storewanderer wrote: ↑October 14th, 2022, 1:52 pm
retailfanmitchell019 wrote: ↑October 14th, 2022, 1:35 pm
I think when all is said and done, there could be 2 banners used for Kroger. Albertsons could be used west of the Mississippi, Kroger east of the Mississippi. Jewel on the other hand? Up in the air.
I don't think Jewel is going to be touched. Jewel is too profitable to be touched. There is no overlap to speak of (Mariano's and F4L are different formats). There is zero benefit to rebranding Jewel.
Same goes for Safeway NorCal, OR, WA. There is no reason to rebrand. The chain is dominant and widely utilized by consumers.
My guess for these guys going forward is they run banners for conventional stores in markets with overlap and at the end of the day I don't think the Albertsons banner survives either. Would be interesting if both banners Albertsons and Vons go to "SpinCo" for exclusive use.
This also assumes Fred Meyer stays Fred Meyer.
NorCal, OR, WA, HI, Alaska- Safeway
SoCal - Ralphs
AZ - Frys
UT/NM/NV - Smiths
WY/MT/ID/SD/ND - mix of Smiths and King Soopers/City Market
TX/Arkansas - Kroger
CO - King Soopers/City Market (expect some smaller marginal Safeways in the rurals to be converted to City Market)
*one wild card here- do you let the United Stores stay as United (including rebranding their Albertsons Market units into United)?
I'm really convinced that the banners are going away. This whole situation is giving me distinct vibes of Kroger's former Cincinnati neighbor (Federated Department Stores) merger with May Company.
Around the time of that merger announcement, Federated converted its stores from the different regional banners to the Macy's banner (and rebranded everything it acquired to Macy's as well).
Kroger management has been quoted as wanting to make Kroger into a nationwide grocer and I think they intend to use the Kroger banner (with that fruit basket logo which reminds me of the Macy's "star" that they started putting everywhere right before re-bannering everything to Macy's as well). The new Fry's store that opened about 2 weeks ago has the fruit basket logo next to the Fry's logo on the outside of the building.
This merger doesn't seem to make much sense to me other than eliminating its main competitor (other that Walmart) out west. The "new" markets would be:
Northern California: Kroger has had a presence here before with Fry's (failed in the 1980s), Ralph's (failed in the early 2000s).
Chicago: Kroger itself failed there 1970. It currently has a token presence with Mariano's and Food4Less.
Boston / New England: It's buying a damaged chain that is #3 in market share behind Ahold Delhaize's combination of Stop and Shop / Hannaford and a very strong independent in Market Basket.
DC / MD / VA /Southeast PA / DE / NJ / NY: It's buying a group of somewhat neglected stores from a hodge podge of different original owners. There is also no shortage of competitors in this region (including a token presence of Kroger itself). Like Boston / New England Ahold Delhaize is the stronger chain here (with its various banners) and this market has become a free for all with Wegman's, Lidl, Publix, etc. all showing interest.
West Texas, El Paso, and Austin: United seems like a good chain with nice stores but its territory is being invaded by H-E-B. Kroger also had previously exited the El Paso market (with Smith's stores there). The Austin stores seem like a token presence that do not have a long term future with Kroger.
The above markets are pretty much it. Kroger wants to be a national chain but even after spending this kind of money it won't have any stores in Cleveland, Pittsburgh or St. Louis (all fairly short drives from Cincinnati). It gets 2 behemoth divisions (Northern California and Chicago), a sinking ship on the East Coast, and a bunch of duplicative stores in almost every region it operates in on the West Coast.
I find it laughable that they think that they'll only need to divest 100 - 375 stores. They're not HEB (in San Antonio) or Publix (in Florida) where they can get away with having a grocery store on every corner as they're publicly traded and shareholders will have less tolerance for stores that drag down the bottom line to simply preserve market share. However, this is exactly the scenario that will play out in Arizona, Colorado, SoCal, Nevada, New Mexico, Idaho, Oregon and Washington if this merger goes through. Maybe they think they can sell the land (that they own) for these duplicative stores to developers who will build condos or apartments on them or they can deed restrict others from occupying the stores.
If they really only divest this number I think that within 2 - 3 years of the merger they'll close (at minimum) another 100 - 375 stores.
Looking at the combined footprint of 5,000 stores I'd expect that the final number (within 5 years) will end up at around 3500 stores (so they'll close 1500 stores or the equivalent of Safeway before it merged with Albertsons). Of course nobody in the media will report that 1500 stores will close but it is by far the most likely outcome (based upon past history).
Another thought that popped into my head is that instead of outright closing stores, it will convert a number of locations to pickup and delivery hubs (Order is made at Ocado warehouse ---> sent to a "dark" store ---> picked up at the "dark" store and then delivered to the customer). This could reduce the "pickup" traffic at the stores open to the public and declutter the stores. A pickup and delivery only store could also potentially service a larger trade area.
If I really truly wanted to grow Kroger and I was running it, I would've bought Giant Eagle, Ahold Delhaize USA, Schnuck's, and Cub Foods. This combination would've required far fewer divestures (simply around Columbus and maybe the Harris Teeter stores in DC/MD/VA) and would've given Kroger stores that are better run in better market positions. Then if I was running Kroger I'd wait for the impending Albertsons implosion and buy the scraps in Northern California and Illinois for pennies on the dollar.
HEB, Hy Vee, Publix and Wegman's didn't view Kroger as a threat prior to this merger announcement (as they've announced more and more new stores locations into Kroger's current territory). If I was running any of those chains I'd say that those executives might've bet on the right horse and their continued expansion into Kroger territory may yield good results. This merger, if it goes through, looks like it's Albertsons / ASC all over again.