The Great Grocery Consolidation of the 21st Century

[wnetmacman]

With this week's announcement that Kroger is purchasing Roundy's, which brings them back to Wisconsin/Northern Illinois, I have a question to pose to you guys:

As Kroger has operated in this area before, this continues a trend I've seen where grocers leave an area where they previously operated, but return later by purchasing a competitor. This really picked up steam when Safeway bought Randalls/Tom Thumb in Texas some time back. Safeway had operated in Texas for many years; more so in Dallas than Houston, but left both high and dry in the late 80's. Neither area had any real nice taste in their mouths for Safeway; then one day, BAM, and they're instantly back. Soon after, all the stores get the Safeway Lifestyle look, and they are Safeway in all but name.

We know because of Genuardis and Dominick's that Safeway wasn't very good at this. Kroger, on the other hand, had done fairly well with this.

Kroger bought up large portions of the west coast business, with Ralphs, Fry's and Smiths/Fred Meyer. Those stores are doing fairly well. Yes, they've closed some in places where the original operator may have kept a marginal store running, but for the most part, they do well.

So here's my question: Do we really benefit from this consolidation, or does it just make the large companies larger? Safeway kind of grew, then shrank, then joined into the Albertsons party. Albertsons split, cut the fat, then rejoined. Kroger has just continually grew, and now their reach will be even larger. I'm not sure this is working for us. So many of the regional stores we had in the 70's have been lost either to larger companies or consolidation, or eventual closure due to consolidation (Kohl's, Farmer Jack, Dominck's and Genuardis, to name a few).

Not all failures have been immediate. Winn Dixie operated the former Kimball Foods/Buddies supermarkets for almost 30 years before giving them up. A&P ran several places for a while before giving up the ghost.

[mbz321]

The grocery business has changed tremendously, even in just the last 10 years, and today, it's 'kill or be killed'. There have been a multitude of new shopping trends....a lot of people no longer do a big 'once a week' grocery trip, but pick up things here and there. A lot of people tend to eat out more often than 20 years ago, reducing money being spent at food stores. More people want specialty items, which is where places like Trader Joe's and Whole Foods and the like have flourished. People want low prices and high quality and are less brand-loyal than the past, which is where the ever-growing Aldi comes into play. Families want to buy in bulk to save money and reduce trips to the store...Costco, BJ's, Sam's Club have all eroded the traditional grocery business. Walmart has helped quicken the demise of a lot of smaller regional grocery chains in rural areas, but in some cases, I would say Walmart has actually been an improvement in some instances. Then there are even more non-traditional sources for food...Dollar Tree, Dollar General, grocery outlets, Pharmacy chains, even large convenience stores are grabbing more of the share than they used to.

Traditional grocery chains that really have nothing unique to offer (Kroger/Albertsons/Winn Dixie/Ahold-owned stores, etc.) have to join together to stay afloat. It certainly doesn't usually benefit the workers, especially as Union grocery chains become the thing of the past, but it does keep grocery prices relatively stable, IMO.

[Super S]

It's not just the grocery business consolidating. Examples: Kmart/Sears. Office Depot/OfficeMax. Chevron/Texaco. PayLess/Thrifty/Rite Aid. Chrysler/Fiat. Whirlpool/Maytag. United/Continental. Schuck's/O'Reilly. In many instances, after the mergers we end up with less selection and higher prices. The lines get blurred as to the things the pre-merger chains were good at. And the things that they were bad at never seem to disappear.

Consolidation is generally not a good thing.

[wnetmacman]

It's not just the grocery business consolidating. Examples: Kmart/Sears. Office Depot/OfficeMax. Chevron/Texaco. PayLess/Thrifty/Rite Aid. Chrysler/Fiat. Whirlpool/Maytag. United/Continental. Schuck's/O'Reilly. In many instances, after the mergers we end up with less selection and higher prices. The lines get blurred as to the things the pre-merger chains were good at. And the things that they were bad at never seem to disappear.

Consolidation is generally not a good thing.

The comparisons you make here are, for the most part, big player buys big player. I never understood Sears/Kmart, except as an attempt to keep both around a little longer. Office Max was a dying brand that Office Depot saved from extinction, and now both are about to become part of Staples, should all go along as planned. Chrysler has been bought and sold twice; first by Daimler, then by Fiat. It really looks like American Motors in the 80's with their purchase by Renault, only to be sold off to Chrysler later.

I agree with your statement; consolidation tends to blur what each individual chain was good at, and it's never good. I have long since forgotten why we still have Sears. The things they were known for (Appliances, Tools, Auto Repair) are all now being done better elsewhere. Craftsman no longer has the buying power it once did. Kenmore was once the #1 brand of appliance; you can't say that any longer.

What else do we stand to lose by this? Had Standard Oil been a player today, would we see the Sherman Anti Trust Act causing the Supreme Court to split them up? How would some of these companies be split? This is something that has had my attention for some time. I believe there is merit to Kroger operating under so many different names: Can't have a monopoly if your name isn't everywhere. Albertsons is doing the same; operating now different named stores in the same towns. And Walmart....well.....they are the only one whose main vehicle of growth hasn't been acquisitions in the U.S. (only one large 100+ store merger in their history). When does it end? When will we be shopping at AlWalKroMart?

[veteran+]

I agree Super S.

The diminishing of choice is at play. Choice of where to shop and choice of where to work. As the scope of choice diminishes, people lose power and by de-facto corporations gain power.

Overwhelmingly and in time, this does not bode well for the employee or the consumer (regardless of the promises in the promulgated rhetoric).

[jamcool]

Yet there are more places to buy groceries including on-line, than 20 years ago

[wnetmacman]

Yet there are more places to buy groceries including on-line, than 20 years ago

I wholeheartedly disagree with this statement. I'll use where I live, Lafayette, LA, as an example.

Lafayette currently is served by three chains and a couple of independants.

Albertsons has 4 stores in the area. Winn Dixie has 2. Walmart has 4 Supercenters. There are four stores owned independently.

Lafayette, in the past, was served by National/Canal Villere/The Real Superstore (at least 4 stores), Kroger (3 stores), 2 more Winn Dixies, an additional Albertsons, 5 Piggly Wiggly stores, a Super Kmart and 4 Delchamps. There are 1/3 the number of possible places to shop. And the ones who are still here have diminished their presence. This is true in any large City:

Dallas: find out how many Minyard stores there are now. There were once over 100. Winn Dixie doesn't exist there any more, and most of their stores were just shut down.

Houston: Albertsons, Safeway, Weingarten....

Chicago: Dominick's, Kroger, A&P....

There are FAR less places to go now. Some just closed. Others sold out.

[klkla]

There are definitely fewer conventional grocery stores in existence now, but there are many more ways to buy groceries.

In my neighborhood in LA there is only one mainline supermarket, a Ralphs Fresh Fare. But there is also a Whole Foods, Smart & Final Extra and WalMart Neighborhood market that have all opened in the last three years. We also have Amazon Fresh available and a lot of my neighbors use it and I have, as well. We also have InstaCart that delivers from Gelson's, Whole Foods and Costco. And as mentioned in an earlier post most people eat outside of home more often than they did in the past.

So, while the conventional supermarket will continue to have a role in the future, it's going to be a much smaller role. There are just too many other options and a conventional supermarket cannot be everything to everybody.

[BillyGr]

Yet there are more places to buy groceries including on-line, than 20 years ago

I wholeheartedly disagree with this statement. I'll use where I live, Lafayette, LA, as an example.

Lafayette currently is served by three chains and a couple of independants.

Albertsons has 4 stores in the area. Winn Dixie has 2. Walmart has 4 Supercenters. There are four stores owned independently.

Lafayette, in the past, was served by National/Canal Villere/The Real Superstore (at least 4 stores), Kroger (3 stores), 2 more Winn Dixies, an additional Albertsons, 5 Piggly Wiggly stores, a Super Kmart and 4 Delchamps. There are 1/3 the number of possible places to shop. And the ones who are still here have diminished their presence. This is true in any large City:

But regardless of the actual number of stores, how has the assortment changed?

You mention 3 chains (Albertsons/WinnDixie/Walmart) and 4 "independent" stores, which makes 7 different "brands" to shop at in the city somewhere.

Where in the past you had that National bunch(I assume that was one chain under several names?)/Kroger/WinnDixie/Albertsons/PigglyWiggly/SuperK/DelChamps, which also makes 7 different "brands".

So a loss of actual store count, but not a loss of choice in brands?

Let me use an area here to explain:
In the 1980's one had in a particular area these brands : Albany Public (2), Price Chopper(2), Star Markets, A&P, Grand Union, Shoprite(or Great American - same location at a different time). So 8 locations, 6 brands.

Today: Price Chopper, Hannaford, Aldi, Super Walmart. 4 Locations, 4 Brands. That is a 33% reduction in the choices of brands (even though a 50% reduction in physical store locations).

[wnetmacman]

You mention 3 chains (Albertsons/WinnDixie/Walmart) and 4 "independent" stores, which makes 7 different "brands" to shop at in the city somewhere.

Where in the past you had that National bunch(I assume that was one chain under several names?)/Kroger/WinnDixie/Albertsons/PigglyWiggly/SuperK/DelChamps, which also makes 7 different "brands".

So a loss of actual store count, but not a loss of choice in brands?

Of the 4 independents, two are the same company. They were the old Piggly Wiggly stores, but rebranded as a new brand called Shoppers Value Foods. The other two are on opposite ends of town. Those two existed WITH the 7 old brands, as did the Super K and Delchamps. To add things up:

Formerly:
Delchamps 4 stores
Albertsons 5 stores
Winn Dixie 4 stores
Kroger 3 stores (at maximum)
National et al 4 stores
Walmart 4 stores
Inds. 3 stores (one with 2 locations)
Piggly Wiggly 5 stores
Super Kmart 1 store
A&P 3 stores

Total stores: 36


Currently:
Albertsons 4 stores
Walmart 4 stores
Winn Dixie 2 stores
Inds. 4 stores (one with 2 locations)

Total stores: 14

That means there are now 38.9% of the number of stores we used to have. That's a reduction in choices. That's my point here. The only other choice in town (120,000 residents) is Whole Foods and Sam's. Lines are long.