Albertsons and...Sprouts?

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pseudo3d
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Albertsons and...Sprouts?

Post by pseudo3d »

I'm not so sure about this one, really. I think that they should just stick to what they know or at least a business that provides better crossover with their offerings. I'd rather see them try to improve their existing stores and start expanding in their markets.

http://www.reuters.com/article/us-alber ... SKBN16Q0XG
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Re: Albertsons and...Sprouts?

Post by storewanderer »

This would ruin Sprouts, but Sprouts has always struck me as a fly by night sort of operation (providing its rather meh format to replace the superior Henry's and Sunflower formats) so it would not surprise me to see them sell out.

It would not surprise me to see this happen, but how much would this add to Albertsons debt? Albertsons already does not turn a profit and additional acquisitions of this size would, I assume (??) add debt...

Also there is overlap and I would expect they would need to do some divesting...
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Re: Albertsons and...Sprouts?

Post by pseudo3d »

storewanderer wrote:This would ruin Sprouts, but Sprouts has always struck me as a fly by night sort of operation (providing its rather meh format to replace the superior Henry's and Sunflower formats) so it would not surprise me to see them sell out.

It would not surprise me to see this happen, but how much would this add to Albertsons debt? Albertsons already does not turn a profit and additional acquisitions of this size would, I assume (??) add debt...

Also there is overlap and I would expect they would need to do some divesting...
Sprouts does operate in at least parts of former ABS or now ABS owned chains, would be nice to see them reclaim that real estate (and expand!), but it would be a better solution to (and I hate to say this) dismantle Sprouts and add their best practices into their respective chains. The problem is that otherwise they'd basically operate another grocery store, existing Sprouts stores will suffer as the distribution changes, customers will leave, bad things happen. This isn't some small regional operation like Bristol Farms.

But again, I'd rather not see that happen at all, and invest the money that would've gone toward Sprouts (which would've gone toward Price Chopper) into the chain's existing stores. Improve service, lower prices, increase volume.
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Re: Albertsons and...Sprouts?

Post by CalItalian »

Would probably result in some store locations being required to be sold off (they are classified as the same type of store by the feds). In Culver City, Sprouts (former Circuit City) and Pavilions are within three blocks of each other. Sprouts in West L.A. is a former Albertsons and a Vons is 1/2 a mile away. Sprouts in San Pedro is down the street (1 mile) from a newly reopened Albertsons (former Haggen & Albertsons).
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Re: Albertsons and...Sprouts?

Post by Knight »

The possibility of a supermarket acquiring a specialty organic grocer is interesting. Albertson's would view Sprouts Farmers Market's stores in the southeastern United States as opportunities to enter and re-enter markets. Sprouts Farmers Market has the risk of positioning itself from a specialty organic grocer to a supermarket.

Does Albertson's acquiring Southeastern Grocers, discussed in the thread "Southeastern Grocers consolidating private label brands across all banners," remain a possibility?
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Re: Albertsons and...Sprouts?

Post by arizonaguy »

Every Sprouts store in the Phoenix area is within 1-2 miles of an Albertsons or Safeway store.
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Re: Albertsons and...Sprouts?

Post by Knight »

The possible acquisition would mean store divestment or closings in the southwestern United States. If Albertson's wants to acquire a participant in the southeastern United States, it should consider taking on what is left of Southeastern Grocers.
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Re: Albertsons and...Sprouts?

Post by pseudo3d »

I think Sprouts is fueling itself with new store growth. Sooner or later that's going to pop and the fortunes of Sprouts or whoever taking it will fall drastically. Many a Sprouts have found a home in half of an Albertsons, and that square footage is really small for a full line supermarket and too small for a Trader Joe's. Unless you could manipulate landlords to "reclaim" extra space for a full-size supermarket, it doesn't seem like a worthwhile pursuit.

Unless that was never the plan all along. Suppose Albertsons' end goal is to take out a competitor and use Sprouts as a reverse merger so it can have its precious IPO. Problem is it would cost the same billions they were planning to raise with the IPO.
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Re: Albertsons and...Sprouts?

Post by storewanderer »

Sprouts is definitely fueling itself with store growth like other bubble retailers we have seen that are no longer with us or having problems now. But there are some things in Sprouts favor: smaller average store sizes, lower expense structure (low labor costs and lower inventory levels), etc. I have been to some Sprouts Stores that are VERY busy and look to have pretty good velocity but I have also been to quite a few that clearly have some problems.

Lately Sprouts has been trying to expand its perishables to try and compete better and its newest stores have a much more compelling perimeter than its older stores with a larger deli, larger soup/salad bar, larger bakery, larger service meat, etc. I am suspecting this expansion is messing up their previous low labor/low expense structure with the money that is needed to run these departments, additional labor, and additional shrink. Sprouts has also added a lot more SKUs to center store (shelves have been made higher, etc.) and I am wondering if they are having movement problems there too.

My observation of Sprouts is their stores sell a ton of produce, bulk foods, and a ton of low margin meat items (like boneless skinless chicken breasts), along with some movement in dairy, but outside of that, they do not move much product; center store is way overpriced and does not move well, vitamins do not move well at all, and their deli/bakery areas also look pretty slow.

I like Sprouts but I have had some quality issues with produce. I am not sure they sell first quality produce in all cases... they also source from very far away, like New York Apples in California. Nobody else does that. I appreciate the variety, but not the dryness or mushiness of those long-transported apples.

As far as Albertsons buying Sprouts goes, how does that impact the image of Sprouts? How will that impact the image of Sprouts if it is expanded into new markets and introduced to the public by media reports or similar as being "owned by Albertsons?"

Kroger already has its arrangement/partnership with "Lucky's Market" but it seems to end there: there is no Kroger product in those stores, they are not on Kroger systems, and have completely separate management. Since Kroger does not actually own it, there is no connection made to them and "Lucky's" in media, etc.
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Re: Albertsons and...Sprouts?

Post by architect »

storewanderer wrote:Sprouts is definitely fueling itself with store growth like other bubble retailers we have seen that are no longer with us or having problems now. But there are some things in Sprouts favor: smaller average store sizes, lower expense structure (low labor costs and lower inventory levels), etc. I have been to some Sprouts Stores that are VERY busy and look to have pretty good velocity but I have also been to quite a few that clearly have some problems.

Lately Sprouts has been trying to expand its perishables to try and compete better and its newest stores have a much more compelling perimeter than its older stores with a larger deli, larger soup/salad bar, larger bakery, larger service meat, etc. I am suspecting this expansion is messing up their previous low labor/low expense structure with the money that is needed to run these departments, additional labor, and additional shrink. Sprouts has also added a lot more SKUs to center store (shelves have been made higher, etc.) and I am wondering if they are having movement problems there too.

My observation of Sprouts is their stores sell a ton of produce, bulk foods, and a ton of low margin meat items (like boneless skinless chicken breasts), along with some movement in dairy, but outside of that, they do not move much product; center store is way overpriced and does not move well, vitamins do not move well at all, and their deli/bakery areas also look pretty slow.

I like Sprouts but I have had some quality issues with produce. I am not sure they sell first quality produce in all cases... they also source from very far away, like New York Apples in California. Nobody else does that. I appreciate the variety, but not the dryness or mushiness of those long-transported apples.

As far as Albertsons buying Sprouts goes, how does that impact the image of Sprouts? How will that impact the image of Sprouts if it is expanded into new markets and introduced to the public by media reports or similar as being "owned by Albertsons?"

Kroger already has its arrangement/partnership with "Lucky's Market" but it seems to end there: there is no Kroger product in those stores, they are not on Kroger systems, and have completely separate management. Since Kroger does not actually own it, there is no connection made to them and "Lucky's" in media, etc.
My biggest worry with Albertsons potentially acquiring Sprouts is the damage such an acquisition could do to Sprouts' fundamentals. Although Sprouts seems to be growing consistently now, most of this growth seems to be through new stores (as mentioned previously) rather than broadening the stores' shopper base. If Albertsons was to come into the picture, Sprouts would likely lose it's health-conscious and independent image among consumers, many of whom frequent the stores to avoid the "corporate grocery" atmosphere, and are the frequent shoppers buying the produce/bulk items/dairy as you mentioned. In many ways, Sprouts has failed to move outside of this "healthy living" demographic, unlike chains such as Wegmans, Mariano's and Central Market which have targeted a much wider "high-end and specialty" shopper base, which includes the aforementioned health-focused consumers. This would also make the chain difficult to integrate within Albertsons' portfoilo, as many of the efficiencies which could be gained by integrating Sprouts into the rest of the company structure could also be the same moves which drive shoppers away. This could also allow Kroger to gain ground by acuiring a controlling interest in Lucky's and attempting to take out Sprouts while it is in a weak state under Albertsons bureaucracy.

Side note: Another huge issue would be divestitures. Many of the markets previously affected by the Safeway acquisition would likely be affected, particularly SoCal, Phoenix/Tucson, Denver, DFW, and potentially Las Vegas. In addition, anti-trust concerns could even be raised in cases in other markets such as Albequerque and Austin where Sprouts occasionally has stores adjacent or close to current Albertsons-bannered operations.
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