🛒 Kroger-Albertsons Merger: National Impact

This is the place for general and miscellaneous posts on topics which might extend past the boundaries of any specific region. No non-grocery posts.
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Re: 🛒 Kroger-Albertsons Merger: National Impact

Post by ClownLoach »

retailfanmitchell019 wrote: January 3rd, 2024, 6:22 pm Arizona AG Kris Mayes cites antitrust laws for the state’s opposition to the merger:
https://ktar.com/story/youtube_videos/v ... ns-merger/

AZ is another battleground for the merger: Albertsons/Kroger would get a combined 40% market share in Metro Phoenix without divests. In Tucson (Pima County), the combined share is closer to 50% (Walmart is weaker in Tucson due to a lack of Supercenter presence).
I don't think that Arizona is as big of a deal as the PNW is though. They have legitimate competition in the market including urban areas; there really isn't anything conventional in the PNW on a large basis. Does the competition execute well? Not really (Bashas) but they could if they were better operated and that isn't the job of the government to manage their business. They have Walmart all over the place too. The PNW is really ACI or KR only for all intents and purposes, with limited Walmart presence in the urban areas. As far as Tucson goes, Walmart could fix that issue in a six month long remodel campaign just like they did in SoCal where so many regular stores had their assortments "compressed" to add in full grocery (even though some had it cut back later, such as Tustin which lost its deli and bakery for more backroom storage).

This also probably should be moved to the regional discussion instead of national.
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Re: 🛒 Kroger-Albertsons Merger: National Impact

Post by storewanderer »

ClownLoach wrote: January 4th, 2024, 12:11 pm
retailfanmitchell019 wrote: January 3rd, 2024, 6:22 pm Arizona AG Kris Mayes cites antitrust laws for the state’s opposition to the merger:
https://ktar.com/story/youtube_videos/v ... ns-merger/

AZ is another battleground for the merger: Albertsons/Kroger would get a combined 40% market share in Metro Phoenix without divests. In Tucson (Pima County), the combined share is closer to 50% (Walmart is weaker in Tucson due to a lack of Supercenter presence).
I don't think that Arizona is as big of a deal as the PNW is though. They have legitimate competition in the market including urban areas; there really isn't anything conventional in the PNW on a large basis. Does the competition execute well? Not really (Bashas) but they could if they were better operated and that isn't the job of the government to manage their business. They have Walmart all over the place too. The PNW is really ACI or KR only for all intents and purposes, with limited Walmart presence in the urban areas. As far as Tucson goes, Walmart could fix that issue in a six month long remodel campaign just like they did in SoCal where so many regular stores had their assortments "compressed" to add in full grocery (even though some had it cut back later, such as Tustin which lost its deli and bakery for more backroom storage).

This also probably should be moved to the regional discussion instead of national.
What I am curious about when this all settles down is what happens to Albertsons stock price. I think their stock price will actually rise as a result of this merger failing and if you don't think the merger will go through you could make some money buying the stock of ACI. I also think the merger failing will boost morale within ACI which will better help them drive sales. There is a lot of uncertainty at this point, people don't know what will be divested, if Kroger will bring its own people in to run what is kept (unlikely in my opinion- the Kroger people are already stretched far too thin), etc.

And Kroger- I don't know. I am seeing less and less impressive operations out of Kroger. I am not really sure what it will take for Kroger to start operating stores better again. Some areas definitely look better than others but the type of operations I am seeing do not strike me as the type of operations a company that is about to add hundreds of stores should have. They need to operate better.
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Re: 🛒 Kroger-Albertsons Merger: National Impact

Post by ClownLoach »

storewanderer wrote: January 5th, 2024, 12:29 am
ClownLoach wrote: January 4th, 2024, 12:11 pm
retailfanmitchell019 wrote: January 3rd, 2024, 6:22 pm Arizona AG Kris Mayes cites antitrust laws for the state’s opposition to the merger:
https://ktar.com/story/youtube_videos/v ... ns-merger/

AZ is another battleground for the merger: Albertsons/Kroger would get a combined 40% market share in Metro Phoenix without divests. In Tucson (Pima County), the combined share is closer to 50% (Walmart is weaker in Tucson due to a lack of Supercenter presence).
I don't think that Arizona is as big of a deal as the PNW is though. They have legitimate competition in the market including urban areas; there really isn't anything conventional in the PNW on a large basis. Does the competition execute well? Not really (Bashas) but they could if they were better operated and that isn't the job of the government to manage their business. They have Walmart all over the place too. The PNW is really ACI or KR only for all intents and purposes, with limited Walmart presence in the urban areas. As far as Tucson goes, Walmart could fix that issue in a six month long remodel campaign just like they did in SoCal where so many regular stores had their assortments "compressed" to add in full grocery (even though some had it cut back later, such as Tustin which lost its deli and bakery for more backroom storage).

This also probably should be moved to the regional discussion instead of national.
What I am curious about when this all settles down is what happens to Albertsons stock price. I think their stock price will actually rise as a result of this merger failing and if you don't think the merger will go through you could make some money buying the stock of ACI. I also think the merger failing will boost morale within ACI which will better help them drive sales. There is a lot of uncertainty at this point, people don't know what will be divested, if Kroger will bring its own people in to run what is kept (unlikely in my opinion- the Kroger people are already stretched far too thin), etc.

And Kroger- I don't know. I am seeing less and less impressive operations out of Kroger. I am not really sure what it will take for Kroger to start operating stores better again. Some areas definitely look better than others but the type of operations I am seeing do not strike me as the type of operations a company that is about to add hundreds of stores should have. They need to operate better.
I suspect Kroger has been following the lead of other short-sighted retailers and has been reducing overall supervision of their stores. Many retailers have been cutting back District and Regional managers who supervise and address whole store execution. They do this to then add specialized leadership positions that only focus on execution of online ordering programs, delivery, etc. This would be right in the Kroger playbook based on what we see. So you see the store focusing more on a unproductive and unprofitable area of the business while missing "the big picture" of running a neat, clean, full and fresh store with good service for all.

I am not anti e-commerce, in fact I have experienced career success as I implemented such programs in my career. But I also recognize that too many retailers are overreacting to the vapid threats of annihilation by Amazon, and as a result they undermine themselves and give the customer more reason to just stay at home and order by allowing dirty, poorly stocked stores with bad service as they take workers off the sales floor, off the register, etc. and move them to picking orders. A few customers get a benefit of store workers shopping for them, but they were almost assuredly customers anyway (so little to no net new business) while the majority of customers get a worse experience. In this grocery industry especially I continue to see that the companies who make the least amount of effort to secure e-commerce business operate the best stores. It's not a coincidence.
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Re: 🛒 Kroger-Albertsons Merger: National Impact

Post by veteran+ »

Spot on again!
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Re: 🛒 Kroger-Albertsons Merger: National Impact

Post by marshd1000 »

At least as of January 5th, the merger is still alive as Kroger, Albertsons and the FTC are still talking. Here’s the latest!

https://boisedev.com/news/2024/01/05/al ... r-ftc-neg/

https://seekingalpha.com/news/4052714-k ... etails-ftc
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Re: 🛒 Kroger-Albertsons Merger: National Impact

Post by Romr123 »

[/quote]

I suspect Kroger has been following the lead of other short-sighted retailers and has been reducing overall supervision of their stores. Many retailers have been cutting back District and Regional managers who supervise and address whole store execution. They do this to then add specialized leadership positions that only focus on execution of online ordering programs, delivery, etc. This would be right in the Kroger playbook based on what we see. So you see the store focusing more on a unproductive and unprofitable area of the business while missing "the big picture" of running a neat, clean, full and fresh store with good service for all.

I am not anti e-commerce, in fact I have experienced career success as I implemented such programs in my career. But I also recognize that too many retailers are overreacting to the vapid threats of annihilation by Amazon, and as a result they undermine themselves and give the customer more reason to just stay at home and order by allowing dirty, poorly stocked stores with bad service as they take workers off the sales floor, off the register, etc. and move them to picking orders. A few customers get a benefit of store workers shopping for them, but they were almost assuredly customers anyway (so little to no net new business) while the majority of customers get a worse experience. In this grocery industry especially I continue to see that the companies who make the least amount of effort to secure e-commerce business operate the best stores. It's not a coincidence.
[/quote]

I wonder if the better-executing stores out there (Meijer/Schnucks/HyVee/Publix/Wegmans/others?) are all private and may not be quite as sensitive to the "take out layers of management" drumbeat as the publically traded retailers.
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Re: 🛒 Kroger-Albertsons Merger: National Impact

Post by CalItalian »

marshd1000 wrote: January 8th, 2024, 3:31 pm At least as of January 5th, the merger is still alive as Kroger, Albertsons and the FTC are still talking. Here’s the latest!

https://boisedev.com/news/2024/01/05/al ... r-ftc-neg/

https://seekingalpha.com/news/4052714-k ... etails-ftc
They are not talking about anything other than the FTC extending the deadline beyond January 17. This is complete silliness. The FTC and multiple states are going to sue to block it.
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Re: 🛒 Kroger-Albertsons Merger: National Impact

Post by wnetmacman »

CalItalian wrote: January 9th, 2024, 9:30 am They are not talking about anything other than the FTC extending the deadline beyond January 17. This is complete silliness. The FTC and multiple states are going to sue to block it.
Yet the FTC has indeed allowed a lot of other silliness over the last two decades that has not been allowed before. I would wait before you automatically write this one off. I know it would create a giant monster, but the government loves giant monsters these days.
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Re: 🛒 Kroger-Albertsons Merger: National Impact

Post by ClownLoach »

wnetmacman wrote: January 9th, 2024, 11:33 am
CalItalian wrote: January 9th, 2024, 9:30 am They are not talking about anything other than the FTC extending the deadline beyond January 17. This is complete silliness. The FTC and multiple states are going to sue to block it.
Yet the FTC has indeed allowed a lot of other silliness over the last two decades that has not been allowed before. I would wait before you automatically write this one off. I know it would create a giant monster, but the government loves giant monsters these days.
I think there are many legitimate arguments against the merger, and there are many legitimate arguments for the merger. It is not as black and white as it seems on the surface.

Some of the most worrisome arguments do not make sense, the largest being concern of hundreds or thousands of stores closing and consolidating - when the price being paid per store is so substantial that the loss from liquidating/closing/severing lease etc. is so high that the only possible return on investment is to operate the store through the entire lease term.

The largest issues I have at this point are the following:

1) C&S should not have exclusive rights to divested stores. There should be an auction process on a store by store, or maybe region by region market with required commitment to operate by the buyer. A new weakling competitor like Haggen is not an adequate remedy for overlaps and if qualified local competition like Stater Bros wants to buy a large batch of stores they should be prioritized over C&S as long as they commit to operate and have the money to do so.

2) Anticompetitive behaviors must be stopped, and substantial and enforceable penalties must be in place. Specifically, if a store is closed it must be made available to the competition to operate as a full service supermarket even if that means an ethnic operator. No dead leases, no dead rent, no deals like the one where it seems Albertsons hands off unwanted stores to a gym that immediately destroys the costly grocery store infrastructure like refrigeration. If they don't want the store they may not do anything to prevent another grocery store from taking the spot. And all non compete agreements should be canceled or scaled back to only exclude direct full service competitors in the same exact center, not to include Walmart or Target etc. and force them to have a reduced assortment of foods.

3) Leadership at Kroger needs to change (this is something investors need to push back on). They demonstrate a lack of willingness to invest in the business, and are allowing poor conditions. If their intent is to run everything the Kroger way then the entire enterprise is going to collapse like a house of cards. They must approach with a merger of equals style deal where the best teams take over and best ideas win. For store brand we know Kroger wins all around and should run such operations; for the field operations I think Albertsons people are far more qualified to improve store conditions and clean up the deteriorating/inconsistent divisions like Ralphs and Smiths, while their counterparts at more successful divisions like Frys, FM, and King Soopers should be running things in those areas. I could make the argument that all of the merchandising processes should be taken over by Albertsons people who would quickly remove clutter and nonsense displays as they make room for customers to actually walk around the store (what a concept!) versus the crowded and difficult to navigate Kroger formats.
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Re: 🛒 Kroger-Albertsons Merger: National Impact

Post by brendenmoney »

ClownLoach wrote: January 9th, 2024, 6:28 pm
wnetmacman wrote: January 9th, 2024, 11:33 am
CalItalian wrote: January 9th, 2024, 9:30 am They are not talking about anything other than the FTC extending the deadline beyond January 17. This is complete silliness. The FTC and multiple states are going to sue to block it.
Yet the FTC has indeed allowed a lot of other silliness over the last two decades that has not been allowed before. I would wait before you automatically write this one off. I know it would create a giant monster, but the government loves giant monsters these days.
I think there are many legitimate arguments against the merger, and there are many legitimate arguments for the merger. It is not as black and white as it seems on the surface.

Some of the most worrisome arguments do not make sense, the largest being concern of hundreds or thousands of stores closing and consolidating - when the price being paid per store is so substantial that the loss from liquidating/closing/severing lease etc. is so high that the only possible return on investment is to operate the store through the entire lease term.

The largest issues I have at this point are the following:

1) C&S should not have exclusive rights to divested stores. There should be an auction process on a store by store, or maybe region by region market with required commitment to operate by the buyer. A new weakling competitor like Haggen is not an adequate remedy for overlaps and if qualified local competition like Stater Bros wants to buy a large batch of stores they should be prioritized over C&S as long as they commit to operate and have the money to do so.

2) Anticompetitive behaviors must be stopped, and substantial and enforceable penalties must be in place. Specifically, if a store is closed it must be made available to the competition to operate as a full service supermarket even if that means an ethnic operator. No dead leases, no dead rent, no deals like the one where it seems Albertsons hands off unwanted stores to a gym that immediately destroys the costly grocery store infrastructure like refrigeration. If they don't want the store they may not do anything to prevent another grocery store from taking the spot. And all non compete agreements should be canceled or scaled back to only exclude direct full service competitors in the same exact center, not to include Walmart or Target etc. and force them to have a reduced assortment of foods.

3) Leadership at Kroger needs to change (this is something investors need to push back on). They demonstrate a lack of willingness to invest in the business, and are allowing poor conditions. If their intent is to run everything the Kroger way then the entire enterprise is going to collapse like a house of cards. They must approach with a merger of equals style deal where the best teams take over and best ideas win. For store brand we know Kroger wins all around and should run such operations; for the field operations I think Albertsons people are far more qualified to improve store conditions and clean up the deteriorating/inconsistent divisions like Ralphs and Smiths, while their counterparts at more successful divisions like Frys, FM, and King Soopers should be running things in those areas. I could make the argument that all of the merchandising processes should be taken over by Albertsons people who would quickly remove clutter and nonsense displays as they make room for customers to actually walk around the store (what a concept!) versus the crowded and difficult to navigate Kroger formats.
Agreed, as I have mentioned in this thread, while I understand the idea of creating a replacement competitor in mergers, a replacement competitor is completely useless if they cannot effectively compete in the, or are only taking divests for the sake of selling them off for real estate, which in Southern California I am convinced that is the eventual goal of C&S to sell them to Stater, and potentially Hispanic and Asian grocery operators like HMart and Northgate as well, and I'm sure Smart & Final would want to pick up a few stores as well. Selling most of the stores directly to Stater in Southern California's case, or for other markets like Arizona, directly to Basha's/Raleys is a better option since they already have experience operating and competing in the said market.

I understand there is the idea that Stater doesn't want to expand too far beyond their Inland Empire base, but Stater already has a single store in Simi Valley, interestingly the only former Haggen they acquired. Simi Valley can be over a two hour drive from their distribution center depending on traffic, as well as with their Santa Clarita and Lancaster area stores. Heck, their store in Ridgecrest lies well over two hours from their distribution center. It wouldn't be out of the realm of possibility to further expand into Northern Los Angeles County and Eastern Ventura county by picking up Albertsons/Ralphs divests, which are very well within range of where they would be willing to open stores. They have several divest store purchases under their belt from the Albertsons/Lucky merger in 1999, so the process of bringing acquired stores into their programs and systems aren't new to them unlike Haggen. Point being, Stater is the best possible buyer for Southern California.
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