecticut stores in 1987, reducing the number of its units to 24. It acquired a processing facility for prepared foods, however, in 1986 and was fielding eight World Class stores in early 1988.

Foodarama Supermarkets had record net income of $3.7 million on sales of $482 million in fiscal 1987 and made almost as much profit the following year. Its stock rose to more than $38 a share in 1989, the year the company purchased four stores from Hilltop Supermarkets Inc., a New Jersey operator, for $24 million. The acquired stores had annual volume of $120 million. In 1990 Foodarama was operating 26 supermarkets, plus the two adjacent liquor stores and two adjacent garden centers. Nineteen of the 26 were in New Jersey, five on Long Island, and two in Pennsylvania. They ranged in size from 26,000 to 75,000 square feet. Eighteen of the 26 had in-store pharmacies. Foodarama also was operating a bakery in Eatontown, New Jersey.

The acquisition of the Hilltop stores enabled Foodarama Supermarkets' sales to reach $673.1 million in fiscal 1990, but net income was only a little more than $1 million. The company's long-term debt reached a troublesome $71.7 million in early 1991. Although Foodarama's revenues reached a peak of $695.3 million in fiscal 1991, the company lost $553,000 and also lost money for two of the next three years. At the company's annual meeting the following spring, Saker said that the recession had continued to "cast a cloud over shoppers' buying habits last year."

In order to increase its profits, Foodarama Supermarkets now was counting on its 11 World Class stores, which were placing an emphasis on service and nonfood departments and on upscale goods that would allow higher markups than the chain's bread-and-butter grocery items. Among the specialty nonfood items at some of the 11 were expensive watches and perfumes and gourmet kitchen utensils. At the same time, Foodarama was discounting such items as greeting cards and paperback books as well as selling high-ticket goods such as television sets at promotional prices to draw in shoppers.

In order to meet competition from the spreading number of deep discounters and price-club operators, Foodarama also had begun adding warehouse-outlet units of 3,000 to 7,000 square feet to some stores. Space for these units was found in the back rooms of ten stores and stocked with some 1,500 grocery, perishable, and nonfood items at prices matching those of the clubs. In addition, in September 1992, all 182 ShopRite supermarkets in five states cut prices on more than 3,000 health and beauty care items.

The competitive challenge of the price clubs also led Foodarama to establish bigger stores, especially a 113,000-square-foot outlet in Neptune, New Jersey, that replaced an earlier 28,000-square-foot one. To lure shoppers farther away from this store than the usual two- or three-mile radius, the new superstore began, in 1993, to offer a rabbi-supervised "Kosher Experience." Building on Foodarama's ten years in ultra-Orthodox Lakewood, New Jersey, the Neptune store offered thousands of stockkeeping units of fresh, frozen, and shelf-stable kosher items, including a delicatessen island.

So large was Foodarama's Neptune store that its 30,000 square feet of selling space for nonfoods products was larger than most conventional supermarkets. It included sections for sporting goods, books and magazines, consumer electronics and camera equipment, automotive needs, flowers, and clothing and accessories. The health and beauty care section included 65 feet for hair care and 43 feet for vitamins. The warehouse store in back "could easily fill a basketball court," wrote Frank Hammel. Its stock included stereos, radios, microwave ovens, and television sets. A leased video store was to open in the front of the store. Foodarama officials saw this gigantic unit as an attraction for every consumer in Monmouth County.

But in the face of an impending $2 million loss on reduced revenues in fiscal 1993, Foodarama Supermarkets was forced to sell its five Long Island stores to Grand Union for a total of $18.3 million. In February 1994 the company announced that it had defaulted on $35.2 million of loans and disclosed increasing operating losses. A restructuring of the company was made possible a year later, when it received a credit and loan facility of $38 million in order to pay three bank creditors and certain senior noteholders a total of $32.9 million. A year later Foodarama sold its two Pennsylvania stores to Wakefern for $8.3 million.

Two World Class Foodarama ShopRite stores opened in 1996, in Marlboro and Montgomery, New Jersey. Another opened in February 1998 in East Windsor as a replacement for an older, smaller unit in Highstown. A fourth opened in late 1998 in Bound Brook, and three more were expected before the end of 2000. Three leases had been signed by April 1998 for replacement locations, with additional plans to expand one existing store and the expansion of the chain's Long Branch store also under way.

After putting its finances in order Foodarama Supermarkets returned to the black, but its profit remained thin, with net income of only $1.1 million in fiscal 1997 on sales of $636.7 million. These totals improved to $1.8 million and a record $697.4 million, respectively, in fiscal 1998. Of the 1998 sales, groceries accounted for around 40 percent; dairy and frozen foods, 16.5 percent; meats, poultry, and seafood, 11 percent; nonfoods, ten percent; produce, 8.5 percent; appetizers and prepared foods, six percent; pharmacy, four percent; bakery, two percent; and liquor, floral, and garden centers, two percent. Products under the ShopRite label came to 17 percent of sales in fiscal 1997.

All of the company's 21 stores were being leased in 1998 and ranged in size from 30,000 to 101,000 square feet. The 15 World Class supermarkets were significantly larger than conventional ones and featured such premium services as fresh fish on ice, prime-meat departments with butcher service, imported cheese cases, salad and snack bars, bulk foods, and pharmacies. Many of these services were also available in the other stores. Foodarama's bakery was now in Howell, New Jersey. Its facility for meat and prepared foods was in Linden, New Jersey.

Joseph Saker, still chairman and president of Foodarama Supermarkets, owned 30 percent of the company's common stock in February 1998. Saker family members collectively owned 43 percent. The company's long-term debt was $50.7 million at the end of fiscal 1998. Foodarama held a one-eighth share of Wakefern.

Principal Subsidiaries: New Linden Price Rite, Inc.; ShopRite of Malverne, Inc.; ShopRite of Reading, Inc.

Further Reading:

  • Barr, Stephen, "CEOs: Masters of NO Degree," Business Journal of New Jersey, April 1992, pp. 30+.
  • Duff, Mike, "Ready for a Fight," Supermarket Business, September 1991, pp. 187-89.
  • Elson, Joel, "Foodarama Develops Format to Fight Clubs," Supermarket News, April 20, 1992, p. 42.
  • ----, "Foodarama Sets Growth by Construction," Supermarket News, April 13, 1998, p. 4.
  • Hammel, Frank, "Now, Here's an Unorthodox Instore Service!" Supermarket Business, January 1994, pp. 65-66, 71.
  • Lewis, Leonard, "Foodarama's Final Round: Long Wakefern Fight Lost," Supermarket News, December 3, 1979, pp. 1, 12.
  • Mendelson, Seth, "Foodarama's Nonfoods Smorgasbord," Supermarket Business, March 1994, pp. 88-89, 92.
  • Norris, Floyd, "Why Not Shop Around?" Barron's, August 4, 1986, p. 30.
  • Wahlgren, Gary, "Foodarama Supermarkets, Inc.," Wall Street Transcript, March 8, 1971, p. 23,419.

Source: International Directory of Company Histories, Vol. 28. St. James Press, 1999.