🛒 Kroger-Albertsons Merger: National Impact

[BillyGr]

But I think they have committed to operating these divested stores for the long haul, or is that just news articles that have interpreted that to be the case somehow?

Of course they are going to tell the media that. If they said they plan to sell or close the stores, various parties would object (unions, state AGs, etc.) and the merger would be dead.

I would only trust a committment to operate these stores for the long haul if it were written into the agreement, with substantial penalties for non-compliance. But of course, they will never agree to that.

It wouldn't be an issue if they were planning to sell them to existing companies to expand - that is what they did with a large quantity of the Grand Union stores (to a variety of companies, depending on where they were - Price Chopper, Hannaford, Shaw's, Stop & Shop and probably a couple others scattered in there as well).

The idea being, you keep the stores operating and under a different ownership from the ones merged, which continues to provide a competition for the area the store is in, no matter who that owner is (as you'll note, some of those names above aren't union either - that was also mentioned as an issue with the recent closing of the Albany ShopRite locations, as they were the only union store, thus their costs were higher than other competitors, making them have to sell more just to get the same level of profit).

[ClownLoach]

But I think they have committed to operating these divested stores for the long haul, or is that just news articles that have interpreted that to be the case somehow?

Of course they are going to tell the media that. If they said they plan to sell or close the stores, various parties would object (unions, state AGs, etc.) and the merger would be dead.

I would only trust a committment to operate these stores for the long haul if it were written into the agreement, with substantial penalties for non-compliance. But of course, they will never agree to that.

It wouldn't be an issue if they were planning to sell them to existing companies to expand - that is what they did with a large quantity of the Grand Union stores (to a variety of companies, depending on where they were - Price Chopper, Hannaford, Shaw's, Stop & Shop and probably a couple others scattered in there as well).

The idea being, you keep the stores operating and under a different ownership from the ones merged, which continues to provide a competition for the area the store is in, no matter who that owner is (as you'll note, some of those names above aren't union either - that was also mentioned as an issue with the recent closing of the Albany ShopRite locations, as they were the only union store, thus their costs were higher than other competitors, making them have to sell more just to get the same level of profit).

I don't have an issue with C&S selling the stores to better operators, as long as they're not going to be closed. I would rather see the stores sold off piecemeal than to a unproductive/uncompetitive owner like C&S which is what I think they'll be in some markets like SoCal.

Where these mergers go wrong is when the government determines what stores divest, which they get wrong every damned time, and when they force a single buyer. The best I've seen was how the Albertsons-American Stores deal went. The worst being the Haggen debacle which in my opinion was exponentially worse because of the specific locations chosen to be sold off. There are still "food deserts" that have not been resolved, other markets with monopoly status even stores across the street from each other, and/or communities that have been downgraded from a full service market that Albertsons certainly would have kept open but now they have a Smart&Final or Grocery Outlet.

I honestly do trust the chains more to choose the locations than the government, with the caveat that there must be restrictions in place to ensure the stores stay open and operating and not reacquired. The government incompetence bundled with corporate greed is the worst possible flavor. And the government seems to like these single buyer deals like Haggen and C&S because it means less work for them. Everyone is better off when market competitors like Stater Bros get to take first crack at the list of divestitures and snap them up to bolster their stance in the marketplace. And I think it could be argued these days that non union buyers that better meet community interests, like 99 Ranch, H-Mart and Northgate need to be able to buy stores too with caveats that the divesting retailer must find equivalent or better jobs for all employees who don't want to work for the non union store.

If everyone could bid on any individual store, I guarantee that not a single store in SoCal for example would be left for C&S to acquire and furthermore every single store would stay open and be poised to more aggressively compete with Krogersons regardless of who the buyer is. This is a case where the truth is the process is designed to suppress the real competition instead of benefit it and the only winners are the Union bosses. There are Ralphs Vons and Albertsons in SoCal that should specifically be Northgate or Seafood City but they won't let the stores out of their iron grip even if they don't make any money. This merger and divestiture plan will not fix that at all.

Market by market the needed approach might be different. What I said above about California is the truth. Nobody is going to benefit when a store is divested and becomes a C&S-Albertsons. If it became a Stater Bros, Bristol Farms, Seafood City, Northgate, Vallarta, H-Mart, 99 Ranch, Raley's, Nugget, Whole Foods, or even Patel Bros. depending on the needs of the community then it would truly be competition. Hopefully that is the intent of C&S, to sell them piecemeal later at a profit to growing and aggressive operators then get the heck out of California.

For the PNW I think the exact opposite and like the idea of C&S assembling a new competitive chain built out of old Safeway, Albertsons, and QFC locations... I just wish it wasn't going to be called QFC. The same could probably be said for Arizona although at least they have the Bashas family of stores competing.

Government driven one size fits all deals do not work, and if that's the best they can do then I'd rather see the merger killed and a Chapter 11 Albertsons breakup where every store gets bid on individually.

[storewanderer]

Of course they are going to tell the media that. If they said they plan to sell or close the stores, various parties would object (unions, state AGs, etc.) and the merger would be dead.

I would only trust a committment to operate these stores for the long haul if it were written into the agreement, with substantial penalties for non-compliance. But of course, they will never agree to that.

It wouldn't be an issue if they were planning to sell them to existing companies to expand - that is what they did with a large quantity of the Grand Union stores (to a variety of companies, depending on where they were - Price Chopper, Hannaford, Shaw's, Stop & Shop and probably a couple others scattered in there as well).

The idea being, you keep the stores operating and under a different ownership from the ones merged, which continues to provide a competition for the area the store is in, no matter who that owner is (as you'll note, some of those names above aren't union either - that was also mentioned as an issue with the recent closing of the Albany ShopRite locations, as they were the only union store, thus their costs were higher than other competitors, making them have to sell more just to get the same level of profit).

I don't have an issue with C&S selling the stores to better operators, as long as they're not going to be closed. I would rather see the stores sold off piecemeal than to a unproductive/uncompetitive owner like C&S which is what I think they'll be in some markets like SoCal.

Where these mergers go wrong is when the government determines what stores divest, which they get wrong every damned time, and when they force a single buyer. The best I've seen was how the Albertsons-American Stores deal went. The worst being the Haggen debacle which in my opinion was exponentially worse because of the specific locations chosen to be sold off. There are still "food deserts" that have not been resolved, other markets with monopoly status even stores across the street from each other, and/or communities that have been downgraded from a full service market that Albertsons certainly would have kept open but now they have a Smart&Final or Grocery Outlet.

I honestly do trust the chains more to choose the locations than the government, with the caveat that there must be restrictions in place to ensure the stores stay open and operating and not reacquired. The government incompetence bundled with corporate greed is the worst possible flavor. And the government seems to like these single buyer deals like Haggen and C&S because it means less work for them. Everyone is better off when market competitors like Stater Bros get to take first crack at the list of divestitures and snap them up to bolster their stance in the marketplace. And I think it could be argued these days that non union buyers that better meet community interests, like 99 Ranch, H-Mart and Northgate need to be able to buy stores too with caveats that the divesting retailer must find equivalent or better jobs for all employees who don't want to work for the non union store.

If everyone could bid on any individual store, I guarantee that not a single store in SoCal for example would be left for C&S to acquire and furthermore every single store would stay open and be poised to more aggressively compete with Krogersons regardless of who the buyer is. This is a case where the truth is the process is designed to suppress the real competition instead of benefit it and the only winners are the Union bosses. There are Ralphs Vons and Albertsons in SoCal that should specifically be Northgate or Seafood City but they won't let the stores out of their iron grip even if they don't make any money. This merger and divestiture plan will not fix that at all.

Market by market the needed approach might be different. What I said above about California is the truth. Nobody is going to benefit when a store is divested and becomes a C&S-Albertsons. If it became a Stater Bros, Bristol Farms, Seafood City, Northgate, Vallarta, H-Mart, 99 Ranch, Raley's, Nugget, Whole Foods, or even Patel Bros. depending on the needs of the community then it would truly be competition. Hopefully that is the intent of C&S, to sell them piecemeal later at a profit to growing and aggressive operators then get the heck out of California.

For the PNW I think the exact opposite and like the idea of C&S assembling a new competitive chain built out of old Safeway, Albertsons, and QFC locations... I just wish it wasn't going to be called QFC. The same could probably be said for Arizona although at least they have the Bashas family of stores competing.

Government driven one size fits all deals do not work, and if that's the best they can do then I'd rather see the merger killed and a Chapter 11 Albertsons breakup where every store gets bid on individually.

In PNW I'd say C&S should have full rights to the Albertsons banner and the QFC banner. Although damaged I somehow think using the Albertsons banner outside Seattle despite the damage Supervalu did to that banner would work better than the QFC banner. Basically they could distinguish the formats a bit with QFC being a small store/slightly upscale and Albertsons being the larger food and drug combo format. The Safeway and Fred Meyer banners are sufficient for Kroger to use going forward in PNW.

Whether or not C&S gets any distribution in SoCal will better display its intentions. I think C&S could probably roll 66 stores into its current NorCal facilities from a supply standpoint. They will need a warehouse in AZ to handle Las Vegas/Phoenix/NM but I think the current Albertsons/Safeway facility in AZ is way too large for them. If they plan to supply those regions from CA they may as well not even open as they'll fail. I'd really like to see a list of the distribution centers they are getting. That would tell us quite a bit.

My suspicion is ultimately the CA, NV, and AZ divests end up with Save Mart. OR/WA/MT/ID stay with C&S and CO/WY stays with C&S too (mainly due to lack of other interested parties) and also a divested CO distribution starts to supply NM.

This may explain some of the odd thing with the banners. Save Mart may figure they already use their name in NV so they can use it in Las Vegas too (bad idea- should have gotten rights to Albertsons banner). Now under the scenario I predict directly above you get it where 3 parties use the banner "Albertsons" - you have Save Mart using it in CA/AZ and you have C&S using it in CO/WY, and Kroger elsewhere which having multiple very different operators using that banner is not good.

I also wonder if C&S could broker a deal with Raleys in AZ to do something. Raleys has not worked with C&S much if at all, so this would be interesting. There are a number of things they could try. They could try to take their supply chain in AZ over entirely. They could try to take over the ~30 independent stores Bashas supplies on as C&S wholesale customers and give Raleys some former Safeway/Albertsons units in exchange, are a couple ideas there.

There is no way especially in CA that any unionized stores will divest directly to non-union operators. Someone is going to get first crack at these stores who says they are a union operator (like Haggen did). Of course then they'll go belly up and some stores will close entirely, others go to non-union operators, etc.

[HCal]

Market by market the needed approach might be different. What I said above about California is the truth. Nobody is going to benefit when a store is divested and becomes a C&S-Albertsons. If it became a Stater Bros, Bristol Farms, Seafood City, Northgate, Vallarta, H-Mart, 99 Ranch, Raley's, Nugget, Whole Foods, or even Patel Bros. depending on the needs of the community then it would truly be competition. Hopefully that is the intent of C&S, to sell them piecemeal later at a profit to growing and aggressive operators then get the heck out of California.

If any divested store goes to a company that is already present in that market, then this represents a reduction in competition, as there is now one fewer option for local residents. In order to preserve competition, the divested stores have to go to a company that was formerly not present in the market.

C&S is the perfect acquirer because they have no retail operations in the areas where Kroger and Albertsons overlap, so no one can claim that selling stores to them will reduce competition. Then, after the merger is done, they can slowly sell stores to local operators, and those individual sales will be small enough to avoid antitrust scrutiny. In the end, this is just a way of circumventing antitrust laws, which of course benefits all companies since it becomes easier to raise prices.

[Romr123]

Market by market the needed approach might be different. What I said above about California is the truth. Nobody is going to benefit when a store is divested and becomes a C&S-Albertsons. If it became a Stater Bros, Bristol Farms, Seafood City, Northgate, Vallarta, H-Mart, 99 Ranch, Raley's, Nugget, Whole Foods, or even Patel Bros. depending on the needs of the community then it would truly be competition. Hopefully that is the intent of C&S, to sell them piecemeal later at a profit to growing and aggressive operators then get the heck out of California.

If any divested store goes to a company that is already present in that market, then this represents a reduction in competition, as there is now one fewer option for local residents. In order to preserve competition, the divested stores have to go to a company that was formerly not present in the market.

C&S is the perfect acquirer because they have no retail operations in the areas where Kroger and Albertsons overlap, so no one can claim that selling stores to them will reduce competition. Then, after the merger is done, they can slowly sell stores to local operators, and those individual sales will be small enough to avoid antitrust scrutiny. In the end, this is just a way of circumventing antitrust laws, which of course benefits all companies since it becomes easier to raise prices.

I think you're right here, but the definition of "present in that market" has to be a pretty small radius. Take the Coachella Valley. Stater Bros certainly has many locations in the NW/SE portions of the valley, but looking at the map of their locations, they have nothing south of Ramon (Cathedral City) east of Washington. That leaves quite a few communities (southern Cat City/Rancho Mirage/Palm Desert) without them as a convenient competitor. I'd argue that a location at, say, 111/Bob Hope would be a significant plus to competition in the entire region (no, I'm not advocating them taking out the Wal-Mart Neighborhood Market near there--that would be a reduction of competition, TBH).

Similarly, a Bristol Farms/Whole Foods/Gelsons smack dab in Palm Springs would be additive to competition (though not at the expense of Jensen's).

Wonder how the "radius of shoppers" differs by concept (I've got to believe that an Asian/Indian concept has a larger radius than a Hispanic concept; similarly gourmet versus Smart and Final as compared to neighborhood standard Albervons/Ralphsforless/Stater)

[jamcool]

It wouldn't be an issue if they were planning to sell them to existing companies to expand - that is what they did with a large quantity of the Grand Union stores (to a variety of companies, depending on where they were - Price Chopper, Hannaford, Shaw's, Stop & Shop and probably a couple others scattered in there as well).

The idea being, you keep the stores operating and under a different ownership from the ones merged, which continues to provide a competition for the area the store is in, no matter who that owner is (as you'll note, some of those names above aren't union either - that was also mentioned as an issue with the recent closing of the Albany ShopRite locations, as they were the only union store, thus their costs were higher than other competitors, making them have to sell more just to get the same level of profit).

I don't have an issue with C&S selling the stores to better operators, as long as they're not going to be closed. I would rather see the stores sold off piecemeal than to a unproductive/uncompetitive owner like C&S which is what I think they'll be in some markets like SoCal.

Where these mergers go wrong is when the government determines what stores divest, which they get wrong every damned time, and when they force a single buyer. The best I've seen was how the Albertsons-American Stores deal went. The worst being the Haggen debacle which in my opinion was exponentially worse because of the specific locations chosen to be sold off. There are still "food deserts" that have not been resolved, other markets with monopoly status even stores across the street from each other, and/or communities that have been downgraded from a full service market that Albertsons certainly would have kept open but now they have a Smart&Final or Grocery Outlet.

I honestly do trust the chains more to choose the locations than the government, with the caveat that there must be restrictions in place to ensure the stores stay open and operating and not reacquired. The government incompetence bundled with corporate greed is the worst possible flavor. And the government seems to like these single buyer deals like Haggen and C&S because it means less work for them. Everyone is better off when market competitors like Stater Bros get to take first crack at the list of divestitures and snap them up to bolster their stance in the marketplace. And I think it could be argued these days that non union buyers that better meet community interests, like 99 Ranch, H-Mart and Northgate need to be able to buy stores too with caveats that the divesting retailer must find equivalent or better jobs for all employees who don't want to work for the non union store.

If everyone could bid on any individual store, I guarantee that not a single store in SoCal for example would be left for C&S to acquire and furthermore every single store would stay open and be poised to more aggressively compete with Krogersons regardless of who the buyer is. This is a case where the truth is the process is designed to suppress the real competition instead of benefit it and the only winners are the Union bosses. There are Ralphs Vons and Albertsons in SoCal that should specifically be Northgate or Seafood City but they won't let the stores out of their iron grip even if they don't make any money. This merger and divestiture plan will not fix that at all.

Market by market the needed approach might be different. What I said above about California is the truth. Nobody is going to benefit when a store is divested and becomes a C&S-Albertsons. If it became a Stater Bros, Bristol Farms, Seafood City, Northgate, Vallarta, H-Mart, 99 Ranch, Raley's, Nugget, Whole Foods, or even Patel Bros. depending on the needs of the community then it would truly be competition. Hopefully that is the intent of C&S, to sell them piecemeal later at a profit to growing and aggressive operators then get the heck out of California.

For the PNW I think the exact opposite and like the idea of C&S assembling a new competitive chain built out of old Safeway, Albertsons, and QFC locations... I just wish it wasn't going to be called QFC. The same could probably be said for Arizona although at least they have the Bashas family of stores competing.

Government driven one size fits all deals do not work, and if that's the best they can do then I'd rather see the merger killed and a Chapter 11 Albertsons breakup where every store gets bid on individually.

In PNW I'd say C&S should have full rights to the Albertsons banner and the QFC banner. Although damaged I somehow think using the Albertsons banner outside Seattle despite the damage Supervalu did to that banner would work better than the QFC banner. Basically they could distinguish the formats a bit with QFC being a small store/slightly upscale and Albertsons being the larger food and drug combo format. The Safeway and Fred Meyer banners are sufficient for Kroger to use going forward in PNW.

Whether or not C&S gets any distribution in SoCal will better display its intentions. I think C&S could probably roll 66 stores into its current NorCal facilities from a supply standpoint. They will need a warehouse in AZ to handle Las Vegas/Phoenix/NM but I think the current Albertsons/Safeway facility in AZ is way too large for them. If they plan to supply those regions from CA they may as well not even open as they'll fail. I'd really like to see a list of the distribution centers they are getting. That would tell us quite a bit.

My suspicion is ultimately the CA, NV, and AZ divests end up with Save Mart. OR/WA/MT/ID stay with C&S and CO/WY stays with C&S too (mainly due to lack of other interested parties) and also a divested CO distribution starts to supply NM.

This may explain some of the odd thing with the banners. Save Mart may figure they already use their name in NV so they can use it in Las Vegas too (bad idea- should have gotten rights to Albertsons banner). Now under the scenario I predict directly above you get it where 3 parties use the banner "Albertsons" - you have Save Mart using it in CA/AZ and you have C&S using it in CO/WY, and Kroger elsewhere which having multiple very different operators using that banner is not good.

I also wonder if C&S could broker a deal with Raleys in AZ to do something. Raleys has not worked with C&S much if at all, so this would be interesting. There are a number of things they could try. They could try to take their supply chain in AZ over entirely. They could try to take over the ~30 independent stores Bashas supplies on as C&S wholesale customers and give Raleys some former Safeway/Albertsons units in exchange, are a couple ideas there.

There is no way especially in CA that any unionized stores will divest directly to non-union operators. Someone is going to get first crack at these stores who says they are a union operator (like Haggen did). Of course then they'll go belly up and some stores will close entirely, others go to non-union operators, etc.

What likely gets divested in AZ are the Albertsons stores in Phoenix and Tucson….they are non-union unlike Safeway in AZ

[veteran+]

Market by market the needed approach might be different. What I said above about California is the truth. Nobody is going to benefit when a store is divested and becomes a C&S-Albertsons. If it became a Stater Bros, Bristol Farms, Seafood City, Northgate, Vallarta, H-Mart, 99 Ranch, Raley's, Nugget, Whole Foods, or even Patel Bros. depending on the needs of the community then it would truly be competition. Hopefully that is the intent of C&S, to sell them piecemeal later at a profit to growing and aggressive operators then get the heck out of California.

If any divested store goes to a company that is already present in that market, then this represents a reduction in competition, as there is now one fewer option for local residents. In order to preserve competition, the divested stores have to go to a company that was formerly not present in the market.

C&S is the perfect acquirer because they have no retail operations in the areas where Kroger and Albertsons overlap, so no one can claim that selling stores to them will reduce competition. Then, after the merger is done, they can slowly sell stores to local operators, and those individual sales will be small enough to avoid antitrust scrutiny. In the end, this is just a way of circumventing antitrust laws, which of course benefits all companies since it becomes easier to raise prices.

I get what you are saying but, as a consumer I would not be interested in anything that C&S has to offer.

[brendenmoney]

Market by market the needed approach might be different. What I said above about California is the truth. Nobody is going to benefit when a store is divested and becomes a C&S-Albertsons. If it became a Stater Bros, Bristol Farms, Seafood City, Northgate, Vallarta, H-Mart, 99 Ranch, Raley's, Nugget, Whole Foods, or even Patel Bros. depending on the needs of the community then it would truly be competition. Hopefully that is the intent of C&S, to sell them piecemeal later at a profit to growing and aggressive operators then get the heck out of California.

If any divested store goes to a company that is already present in that market, then this represents a reduction in competition, as there is now one fewer option for local residents. In order to preserve competition, the divested stores have to go to a company that was formerly not present in the market.

C&S is the perfect acquirer because they have no retail operations in the areas where Kroger and Albertsons overlap, so no one can claim that selling stores to them will reduce competition. Then, after the merger is done, they can slowly sell stores to local operators, and those individual sales will be small enough to avoid antitrust scrutiny. In the end, this is just a way of circumventing antitrust laws, which of course benefits all companies since it becomes easier to raise prices.

I get what you are saying but, as a consumer I would not be interested in anything that C&S has to offer.

From a consumer standpoint, while I understand that the FTC is trying to create a replacement competitor in markets they have to divest, this "new" competitor theory is completely useless if the competitor simply doesn't have plans to compete on the level Albertsons and Kroger intend on competing at. Yes, I know that it isn't confirmed that C&S doesn't have the desire to operate retail stores, because there is surely a possibility that they do, but if they don't, then it would certainly be more beneficial to sell stores to competitors already in the market. For example, in SoCal, it would be much more beneficial if a competitor already in the market, such as Stater Bros and Walmart Neighborhood Market acquired divested stores since they have a desire to compete in said market, otherwise we end up with stores slowly sold to non full-service operators such as Smart & Final, Aldi, and Grocery Outlet, with maybe Stater acquiring a store here and there.

[storewanderer]

I get what you are saying but, as a consumer I would not be interested in anything that C&S has to offer.

Why not give them a fair shake? We don't know what kind of a store they will put out there... until they put it out there.

I am expecting something similar to the Haggen SoCal/AZ/NV operation but maybe they will get it better somehow. Based on the C&S supplied/merchandised independents I have been to I do not know how they will get it better but they are the biggest grocery wholesaler in the US so I guess they must be doing something right? You never know I guess.

[HCal]

For example, in SoCal, it would be much more beneficial if a competitor already in the market, such as Stater Bros and Walmart Neighborhood Market acquired divested stores since they have a desire to compete in said market, otherwise we end up with stores slowly sold to non full-service operators such as Smart & Final, Aldi, and Grocery Outlet, with maybe Stater acquiring a store here and there.

Would that be such a bad thing? I would think that Smart & Final, Aldi, or Grocery Outlet would be much better for communities, as they have a desire to compete in these markets, and will apply downward pressure on prices.

I see your point about full service, but I don't think it's a big issue.
Most people will prefer lower prices to better service.