ALDI to acquire Winn-Dixie

[storewanderer]

Might Aldi be using some of these W/D stores to develope a bigger format like Lidl?

That could destroy Lidl and send them packing!

Lidl is the superior format but they aren't doing themselves any favors in the US with their ongoing changes in strategy and management.

[pseudo3d]

I really haven't read anything about "ALDIxie" in months, good or bad. The stores got rid of their pharmacies either way.

I wonder if Aldi got cold feet.

Winn-Dixie could be closing a quantity of stores before Aldi's acquisition is finalized.

I think they're going to shove this merger through once they see what happens with KR-ACI, but I think they're going to do it as a Winn-Dixie prepackaged bankruptcy to get rid of all the stores Aldi doesn't want without paying lease severance. I still have my concerns about the very aggressive comments that were made at the time of the merger announcement, that Aldi intends to grow their company by any means necessary to become the 3rd largest grocer in the USA. I really think if they can pull this Winn-Dixie thing off they're going to turn it into a model to grow and start picking off other heavily indebted local and regional chains. The irony is that although they don't need as much volume to be profitable due to their low cost model, they might find that they don't retain enough of the acquired store's business to ever attain this "3rd place" status they desire. But they seem to have more than enough money to try to get what they want, and that attitude plus financial status makes them far more dangerous to the industry than Amazon in my opinion. So let's hope this deal is a flop.

The problem is that Aldi stores are very low volume as-is, even if they can maintain profitability.

Anyway, I believe the deal as stands is that Aldi (hereafter referred to Aldi Süd), acquires SEG whole, so unless they want to spin off a doomed REIT to relieve themselves of the leases, the leases come with it.

But as I've said before, the idea of purchasing SEG for the real estate is a half-baked plan at best. Could Aldi Süd see Albertsons as a bigger prize, and in the process give up SEG, or merge SEG and Albertsons together, and run a traditional grocery store chain alongside Aldi? It's not altogether an unfeasible idea...as part of their 1992 purchase of Wetterau, SuperValu bought Save-A-Lot, which had its own brand names as it ran parallel to SuperValu's existing stores. There was at least one conversion where an ACME closed down under SuperValu's reign reopened as a Save-A-Lot in half of the space.

If Aldi Süd is truly in it for "get big or die trying" then purchasing Albertsons and SEG, would catapult into one of the nation's leading grocers.

[ClownLoach]

Winn-Dixie could be closing a quantity of stores before Aldi's acquisition is finalized.

I think they're going to shove this merger through once they see what happens with KR-ACI, but I think they're going to do it as a Winn-Dixie prepackaged bankruptcy to get rid of all the stores Aldi doesn't want without paying lease severance. I still have my concerns about the very aggressive comments that were made at the time of the merger announcement, that Aldi intends to grow their company by any means necessary to become the 3rd largest grocer in the USA. I really think if they can pull this Winn-Dixie thing off they're going to turn it into a model to grow and start picking off other heavily indebted local and regional chains. The irony is that although they don't need as much volume to be profitable due to their low cost model, they might find that they don't retain enough of the acquired store's business to ever attain this "3rd place" status they desire. But they seem to have more than enough money to try to get what they want, and that attitude plus financial status makes them far more dangerous to the industry than Amazon in my opinion. So let's hope this deal is a flop.

The problem is that Aldi stores are very low volume as-is, even if they can maintain profitability.

Anyway, I believe the deal as stands is that Aldi (hereafter referred to Aldi Süd), acquires SEG whole, so unless they want to spin off a doomed REIT to relieve themselves of the leases, the leases come with it.

But as I've said before, the idea of purchasing SEG for the real estate is a half-baked plan at best. Could Aldi Süd see Albertsons as a bigger prize, and in the process give up SEG, or merge SEG and Albertsons together, and run a traditional grocery store chain alongside Aldi? It's not altogether an unfeasible idea...as part of their 1992 purchase of Wetterau, SuperValu bought Save-A-Lot, which had its own brand names as it ran parallel to SuperValu's existing stores. There was at least one conversion where an ACME closed down under SuperValu's reign reopened as a Save-A-Lot in half of the space.

If Aldi Süd is truly in it for "get big or die trying" then purchasing Albertsons and SEG, would catapult into one of the nation's leading grocers.

I do not believe Aldi has any interest whatsoever in operating anything but their own standard prototype. The fact that they right now have two stores under development known to this forum where they're spending a substantial extra amount for larger sites and deliberately choosing not to use the space speaks volumes of their intents. They are almost religious in their beliefs that they are the right format, the right size, right everything as they are with their 20,000 Sq ft, 5 aisle box that is built identically everywhere with increasingly significant merchandise mix changes entirely based on demographics. Their only diversification interests are what goes into the aisles of their otherwise uniform and identical boxes.

If they bought Albertsons it would be to eliminate their entire format, and frankly the cost would be too high because of their commitments to stores two to three times the size of an Aldi which would not easily divide for sublease. Obviously they'd not deliver enough revenue to be profitable as Aldi if downsized to 20K, even if other stores took the other half of the building after very costly leaseholder improvements.

The parent of Winn-Dixie could easily use their debts to get another bankruptcy rolling and asset sale all the "wanted" stores to Aldi. The rest close. As long as agreements are in place (prepackaged deal) so nobody is left unhappy except landlords of a closing W-D, then they are left with few if any legacy expenses.

But you have to listen to them to understand that they do not care if they have to open up to 15,000 locations to hit the point where their revenue reaches the #3 grocery share (even if they surpass a competitor like Albertsons or Publix that only have a tiny fraction of that store count). They don't want their stores to do a million a week. They'd rather build a small cluster of stores that deliver a million a week collectively but accomplish that at a much lower overhead and a much higher profit margin.

Which chain would you rather operate: Chain "A" with 2,000 moderate size stores that deliver $80B and makes $4B after the bills are paid, or chain "Aldi" with 3,500 compact stores that deliver $30B and makes $10B profit? Because that's the likely scenario.

[pseudo3d]

I think they're going to shove this merger through once they see what happens with KR-ACI, but I think they're going to do it as a Winn-Dixie prepackaged bankruptcy to get rid of all the stores Aldi doesn't want without paying lease severance. I still have my concerns about the very aggressive comments that were made at the time of the merger announcement, that Aldi intends to grow their company by any means necessary to become the 3rd largest grocer in the USA. I really think if they can pull this Winn-Dixie thing off they're going to turn it into a model to grow and start picking off other heavily indebted local and regional chains. The irony is that although they don't need as much volume to be profitable due to their low cost model, they might find that they don't retain enough of the acquired store's business to ever attain this "3rd place" status they desire. But they seem to have more than enough money to try to get what they want, and that attitude plus financial status makes them far more dangerous to the industry than Amazon in my opinion. So let's hope this deal is a flop.

The problem is that Aldi stores are very low volume as-is, even if they can maintain profitability.

Anyway, I believe the deal as stands is that Aldi (hereafter referred to Aldi Süd), acquires SEG whole, so unless they want to spin off a doomed REIT to relieve themselves of the leases, the leases come with it.

But as I've said before, the idea of purchasing SEG for the real estate is a half-baked plan at best. Could Aldi Süd see Albertsons as a bigger prize, and in the process give up SEG, or merge SEG and Albertsons together, and run a traditional grocery store chain alongside Aldi? It's not altogether an unfeasible idea...as part of their 1992 purchase of Wetterau, SuperValu bought Save-A-Lot, which had its own brand names as it ran parallel to SuperValu's existing stores. There was at least one conversion where an ACME closed down under SuperValu's reign reopened as a Save-A-Lot in half of the space.

If Aldi Süd is truly in it for "get big or die trying" then purchasing Albertsons and SEG, would catapult into one of the nation's leading grocers.

I do not believe Aldi has any interest whatsoever in operating anything but their own standard prototype. The fact that they right now have two stores under development known to this forum where they're spending a substantial extra amount for larger sites and deliberately choosing not to use the space speaks volumes of their intents. They are almost religious in their beliefs that they are the right format, the right size, right everything as they are with their 20,000 Sq ft, 5 aisle box that is built identically everywhere with increasingly significant merchandise mix changes entirely based on demographics. Their only diversification interests are what goes into the aisles of their otherwise uniform and identical boxes.

If they bought Albertsons it would be to eliminate their entire format, and frankly the cost would be too high because of their commitments to stores two to three times the size of an Aldi which would not easily divide for sublease. Obviously they'd not deliver enough revenue to be profitable as Aldi if downsized to 20K, even if other stores took the other half of the building after very costly leaseholder improvements.

The parent of Winn-Dixie could easily use their debts to get another bankruptcy rolling and asset sale all the "wanted" stores to Aldi. The rest close. As long as agreements are in place (prepackaged deal) so nobody is left unhappy except landlords of a closing W-D, then they are left with few if any legacy expenses.

But you have to listen to them to understand that they do not care if they have to open up to 15,000 locations to hit the point where their revenue reaches the #3 grocery share (even if they surpass a competitor like Albertsons or Publix that only have a tiny fraction of that store count). They don't want their stores to do a million a week. They'd rather build a small cluster of stores that deliver a million a week collectively but accomplish that at a much lower overhead and a much higher profit margin.

Which chain would you rather operate: Chain "A" with 2,000 moderate size stores that deliver $80B and makes $4B after the bills are paid, or chain "Aldi" with 3,500 compact stores that deliver $30B and makes $10B profit? Because that's the likely scenario.

The agreement in place is to have Aldi Süd purchase SEG from Lone Star Funds. I suppose that they could change plans and have SEG could file for bankruptcy again while Aldi Süd picks up the assets, but with some uneven grounds for merging and Aldi's intentions to buy SEG in order to close stores and create more vacancies, it's possible that they won't be able to file for bankruptcy, because bankruptcy is a governmental process, and a deal this big will be under a lot of scrutiny. It's not some "let my company file for bankruptcy while I slip away a millionaire" deal, it's an extremely transparent and very public move to kill the leases so Aldi Süd has less to deal with.

If the deal hinges on the leases being purged through bankruptcy, Aldi Süd may be in for a rude awakening.

[veteran+]

One must remember that European retailers are usually very different in their strategies and operating styles.

Perhaps Ahold/Delhaize is slightly more versatile to the American way.

There is a measurable hubris with these European operators. Having worked for Tesco (and even my son working for Puma) I witnessed first hand their ideology.

There's is an undertone in their attitudes that transmit, we know better and we are going to teach these Americans what Excellence looks like.

I don't believe that Aldi is going to change their format. They could use these larger newly purchased stores to duplicate (maybe) a Lidl format as a way to get rid of that competitor for good. If I am correct Lidls are larger than Aldis?

What they will do with this added square footage will be interesting, but I maintain they will not change their format.

[buckguy]

One must remember that European retailers are usually very different in their strategies and operating styles.

Perhaps Ahold/Delhaize is slightly more versatile to the American way.

There is a measurable hubris with these European operators. Having worked for Tesco (and even my son working for Puma) I witnessed first hand their ideology.

Thers is an undertone in their attitudes that transmit, we know better and we are going to teach these Americans what Excellence looks like.

I don't believe that Aldi is going to change their format. They could use these larger newly purchased stores to duplicate (maybe) a Lidl format as a way to get rid of that competitor for good. If I am correct Lidls are larger than Aldis?

What they will do with this added square footage will be interesting, but I maintain they will not change their format.

The Europeans seem to have been most successful outside of the European continent when they did joint ventures--Ahold was very successful in Thailand with stores that varied quite a bit in their selection and format. Those ultimately were sold to their partner, Central. Delahize opened Food Lions in Thailand with fewer concessions to local tastes and those didn't last very long. Ahold screwed-up here by trying to combine their operations. They killed off their western flank in Ohio and did long-term damage to Giant-Landover, even though the chain remained dominant. The combo of Bruno's and BiLo didn't work at all.

Aldi has pledged to keep the conventional format going for the foreseeable future. They also seem likely to keep C&S as a supplier for those stores. The conversions seem likely to take several years and they seem like a chain that has a lot of patience and secrecy---so they might have a strategy that they don't want to disclose or they might have a set of contingencies which depend on how conversions of existing stores go.

Lidl stores vary in size. They initially planned stores as large as 36K sf, but are now opening stores in the 20-25K range. The one nearest to me seems like it's about 20K sf and does very well, despite a somewhat awkward layout---it competes with a very high volume Target that seems to do middling food volume and one of the highest volume Giants in the chain. The selection doesn't work for me, but it draws a wide range of other people.

Upthread, ClownLoach mentioned Aldi buying other laggard chains. There aren't that many, anymore because so many chains died out about 15 or so years ago: Marsh, P&C, Eagle (Midwest), and Seaway FoodTown all bit the dust around the same time and A&P as well as W-D went bankrupt, while Ahold shed pieces. Albertson's would be too big for Aldi to assimilate. SEG is probably around the right size and geographically concentrated which is probably the best set of circumstances for whatever they do,

[BillyGr]

Lidl stores vary in size. They initially planned stores as large as 36K sf, but are now opening stores in the 20-25K range. The one nearest to me seems like it's about 20K sf and does very well, despite a somewhat awkward layout---it competes with a very high volume Target that seems to do middling food volume and one of the highest volume Giants in the chain. The selection doesn't work for me, but it draws a wide range of other people.

Some of that size variation may also be from their having acquired stores that were already in existence (such as a small chain in the NYC area), likely due to those stores being in an area that would have otherwise been hard to move into (more populated, less places to build from scratch).

[storewanderer]

I can name a lot of other chains in a similar poor position to Winn Dixie. I can think of specific 50 store+ chains in CA, AZ, NV, OK, TX, NM, where I could see this happen. And throughout the South, and midwest, there are still a number of surviving 20-50 store size chains that I could also see go this way.

[pseudo3d]

I can name a lot of other chains in a similar poor position to Winn Dixie. I can think of specific 50 store+ chains in CA, AZ, NV, OK, TX, NM, where I could see this happen. And throughout the South, and midwest, there are still a number of surviving 20-50 store size chains that I could also see go this way.

I bet that almost all of them you're thinking of are small, rural store chains in small towns (under 20k people), and the only real grocery store in town beyond Walmart (if there is even a Walmart). Aldi isn't a good fit for them because they can fit into cities with a unique niche, that doesn't work in smaller areas. Winn-Dixie at least it has stores in bigger metro areas (even if that number has dramatically shrunk).

They killed off their western flank in Ohio and did long-term damage to Giant-Landover, even though the chain remained dominant. The combo of Bruno's and BiLo didn't work at all.

A lot of that related to the accounting scandal at Royal Ahold in the early 2000s, which ultimately resulted in the sale of US Foods, Tops, and Bruno's/BI-LO. Bruno's still needed a lot of work...the company was fatally damaged by the death of several key family members and executives in 1991, the KKR ownership was a disaster, Publix was boring into their customer base, and Royal Ahold/BI-LO didn't give the chain the attention it deserved.

But I digress.

[storewanderer]

I can name a lot of other chains in a similar poor position to Winn Dixie. I can think of specific 50 store+ chains in CA, AZ, NV, OK, TX, NM, where I could see this happen. And throughout the South, and midwest, there are still a number of surviving 20-50 store size chains that I could also see go this way.

I bet that almost all of them you're thinking of are small, rural store chains in small towns (under 20k people), and the only real grocery store in town beyond Walmart (if there is even a Walmart). Aldi isn't a good fit for them because they can fit into cities with a unique niche, that doesn't work in smaller areas. Winn-Dixie at least it has stores in bigger metro areas (even if that number has dramatically shrunk).

It is all conjecture because I think this Winn Dixie deal is going to be a miserable failure for Aldi and will have a negative impact on the entire Aldi US operation. But if I am wrong here and this deal is a success, they can do a lot more deals like this.

However I wasn't thinking of any chains made up primarily of small town stores.

One of the chains I'm thinking of has a lot of very rural stores but also has stores in actual cities such as Albuquerque, El Paso, and even a couple hispanic format in Denver.

The other chains I'm thinking of have store configurations largely similar to Winn Dixie. In the case of the AZ chain I'm thinking of, similar to Winn Dixie, the only stores they have that actually perform well seem to be ones in rural areas with no competition.

My assumptions above also assume Aldi will "split off" the hispanic focused formats of chains in question, both of whom have such formats, similar to the handling of Fresco Y Mas.

I'm also going to throw this out there- could Aldi be the solution for some of the problem Safeway assets such as the Denver Division? Recall Sobeys has done this very thing with numerous former Safeway units converting them to that format FreshCo. FreshCo is pretty similar to an Aldi. But I'd much rather shop FreshCo than Aldi, and I did not like FreshCo. I guess I really dislike Aldi.