Kroger to merge with Albertsons?

[veteran+]

When a Brand is tarnished it spreads like a cancer and that cancer "travels".

Every location functions like an ambassador.

What I have experienced in a store in the Coachella Valley CA. will affect my decision when I face that same name in Elmira N.Y.

The Name is what matters. People don't know or care about corporate or franchise entities.

[mjhale]

The difference being, people often go to things like McDonalds or other chain restaurants when traveling. Most people (aside from those on a forum like this) aren't going to supermarkets, or if they do it's just because they need something while there (say buy food to keep in the hotel vs. going out for breakfast), so a fairly limited size purchase, one time.

Thus, the number of customers who will even experience these stores outside their home area is tiny, and it just doesn't impact other locations since either they don't go while travelling or if they do, they know what their own locations are like and thus what they see elsewhere doesn't impact their opinion of their home stores.

What you (as a franchisee that does better) might lose are a few random one-time visits from people who have travelled from an area with a poor franchisee, but that is such a small impact (since they aren't coming weekly or likely even once a year anyway) that it has no real change on your sales.

For whatever people think about Walmart, people approach them while traveling the same way people do with McDonald's. There is a basic level of consistency in terms of product offerings and the way the store is laid out and operates. This is one of the reasons I have said in the threads on this site about Walmart that I don't understand why they have dropped the Supercenter tag off the front of their stores. Sure, the majority of their stores are Supercenters, but when you run across that one that isn't and can't find what you are looking for you are going to be frustrated. You'll end up elsewhere within the distance you are willing to travel to get what you want. You make a good point that for people traveling there is less of an impact when a store doesn't match expectations of what you are used to "back home". However, to veteran+'s point, if you are familiar with a store "back home" you are more willing to seek it out when traveling. For a lot of people the name they are used to or know at home is a place of familiarity in an area that one is completely unfamiliar with. I have made multiple trips out west. On those trips I was always happy to run across a Safeway or Vons location because I knew what their baseline offer would be based on the Safeway that is 1/2 mile from my house. Does a poor Safeway elsewhere sour me enough to not shop there anymore when I'm home? No. But it does make me wonder why stores are so inconsistent even within the same chain. At home, everyone has "their store" within whatever chain store they shop at. Maybe it is because of the general quality of the location, offer of product or the employees. I think maintaining that loyalty is most important as that is where the most is to be lost if a customer goes elsewhere. If their reasons for going elsewhere are severe enough that is when it affects the rest of the chain and what people seek out when traveling or if they move to a new area.

[pseudo3d]

How would I have visited any of those stores, being they have NEVER HAD ANY in this area (save the ONE now in Watertown, which is recent)?

But, since you CONTINUE to miss my point it doesn't matter anyway - that point being it DOES NOT MATTER WHAT ANY PARTICULAR STORE DOES, since 99.999999999999% of those who shop at that store will NEVER KNOW THAT OTHER STORES WITH THE SAME NAME are doing things differently - thus their choice to shop (or not) is based only on their LOCAL store(s) and what others in other states do makes ZERO difference to those customers!

There are going to people who live in a vacuum and don't have any idea what other stores are like, but consumers have come to expect that chains are going to more or less a consistent experience, whether good or bad. Think of any restaurant or retail chain. McDonald's. Walmart. Trader Joe's. Dollar General. Costco. Applebee's. They definitely aren't going to take into wildly different franchises in mind.

The difference being, people often go to things like McDonalds or other chain restaurants when traveling. Most people (aside from those on a forum like this) aren't going to supermarkets, or if they do it's just because they need something while there (say buy food to keep in the hotel vs. going out for breakfast), so a fairly limited size purchase, one time.

Thus, the number of customers who will even experience these stores outside their home area is tiny, and it just doesn't impact other locations since either they don't go while travelling or if they do, they know what their own locations are like and thus what they see elsewhere doesn't impact their opinion of their home stores.

What you (as a franchisee that does better) might lose are a few random one-time visits from people who have travelled from an area with a poor franchisee, but that is such a small impact (since they aren't coming weekly or likely even once a year anyway) that it has no real change on your sales.

Again though, people start hearing and reading about other stores. Costco and H-E-B can build hype in a new market just on reputation.

I could count on my fingers how many times I've been to Dollar General but their reputation isn't good. Cheap, low-quality items, messy stores, and critically understaffed, with miserable employees. You can't take a moderate store like Albertsons and slap something with a bad reputation on it and expect it to go over well.

I admit it's not a great example as Piggly Wiggly doesn't have a widespread, bad reputation, but even now its associated with small, antiquated grocers.

[arizonaguy]

Report says that the proposed divestitures should be fine with FTC based upon past precedent:

https://www.supermarketnews.com/retail- ... ure-report

I hope that regulators know that if this is approved they'll be sitting on 100 - 120 dark boxes in So Cal, 70 in Arizona, 25 in Nevada, 15 in Nevada, etc. even after all of the divestitures. Plus it will certainly lead to higher prices.

[ClownLoach]

Report says that the proposed divestitures should be fine with FTC based upon past precedent:

https://www.supermarketnews.com/retail- ... ure-report

I hope that regulators know that if this is approved they'll be sitting on 100 - 120 dark boxes in So Cal, 70 in Arizona, 25 in Nevada, 15 in Nevada, etc. even after all of the divestitures. Plus it will certainly lead to higher prices.

I'm pretty skeptical about the merger and opposed to it, but I think the California figure you're giving here is not even close to reality. Kroger has recognized that their strategy after acquiring Fred Meyer of "shrinking to grow scale" backfired. They now find themselves with a fleet of stores especially in California that are "maxed out" and literally cannot scale up to allow any more sales volume. Most of their remaining Ralphs stores are losing sales to competitors with growth capacity because they culled too many locations in areas that are now growing in population density drastically with new zoning standards that are replacing single family and duplexes with 5 story mega complexes. In fact I wouldn't be surprised if their only sales increases in some locations stem entirely from price increases because transaction comp growth is zero due to these bad conditions. Long Beach, CA is a great example where they closed multiple Ralphs locations that they desperately need today and cannot replace; they have stores that are operationally on the edge of broken because they cannot process one more carton of freight or ring one more transaction on the front end. If they had the additional stores of their focus competitor Albertsons they would at least be able to make a strategy to get their customers to balance out where they might currently drive past a Vons to get perceived better deals at Ralphs, now they'll shop that converted Vons and they better balance transactions opening capacity to grow. This lack of capacity is a real and serious problem that has caused them to lose more than half their sales volume in constant dollars since 2005 and allowed Albertsons-Vons to become the conventional #1 chain in Southern California with Stater Bros as #2.

It is crystal clear that any closure resulting from this merger will mean the 100% forfeit of the sales and profit dollars at said location, thus rendering such consolidation as unnecessary and problematic. Thus no cost savings or profit improvement from closures at all in California. The fact is that there are a tiny handful of fringe market stores, probably less than a dozen I can name in all of SoCal, where I would anticipate closures and those would happen with or without a merger (such as Ralphs in Santa Barbara and San Luis Obispo counties where they clearly don't want to be there and run garbage, dead stores while Albertsons rules with an ironclad grip). Nowhere near 120+ stores would close. There is more than enough expenses behind the scenes and in distribution and such to reduce overhead and thus give them tons of savings from merging, closing stores in California is not necessary at all. Arizona and Nevada might be different but both are substantially over stored and again closures need to organically happen merger or not. I do believe them when they promise no closures, there's no reason to spend good money and then throw it away which all closures here would be.

[HCal]

When a Brand is tarnished it spreads like a cancer and that cancer "travels".

Every location functions like an ambassador.

What I have experienced in a store in the Coachella Valley CA. will affect my decision when I face that same name in Elmira N.Y.

The Name is what matters. People don't know or care about corporate or franchise entities.

People are aware that locations vary. That is why Walmart got rid of the Supercenter branding and Target calls its tiny downtown stores "Target" instead of City Target. Most people don't really buy groceries while traveling, but if they do, and have a bad experience, they will figure the local management sucks, rather than judging the entire chain. And that's if they even remember the name of the store, which they probably won't. Retail watchers like us are a very small minority.

For businesses that are commonly patronized by people while traveling, such as hotel and restaurant chains, perhaps consistency is more important since people will look for a familiar name.

[storewanderer]

Report says that the proposed divestitures should be fine with FTC based upon past precedent:

https://www.supermarketnews.com/retail- ... ure-report

I hope that regulators know that if this is approved they'll be sitting on 100 - 120 dark boxes in So Cal, 70 in Arizona, 25 in Nevada, 15 in Nevada, etc. even after all of the divestitures. Plus it will certainly lead to higher prices.

I'm pretty skeptical about the merger and opposed to it, but I think the California figure you're giving here is not even close to reality. Kroger has recognized that their strategy after acquiring Fred Meyer of "shrinking to grow scale" backfired. They now find themselves with a fleet of stores especially in California that are "maxed out" and literally cannot scale up to allow any more sales volume. Most of their remaining Ralphs stores are losing sales to competitors with growth capacity because they culled too many locations in areas that are now growing in population density drastically with new zoning standards that are replacing single family and duplexes with 5 story mega complexes. In fact I wouldn't be surprised if their only sales increases in some locations stem entirely from price increases because transaction comp growth is zero due to these bad conditions. Long Beach, CA is a great example where they closed multiple Ralphs locations that they desperately need today and cannot replace; they have stores that are operationally on the edge of broken because they cannot process one more carton of freight or ring one more transaction on the front end. If they had the additional stores of their focus competitor Albertsons they would at least be able to make a strategy to get their customers to balance out where they might currently drive past a Vons to get perceived better deals at Ralphs, now they'll shop that converted Vons and they better balance transactions opening capacity to grow. This lack of capacity is a real and serious problem that has caused them to lose more than half their sales volume in constant dollars since 2005 and allowed Albertsons-Vons to become the conventional #1 chain in Southern California with Stater Bros as #2.

It is crystal clear that any closure resulting from this merger will mean the 100% forfeit of the sales and profit dollars at said location, thus rendering such consolidation as unnecessary and problematic. Thus no cost savings or profit improvement from closures at all in California. The fact is that there are a tiny handful of fringe market stores, probably less than a dozen I can name in all of SoCal, where I would anticipate closures and those would happen with or without a merger (such as Ralphs in Santa Barbara and San Luis Obispo counties where they clearly don't want to be there and run garbage, dead stores while Albertsons rules with an ironclad grip). Nowhere near 120+ stores would close. There is more than enough expenses behind the scenes and in distribution and such to reduce overhead and thus give them tons of savings from merging, closing stores in California is not necessary at all. Arizona and Nevada might be different but both are substantially over stored and again closures need to organically happen merger or not. I do believe them when they promise no closures, there's no reason to spend good money and then throw it away which all closures here would be.

Kroger could have built more stores in CA over the years. They chose not to. And to add insult they closed many stores too.

In CA what I see this merger doing is taking what are essentially a bunch of shrinking/failing grocery chains and moving them all under one owner. This is the last round but the shrink will continue. Customers have voted with their feet and new ethnic competitors with better pricing/service levels open new stores what feels like weekly in SoCal. There was a point in 1999 when Vons, Albertsons, Ralphs, and Lucky were all very viable strong individual chains with collectively nearly 1,000 stores between them in SoCal. Now what I think we are looking at here is you will have all of these joined together and they will just keep on shrinking. As you point out there are some bright spots for the Albertsons banner in some growing areas (most of these were large stores planned by Lucky) as they have large stores that were under utilized for 20 years and now finally those areas have enough people around to get those stores finally doing the business they needed to be doing 20 years ago, and I'd argue a lot of areas around Los Angeles are bright spots for Ralphs as they run some extremely high volume stores that are stable from a volume perspective and Vons is in the same position in a lot of spots.

I am also not confident Kroger will somehow work miracles and get a healthy, growing, operation going in CA either. Kroger does well in most other markets and generally enjoys strong customer loyalty, but CA, specifically Ralphs, has been a very sore spot. And the quality of the Ralphs store has deteriorated so much from what it was 20 years ago (most of the decline was right after the strike), yet Ralphs still has prices quite a bit higher than other parts of Kroger, so the price to quality ratio at Ralphs is poor, while much of the rest of Kroger gets that ratio pretty spot on.

[retailfanmitchell019]

Report says that the proposed divestitures should be fine with FTC based upon past precedent:

https://www.supermarketnews.com/retail- ... ure-report

I hope that regulators know that if this is approved they'll be sitting on 100 - 120 dark boxes in So Cal, 70 in Arizona, 25 in Nevada, 15 in Nevada, etc. even after all of the divestitures. Plus it will certainly lead to higher prices.

“Based upon past precedent”
The Feds should only allow the deal if C&S is willing to operate the stores for at least 20 years. I think at least 10% of the combined company needs to be divested (500 stores).

They should know that C&S is basically a successor to Fleming. Fleming struggled to operate corporate retail successfully, or they lost interest. In 2000, Fleming put its corporate retail on the sale block. Fleming’s corporate retail operations were ABCO Foods in Arizona; Baker’s in Omaha; Rainbow Foods in Minnesota; Sentry Foods in Wisconsin; and Thompson Food Basket in Central Illinois.
ABCO was ultimately parted out to Safeway and Bashas’ in 2002.
Baker’s was sold to Kroger in late 2000 after winning a bidding war with Albertsons.
Rainbow was almost sold to Albertsons in 2000 after winning a bidding war with Safeway and Kroger (but ABS backed out at the last minute for some reason). Ultimately, Rainbow was sold to Roundy’s when Fleming went bankrupt 20 years ago.
Sentry was parted out to independents in Wisconsin, while Thompson Food Basket was ultimately shut down.

The Feds could likely remember the Haggen disaster, Cerberus’ immediate sale of Cub Foods in Chicago/Jewel in Springfield IL (was done to circumvent FTC action during Supervalu’s 2006 acquisition of Albertsons’ strong assets), the Raley’s failure in Las Vegas, Ralphs’ failure in NorCal acquiring Albertsons/Lucky divests, Smith’s near-failure in Montana/Wyoming acquiring Albertsons/Buttrey divests, etc.

[storewanderer]

Report says that the proposed divestitures should be fine with FTC based upon past precedent:

https://www.supermarketnews.com/retail- ... ure-report

I hope that regulators know that if this is approved they'll be sitting on 100 - 120 dark boxes in So Cal, 70 in Arizona, 25 in Nevada, 15 in Nevada, etc. even after all of the divestitures. Plus it will certainly lead to higher prices.

“Based upon past precedent”
The Feds should only allow the deal if C&S is willing to operate the stores for at least 20 years. I think at least 10% of the combined company needs to be divested (500 stores).

They should know that C&S is basically a successor to Fleming. Fleming struggled to operate corporate retail successfully, or they lost interest. In 2000, Fleming put its corporate retail on the sale block. Fleming’s corporate retail operations were ABCO Foods in Arizona; Baker’s in Omaha; Rainbow Foods in Minnesota; Sentry Foods in Wisconsin; and Thompson Food Basket in Central Illinois.
ABCO was ultimately parted out to Safeway and Bashas’ in 2002.
Baker’s was sold to Kroger in late 2000 after winning a bidding war with Albertsons.
Rainbow was almost sold to Albertsons in 2000 after winning a bidding war with Safeway and Kroger (but ABS backed out at the last minute for some reason). Ultimately, Rainbow was sold to Roundy’s when Fleming went bankrupt 20 years ago.
Sentry was parted out to independents in Wisconsin, while Thompson Food Basket was ultimately shut down.

The Feds could likely remember the Haggen disaster, Cerberus’ immediate sale of Cub Foods in Chicago/Jewel in Springfield IL (was done to circumvent FTC action during Supervalu’s 2006 acquisition of Albertsons’ strong assets), the Raley’s failure in Las Vegas, Ralphs’ failure in NorCal acquiring Albertsons/Lucky divests, Smith’s near-failure in Montana/Wyoming acquiring Albertsons/Buttrey divests, etc.

Back in 1999, the buyers of divested Lucky/Albertsons Stores "agreed" to operate the stores for at least 10 years. Stores (especially the ones sold to Certified Grocers - including some that were corporate run Sav Max Foods.. oh there we go again with selling stores to a wholesaler who fails...) started closing after a year. Ralphs started closing stores before a year was up (a store in Jackson was the first to close; a new Raleys was built next to it and it was doing almost no sales).

So you can't "force" C&S to promise to run the stores for 20 years. There are too many factors. Will the landlords even agree to keep leasing the store for C&S for 20 years?

A block of the divests sold to Haggen were "poorly performing stores" for Albertsons/Safeway. I think it was about 30 of the stores. Junk like the Los Osos Vons, both of the Klamath Falls Safeways, some other small junk run down Vons units, mostly pretty obvious. Many of these would have closed anyway even if they hadn't been divested.

[retailfanmitchell019]

Back in 1999, the buyers of divested Lucky/Albertsons Stores "agreed" to operate the stores for at least 10 years. Stores (especially the ones sold to Certified Grocers - including some that were corporate run Sav Max Foods.. oh there we go again with selling stores to a wholesaler who fails...) started closing after a year. Ralphs started closing stores before a year was up (a store in Jackson was the first to close; a new Raleys was built next to it and it was doing almost no sales).

So you can't "force" C&S to promise to run the stores for 20 years. There are too many factors. Will the landlords even agree to keep leasing the store for C&S for 20 years?

A block of the divests sold to Haggen were "poorly performing stores" for Albertsons/Safeway. I think it was about 30 of the stores. Junk like the Los Osos Vons, both of the Klamath Falls Safeways, some other small junk run down Vons units, mostly pretty obvious. Many of these would have closed anyway even if they hadn't been divested.

Simply put, the consensus is that wholesalers like Supervalu, Fleming, Unified, and AWG have failed to operate their own corporate stores.

I’m surprised the Safeways in Klamath Falls were divested instead of the Albertsons. But Albertsons is stronger than Safeway in Southern Oregon.