Kroger to buy Roundy's for $800 million

[arizonaguy]

Source: http://supermarketnews.com/kroger/kroge ... 00-million

[bm10k]

I think this is great, given that Jewel-Osco pretty much
Controls Chicago, I think Kroger will give them competition with pricing

[pseudo3d]

This just might be the best thing ever for Jewel-Osco if they play their cards right.

You see, what's especially tragic is that Mariano's was founded as to pick up where Dominick's left off, with its prepared foods and specialty items, which Safeway didn't pick up quite as well on (to put it lightly).

Kroger in recent years has not shown the same patience to brands it acquired--earlier this year, it took the upscale-leaning (but still midline) Hiller's Market in Michigan, known for its wide beer selections and good meats, and replaced all that with the Kroger name, flooding the stores with Kroger brand products, and in general destroying the chain and laying waste to everything people liked about it. That will happen to Mariano's too as Kroger takes its course. Sure, Mariano's will survive--at least for a while, and Kroger will almost certainly lower prices, but Mariano's will functionally "die".

Jewel-Osco can counter the effect of Kroger trying to undercut them in price by doing what Mariano's offered, while continuing efforts to lower price.

[storewanderer]

I really think Kroger will keep Mariano's going and use its programs for fresh foods in other places. Mariano's is one of the best operators in the entire country for fresh foods and this is fairly widely known throughout the industry. I don't feel Kroger would have done this deal if their intention was to ruin or "kill" Mariano's and dumb it down. $600 million+ in debt for Marianos in Chicago which barely turn a profit (high overhead) and Pick N Saves in WI which are operationally not good and need some investments in price and service does not strike me as a good move.

Hiller's was taken over by Kroger Michigan Division while Mariano's/Pick N Save will operate as "new" divisions.

Mariano's actually already had low prices, that was part of the draw.

[pseudo3d]

If Roundy's was doing badly in Chicago despite a following, then what is Kroger going to do? They're not in the business of reviving failing companies, and they're not in the business of keeping unprofitable stores open for market/mind share reasons. They can and have pulled of markets if their market share got low enough, even in the last 20 years.

Kroger is likely going to cut costs by replacing the Roundy's store brand with their own, and probably make other changes that shoppers won't be happy with. Sorry for your loss.

[klkla]

Mariano's is doing very well. There is no reason for Kroger to do anything there except let management grow the concept. They've said this publicly and the results would seem to verify it with average store sales currently at $865,000 a week per unit.

The problem Roundy's has is with their legacy stores in Wisconsin, which have been battered by low price entrants like WalMart. Kroger has the buying clout to lower prices and grow sales and have proved that they can compete against the likes of WalMart.

This is a good deal for both Roundy's and Kroger.

[storewanderer]

It is my understanding the Marianos Stores are running very high volumes but for a variety of reasons are having some trouble turning a profit. They are easily one of the best grocery operations in the entire country. I believe this is probably the 2nd best acquisition Kroger has ever made and will have a ton of influence on the entire company going forward. Similar to the influence Fred Meyer (not Smiths/Ralphs/QFC but Fred Meyer itself) has had on the entire Kroger company.

[pseudo3d]

It is my understanding the Marianos Stores are running very high volumes but for a variety of reasons are having some trouble turning a profit. They are easily one of the best grocery operations in the entire country. I believe this is probably the 2nd best acquisition Kroger has ever made and will have a ton of influence on the entire company going forward. Similar to the influence Fred Meyer (not Smiths/Ralphs/QFC but Fred Meyer itself) has had on the entire Kroger company.

I'm not so sure of that. Now, granted, I have never been in a Fred Meyer store nor can compare "before and after" (as "before" reviews on Yelp don't exactly exist...) but I do know this:

- Kroger killed Fred Meyer's expansion in the South, Fred Meyer was actually building full-line stores in Arizona but they never opened, with Kroger even demolishing the oversized unbuilt stores
- Fred Meyer's brand names are now totally gone, with initially being "in name only" and now virtually extinct...a vestige had been the "Fred Meyer Value" (FMV) brand, which was renamed and relaunched as P$$T and Check This Out
- Any "expertise" Fred Meyer brought to the rest of the company with GM took years to even move on and still comes off as amateurish and incomplete. This might be the fact that the buying for that department is done by FM, even in the Sun Belt. [Clothes I know have the buying done there, and I do remember seeing the Fred Meyer name on incoming GM for my local Kroger] No wonder merchandise moves slowly in Marketplace stores down in Arizona.

Best case scenario is that Mariano's remains mostly intact but any "best practices" are bungled, worse case scenario bye-bye Mariano's. I'm not saying that this is what will happen to Mariano's, but from Kroger's past actions, I'm not optimistic.

[storewanderer]

It is a little different since what makes Mariano's special is the heavy perimeters skewed with in-store preparation of products. It is fairly easy to obtain the raw materials and keep preparing food items in the stores if they are willing to devote the training and labor to execute the concept well.

In Arizona there was only one full size Fred Meyer under construction and it was not in a good neighborhood; it would not have been a good place at all for a Fred Meyer (the Wal Mart Supercenter currently on that land is a much better fit for the neighborhood). That was a real estate mistake by whatever management was running Fred Meyer in Arizona. There were a lot of other opportunities in growing suburbs that could have been just right for the full size Fred Meyer but the Bethany Home Road location where they actually constructed a full size Fred Meyer was not the right spot, to put it nicely. Here are the Yelp reviews on the Wal Mart that was built in the place of the full size unopened Fred Meyer: http://www.yelp.com/biz/walmart-supercenter-phoenix-5

Also there are many Fred Meyer brands that are in use throughout Kroger in one form or another:
Office Works (home/office supplies: paper, envelopes, pencils)
MotoTech (windshield washier fluid, antifreeze, etc.)
HD Designs (seen in kitchen/home in some locations, seen on seasonal items in other cases)
Everyday Living (seems to be a lower end version of HD Designs)
Playville (seen primarily on stuffed animals during the holidays but this is the name of the Fred Meyer toy department in older stores)
Joy of Gardening (seasonal)
Private Selection while originally a Ralphs brand is fairly well rooted to Fred Meyer as well

And Fred Meyer brands seen primarily only at Fred Meyer:
Javatopia (organic coffee, roasted at Fred Meyer plant)
Kivu (coffee, roasted at Fred Meyer plant, also at QFC)
Vita Bee (bread)
Along with the various clothing lines...

Also while we are at it, some other brands Kroger took from acquired chains and moved elsewhere:
Mountain Dairy, a Smiths Brand, used chainwide for budget dairy
Layton Farms, another Smiths Brand, used in some divisions for budget bread
Heritage Farm, a QFC Brand, used as budget meat/lunchmeat/chicken brand

Also little things like the labor scheduling system used in all of Kroger (came from Ralphs), the IBM point of sale platform which came from Fred Meyer... the current Kroger print ad format is also the Fred Meyer format, layout, and even appearance. I would argue there is more Fred Meyer influence over Kroger than Kroger's own influence. Maybe my view is somewhat blurred being out west.

[rwsandiego]

Apologies for arriving so late to the party. I somehow missed this thread when it started. That said...

I grew up and lived in Chicago until 2000 when I moved to Southern California. When I lived there I was a Jewel shopper. Virtually every shopping trip to Dominick's resulted in returning something, so I finally gave up and shopped at either the Jewel within walking distance of my home or the nearly 100K sq ft food palace on the Evanston/Chicago/Skokie border whose produce department was bigger than some small supermarkets. I still have friends and family there and visit quite frequently. Every trip involves a visit to various grocers, including Jewel-Osco and Mariano's.

...You see, what's especially tragic is that Mariano's was founded as to pick up where Dominick's left off, with its prepared foods and specialty items, which Safeway didn't pick up quite as well on (to put it lightly)....

That is quite true. The original Dominick's Fresh Stores, which you are referring to, had an amazing prepared foods section. The bakery sold bread by the piece (half- or quarter- loaves) and the deli had wonderful salads and Italian specialties, a nod to the heritage of founder Dominick DiMatteo. However, even at the Fresh Stores the quality of the baked goods was variable and was never up to the same standard as Jewel's and the delicatessen meats were typically pre-sliced. Jewel sliced to order and advertised this fact on almost every bus in the city. Dominick's produce was generally pretty poor and the fish and meat were not always fresh. Dominick's stores that were not branded as Fresh Stores varied from "meh" to "hideous." Even under Bob Mariano's leadership, Dominick's quality (aside from prepared foods) was never on par with Jewel's.

I really think Kroger will keep Mariano's going and use its programs for fresh foods in other places. Mariano's is one of the best operators in the entire country for fresh foods......

I agree with you on their prepared foods. The stores I've shopped (Lakeshore East, Harwood Heights, West Loop, and Park Ridge) had decent, but not extraordinary, fresh produce and meat. I was unimpressed with the preponderance of pre-sliced deli meat and cheese, which is a carryover from Bob Mariano's days with Dominick's. If I want pre-sliced deli I will buy it in a package. Their deli and meat prices seemed high for what they offered. Center store is not their strength. The Roundy's brand reminds me of the old Certified brands and the selection is a little "meh." I don't recall them having much in the way of organic product. Doesn't mean they don't, just means it was not particularly memorable. One of Dominick's strengths when Bob Mariano ran it under Yucaipa's ownership was the availability of Private Selections products, thanks to Yucaipa's ownership of Ralphs. Fred Meyer, and later Kroger, wisely retained Private Selections. Look for Private Selection and Simple Truth at a Mariano's near you.

...I don't feel Kroger would have done this deal if their intention was to ruin or "kill" Mariano's and dumb it down....

Quite true. In its press release Kroger stated their intent to adapt Mariano's prepared foods and "urban" store layouts in its other banners.

...600 million+ in debt for Marianos in Chicago which barely turn a profit (high overhead)...

In the same press release Bob Mariano mentioned the financial resources of Kroger being a huge benefit for Roundy's and for the Mariano's chain, specifically.

... Pick N Saves in WI which are operationally not good and need some investments in price and service does not strike me as a good move. ...

Something tells me Kroger did not buy Roundy's for Pick N Save and Copp's. Would not be surprised if they were sold. Also would not be surprised if they were retained but Krogerized, much in the same way as Ralphs. Ralphs had some very dismal stores pre-Kroger and they have been greatly improved.

...
Kroger is likely going to cut costs by replacing the Roundy's store brand with their own...

Trust me, this is a good thing. Roundy's brand makes the Save-a-Lot brands look like something from Whole Foods Market.

......and probably make other changes that shoppers won't be happy with. Sorry for your loss.

I doubt this will occur. The new Ralphs in Westwood near UCLA very closely resembles a Mariano's, save for a different decor package and layout thanks to it being an existing Ralphs that was expanded to more than double its original size. I suspect Kroger was taking a page from the Mariano's playbook and then decided "What the heck, let's just buy the thing." It would not surprise me if Kroger created a division that focused on developing "urban fresh" concepts and put Bob Mariano in charge of it. Can't speak for LA and the Inland Empire, but in San Diego, Ralphs meat and deli are always very high quality. Deli meat and cheese is sliced to order.

Given that Kroger is on track to become the largest seller of organic products in the country and has very good deli and meat, I think the acquisition of Mariano's will be a huge improvement for both chains.

Quick clarification: The Park Ridge Mariano's is a converted Dominick's, so it is not quite the same as the other stores, which were built as Mariano's. I suspect Park Ridge will soon be up to the same standard as the other stores, as it began its life as one of the first Fresh Stores that was built from the ground up.