SpinCo

[Bagels]

I doubt Kroger is going to "give" SpinCo any banners. That would require a massive rebranding of entire divisions, which is the last thing they want to do right now. If they want this merger to go through, they have to keep rebrandings to an absolute minimum in order to avoid public opposition.

At the most, they will give the spun off stores the rights to use their former brand names, perhaps indefinitely or perhaps for a certain number of years. If most of the SpinCo stores are Albertsons, Safeway or Vons (given that the western US is where there is the most overlap) then that might be feasible.

Something I've found interesting on this forum is the crazy speculation about sale of divisions to other operators, mass rebranding of stores, etc. In reality, they are going to want to rock the boat as little as possible. They will agree to sell off the minimum number of stores needed to secure antitrust approval, and keep everything else the same. Changing names of stores will just upset customers.

Seriously? First off, there could be nearly 400 stores from roughly a dozen banners. Secondly, let’s think about this: one year after the merger, I stop at a Ralphs. The store is filthy, garbage cans are overflowing, there’s absolutely no help in sight, the produce is rotting, the prices are high and as an exclusive Ralphs shopper for years, I don’t understand why they got rid of my favorite Kroger brands. I know some smart arse is going to respond that’s the everyday Ralphs experience, but it’s not, and yes Kroger would have to deal with another company destroying their brand equity. Remember- the divested stores will be mostly underperformers.

The divested stores will unquestionably be rebranded, likely into a single banner or possibly two if SpinCo gets F4L. Kroger isn’t going to give SpinCo any of its banners, and Vons, Hagen & the Texas banners are the only ones likely to be retired initially. If there’s a significant number of ex-Albertsons Texas stores that are divested, maybe they’ll get to keep their names (joined by some ex-Kroger). But I guarantee you the stores won’t be named Haggen, and Vons has no equity outside of SoCal. Maybe Luxky or maybe Kroger comes up with a new name.

[storewanderer]

I doubt Kroger is going to "give" SpinCo any banners. That would require a massive rebranding of entire divisions, which is the last thing they want to do right now. If they want this merger to go through, they have to keep rebrandings to an absolute minimum in order to avoid public opposition.

At the most, they will give the spun off stores the rights to use their former brand names, perhaps indefinitely or perhaps for a certain number of years. If most of the SpinCo stores are Albertsons, Safeway or Vons (given that the western US is where there is the most overlap) then that might be feasible.

Something I've found interesting on this forum is the crazy speculation about sale of divisions to other operators, mass rebranding of stores, etc. In reality, they are going to want to rock the boat as little as possible. They will agree to sell off the minimum number of stores needed to secure antitrust approval, and keep everything else the same. Changing names of stores will just upset customers.

Recall how Kroger handled the Frys-Smiths-Fred Meyer Marketplace situation in AZ. They moved very quickly to rebrand everything in the market to Frys not long after the merger took place, even not opening a full size Fred Meyer unit that was complete and in the process of being stocked. Frys in Phoenix has been a huge success story for Kroger and that success got off the ground with a successful store conversion program.

They are going to have to give some token concessions to make it work for this SpinCo. They cannot load SpinCo with terrible stores, tell them they don't get a banner, don't get any distribution, don't get any private label, that isn't how this is going to work if they want to get this deal approved...

My expectation is the vast majority of stores divested to "SpinCo" will be stores with the Albertsons banner, and the second large block will be stores with the "Vons" banner. There are currently 387 Albertsons, 195 Vons, and about 25 "Albertsons Market-United" locations.

Easy one first- Of the Albertsons Market-United locations, 15 of them (Albuquerque area, Santa Fe, Taos) compete with Smiths. I don't think they'll have to divest all 15 stores but probably at least 6-7 stores.

For instance let's look at just Vons:
1. All 9 Vons in Las Vegas being divested would be a very easy way to do something, but those are all lousy low-medium volume operations (though they've done cheap "Modern" remodels to a few of them), not positioned particularly well, and far weaker than Smiths or Albertsons. I'm surprised a few of them are even still in business. SpinCo will not be a viable chain in Las Vegas with these 9 Vons Stores as its only store base. Throw in 6-7 Las Vegas area Albertsons (Pahrump obviously needs to go, but that is a marginal volume Albertsons) and it may work out for them.
2. Of the rest of Vons, that leaves you with 186 stores. Now, of that 186 stores, I am going to propose that you have about 50 stores that do not compete within same zip code as Kroger (Bishop, Coronado, Oakhurst, Fresno, Mammoth, Central Coast, and various around San Diego/a few other random ones). I see 75-100 Vons getting divested in CA.

[marshd1000]

I doubt Kroger is going to "give" SpinCo any banners. That would require a massive rebranding of entire divisions, which is the last thing they want to do right now. If they want this merger to go through, they have to keep rebrandings to an absolute minimum in order to avoid public opposition.

In reality, they are going to want to rock the boat as little as possible. They will agree to sell off the minimum number of stores needed to secure antitrust approval, and keep everything else the same. Changing names of stores will just upset customers.

I don't think Kroger would want to run around 50 banners.
My idea/roadmap would be (some would agree with me on this):
SpinCo should include all of the Albertsons brand stores (maybe not the Southern Divsion Albertsons stores, which could be HEB's entrance ticket into D/FW), along with Vons, and maybe the Safeway/Carrs stores in Alaska. The Vons name could be eliminated in inland SoCal/OC and perhaps parts of San Diego County. Safeway/Eagle stores in Alaska should all be rebranded to Carrs.
SpinCo should take the Albertsons store brands like Signature Select, maybe eliminating that and going back to the Albertsons brand.
As soon as the ink dries out on the merger deal in 2024, SpinCo should be scooped up by Loblaws as a permanent home for the Albertsons and Vons banners. Loblaws is a great Canadian retailer that has a lot of potential to expand south of their border. Excellent private label (President's Choice).

Kroger meanwhile? Once the ink dries out, they should clean house and kill off irrelevant banners like QFC (replace that with Safeway),
Andronico's and Pak N Save (replace that with Safeway)
Tom Thumb and Market Street (replace that with Kroger),
Jay C and PayLess in Indiana (replace that with Kroger),
Lucky in UT (replace that with Smith's),
Safeway in AZ (replace that with Fry's),
Safeway in NV/NM/ID/MT (replace that with Smith's),
Safeway in CO/NE/WY/SD (replace that with King Soopers or City Market, and maybe kill off City Market entirely),
Safeway Eastern Seaboard (replace that with Harris Teeter),
Baker's in Omaha (replace that with Dillons),
Gerbes in central Missouri (replace that with Dillons),
Mariano's (replace that with Jewel),
Metro Market in Milwaukee (replace that with Pick n Save).
Star Market ("Stah Mahket" ) in Boston (replace that with Shaw's)
Balducci's and Kings (replace both with Acme)
Kroger should offload Fred Meyer Jewelers too. Food 4 Less/Foods Co./Rvler should be dumped off in a separate transaction to UNFI (successor to SVU/Unified). Amigos should be sold to Fiesta Mart.
Fred Meyer will be here to stay.

When all is said and done, Kroger will have 14 banners left:
Dillons
Fred Meyer
Fry's
Harris Teeter
King Soopers
Kroger
Pick n Save
Ralphs
Smith's
Safeway
Jewel
Acme
Shaw's
United

I saw no mention of Haggen here. I’m guessing you’d suggest a rebrand to Safeway?

[storewanderer]

Seriously? First off, there could be nearly 400 stores from roughly a dozen banners. Secondly, let’s think about this: one year after the merger, I stop at a Ralphs. The store is filthy, garbage cans are overflowing, there’s absolutely no help in sight, the produce is rotting, the prices are high and as an exclusive Ralphs shopper for years, I don’t understand why they got rid of my favorite Kroger brands. I know some smart arse is going to respond that’s the everyday Ralphs experience, but it’s not, and yes Kroger would have to deal with another company destroying their brand equity. Remember- the divested stores will be mostly underperformers.

The divested stores will unquestionably be rebranded, likely into a single banner or possibly two if SpinCo gets F4L. Kroger isn’t going to give SpinCo any of its banners, and Vons, Hagen & the Texas banners are the only ones likely to be retired initially. If there’s a significant number of ex-Albertsons Texas stores that are divested, maybe they’ll get to keep their names (joined by some ex-Kroger). But I guarantee you the stores won’t be named Haggen, and Vons has no equity outside of SoCal. Maybe Luxky or maybe Kroger comes up with a new name.

Rebranding stores will be a costly activity for SpinCo. They need to do this as cheaply as possible and invest money in labor, pricing, and merchandising in order to have a chance. Regardless what SpinCo's plans are (close and sell to other parties, or keep them for a while), they need to operate their stores exceptionally well in order to maintain asset value. This isn't their first rodeo, I spent a lot of time shopping Albertsons LLC Stores in AZ, NM, and CO from 2008-2010 and saw what they did with improving those stores from a price/mix/service standpoint (didn't do much on looks or technology), and expect them to do the same thing again with these SpinCo Stores.

Whatever banner SpinCo gets the majority of its stores from, should be SpinCo's banner going forward. Maybe they end up with two banners. Some stores are certainly going to have to be rebranded because there are flat out too many banners. We can already with decent odds predict the majority of the stores will come from either Vons or Albertsons banners.

I think Safeway in the Pacific Northwest will get away with a lot fewer divests than they probably should, but defining marketshare for Fred Meyer is going to be a little cryptic with all of the non food sales mixed in that shouldn't be considered as part of grocery share analysis in the divest process.

[retailfanmitchell019]

They are going to have to give some token concessions to make it work for this SpinCo. They cannot load SpinCo with terrible stores, tell them they don't get a banner, don't get any distribution, don't get any private label, that isn't how this is going to work if they want to get this deal approved...

My expectation is the vast majority of stores divested to "SpinCo" will be stores with the Albertsons banner, and the second large block will be stores with the "Vons" banner. There are currently 387 Albertsons, 195 Vons, and about 25 "Albertsons Market-United" locations.

SpinCo would keep the Signature private labels, but should switch them back to the Albertsons name, as it was 12 years ago before SVU started to really ruin Albertsons when the Albertsons name was last used on private label and then replaced with Essential Everyday (except for milk, water, bread. Water still had the Albertson's script logo in a blue stripe until 2016).
Another factor is SpinCo would need distribution centers. I'd think they'd take the current Albertsons distros.
marshd1000, Haggen should be rebranded to Safeway. They are a dog of a chain that needs to go after their expansion calamity.
Star Market should be turned into Shaw's Fresh Fare.
My ultimate plan for SpinCo would be to give it to Loblaws. That simple. It would be a reliable permanent home for Albertsons/Vons.

[arizonaguy]

I expect most of the Safeway and Albertsons stores in AZ to be spun off…the bulk in Phoenix and Tucson (which is Fry’s primary markets) and some in Northern Arizona (Prescott/Verde Valley/Flagstaff)plus the ABS/SWY warehouses/dairy plants in Metro Phoenix. The question is will Fry’s want to have the ex-Safeways in the small towns in AZ.

I don't know if I agree that most Safeway and Albertsons stores will be spun off. There was a period of time between 1998 - 2006ish where Fry's didn't build or open a lot of stores but Safeway and Albertsons did. Phoenix as a metro area was booming during this time period and it created a lot of situations where Safeway and or Albertsons are in shopping centers where there aren't Fry's anywhere nearby. There are also situations where shopping centers were redeveloped during the 1980s and 1990s and Safeway already had stores in those centers and Fry's (or Smith's or Smitty's) didn't operate in those areas so Safeway is well located. Safeway was also a but more opportunistic about store locations than Fry's or Albertsons. Bashas' would put a store anywhere but they've probably closed as many stores in Arizona over the last 20 years than Fry's, Safeway and Albertsons combined.

Fry's currently has no problems operating stores in very close proximity to one another. They currently have 2 stores less than 1/2 a mile from one another on 90th St in Scottsdale. They also operated 2 stores at the Rural / Ray Rd. intersection in Chandler/Tempe for 15 years or so. I'd say of Albertsons/Safeway's 134 stores at least 40 - 50 would probably be a good fit for Fry's. Of the remainder, SpinCo (or whomever else) would still get some great stores which could be profitable with the right operator.

Also, I actually think Kroger would want to keep the Albertsons distribution center in Tolleson, AZ as it could consolidate its distribution centers to one central location (the Albertsons DC is next door to the main Fry's DC with simply a railroad separating the 2 facilities). These Tolleson facilities are also only 1 - 1.5 miles away from the new Ocado warehouse Kroger is building in Phoenix.

The Tolleson facility was originally the Smith's Phoenix distribution center and the Fry's distribution center was a few miles away in Phoenix. Eventually Fry's consolidated everything into Tolleson and Target (or SuperValu) was using the old Fry's facilities in Phoenix. About 5 or so years ago Fry's purchased back it's original DC in Phoenix and now also uses that facility.

[HCal]

Recall how Kroger handled the Frys-Smiths-Fred Meyer Marketplace situation in AZ. They moved very quickly to rebrand everything in the market to Frys not long after the merger took place, even not opening a full size Fred Meyer unit that was complete and in the process of being stocked. Frys in Phoenix has been a huge success story for Kroger and that success got off the ground with a successful store conversion program.

That was a very different situation because the other banners weren't that strong in Arizona. Smith's was relatively small in Phoenix until they acquired Smitty's in 1996, so they had been a major player in the market for only a couple years before the Kroger deal. Fred Meyer had a relatively small presence in Arizona. That is very different from rebranding a chain with hundreds of locations and decades of history in a market.

They are going to have to give some token concessions to make it work for this SpinCo. They cannot load SpinCo with terrible stores, tell them they don't get a banner, don't get any distribution, don't get any private label, that isn't how this is going to work if they want to get this deal approved...

I don't think those things really matter. The FTC looks at retail presence in each market and makes sure that there are a sufficient number of competing (unaffiliated) businesses. They don't care about banners, distribution or private labels. SpinCo could get supplied by C&S for all they care.

After the Haggen fiasco, I think they should look at whether SpinCo will be viable, but I'm not sure what legal authority they have to consider that.

[storewanderer]

SpinCo would keep the Signature private labels, but should switch them back to the Albertsons name, as it was 12 years ago before SVU started to really ruin Albertsons when the Albertsons name was last used on private label and then replaced with Essential Everyday (except for milk, water, bread. Water still had the Albertson's script logo in a blue stripe until 2016).
Another factor is SpinCo would need distribution centers. I'd think they'd take the current Albertsons distros.
marshd1000, Haggen should be rebranded to Safeway. They are a dog of a chain that needs to go after their expansion calamity.
Star Market should be turned into Shaw's Fresh Fare.
My ultimate plan for SpinCo would be to give it to Loblaws. That simple. It would be a reliable permanent home for Albertsons/Vons.

Haggen in Bellingham and a few other locations (Marysville, Ferndale, up the hills of Auburn, Olympia) runs an exceptional store, they are easily the best store in town/highest quality operator. I think they still have a castoff or two from Albertsons/Safeway but the core stores of Haggen were really really good. Haven't been there to see what Safeway has done to them but from what I've heard they haven't done too much wrong and largely let Haggen's perimeter be. Haggen did have very high pricing already, always did, so that is something Safeway couldn't make any worse. Maybe some Haggen need to be divested (something is going to need to be divested in Marysville for instance...) but frankly I'd keep those if I were Kroger and divest the lousy Safeway locations. Bellingham does have a newer Safeway so maybe they will want to keep that. Converting Haggen locations to Safeway would easily drop 50% of their sales due to the differences in perimeter offer (unless they closed a nearby Safeway). Haggen has been left with a small buying operation for perimeter to this day. This is not at all the same Haggen that was being presented in former Albertsons/Safeway Stores. May have the same name but completely different offer.

[Bagels]

Legal analysts are predicting that the bar will be high, especially given the quick collapse of Hagen several years ago. Among the expectations: Kroger will cover the rebranding costs, Kroger will agree to supply the stores if necessary for a specified time period, Kroger and SpinCo will enter into a joint purchasing agreement for a specified time period (so SpinCo has access to lower price points), Kroger will support the stores for a specified time period (Albertsons agreed to support Hagen, and was accused of providing false data), Kroger will guarantee operating capital / LOC for a specified time period, etc. Buckle up!

[Romr123]

The broad strokes here are correct about the west coast alignment activity; there are going to be a few (25-50) stores in the rest of the US which are going to need to be divested because of hyperlocal competition issues (Bloomington/Normal, IL; probably a few others in Chicagoland, a few in Texas; a few in DC) which won't fit with a west-coast divestiture.

They'll doubtless end up with a local operator (Schnucks/Hy-Vee/Meijer/H-E-B) and the odd one or two with C&S/AWG rather than long-term with SpinCo.

I could also see teaming up a spin of the 100-ish Ruler-F4L to simplify operations and reduce the distraction of the alternate situation--spin off F4L to ethnic operator and Ruler to Aldi/SaveALot.