Ralphs Up while Albertsons Down (market share)

[CalItalian]

http://latimesblogs.latimes.com/dailydi ... ornia.html

I would have posted this earlier but I'm new and only registered since the article came out. I've been a lurker on this site and Groceteria for a long time.

[Alpha8472]

It is no surprise that Albertsons is not doing so well. Albertsons was always a high priced store. Even with Albertsons' recent price reductions, people still come to associate the Albertsons name with high prices. Their selection was mediocre to adequate at best. Also, Supervalu Albertsons has been neglecting upkeep on some of their stores. Having half of the fluorescent lights in the store removed was a bad move for them. Their stores looked like dark dingy caves.

Ralphs always seemed to have a slightly better selection of products. Mostly due to Kroger's selection of products. There are some higher quality items such as Boar's Head. The decor of Ralphs stores usually is quite nice looking when it comes to the Fresh Faire stores and to the remodeled regular Ralphs stores. Even their unremodeled stores at least have all of the lights on inside. Over a year ago, Ralphs started a lower price advertising strategy. It seems to have worked. In actuality, of course only some prices went down and other prices went up.

Vons has been remodeling stores with Safeway's Lifestyle format. Some people don't like the dark and dim look. Ralphs stores have style, but they are bright and clean looking with higher quality materials. The Lifestyle format is sort of a cheap and dark look. However, Vons always has had somewhat high prices. Although, recently Vons has started an Everyday Low Price advertising strategy. However, the prices are not that low and it seems to have come a little late.

[klkla]

It is no surprise that Albertsons is not doing so well....

Vons has been remodeling stores with Safeway's Lifestyle format. Some people don't like the dark and dim look. Ralphs stores have style, but they are bright and clean looking with higher quality materials. The Lifestyle format is sort of a cheap and dark look. However, Vons always has had somewhat high prices. Although, recently Vons has started an Everyday Low Price advertising strategy. However, the prices are not that low and it seems to have come a little late.

I agree with you about Albertson's. The biggest mistake the previous owners made was to get rid of the Lucky's name and switch to Albertson's for the whole region. Nobody really knew what Albertson's stood for but everybody knew Lucky was 'The Low Price Leader." On top of that they only remodeled a handful of stores and really squandered an opportunity.

I disagree with your assesment of Ralphs and Vons a little bit. The lifestyle stores are actually very attractive and not cheap looking at all and I think that might be a problem because they look expensive. I think the format is a little too upscale for some locations. The non-Fresh Fare Ralphs stores are modern but sterile in comparison IMHO.

It's also important to note that Vons has much higher sales per store than either Ralphs or Albertson's (or any other supermarket operator in the region) and have held on to their market share despite the fact that they are operating fewer stores.

[Alpha8472]

Sadly, I have seen some really awful Lifestyle "remodels." Safeway tried to cut costs and some small stores got Lifestyle "Lite" remodels. They cut corners and did not fully remodel. For example, old refrigerator units were not replaced(even though dented and rusted), most of the fluorescent lighting was not replaced, some lighting was removed in other places making the store too dark in areas, old damaged white tiles in some aisles were left, aisles pushed together and narrowed, aisles rearranged so that columns ended up in the middle of the aisles, etc. It is really ridiculous in some of the smaller stores. Maybe the corporate office thought no one shopping in those smaller stores would notice, but we did.

[storewanderer]

The majority of the Safeway Lifestyle remodels I've seen are quite cheap. I know it all comes down to the specific stores and how they perform. Take the bakery for example. Some locations really got nice work in the bakery with a good looking tile wall installed out by the counter so the prep area is no longer visible to the customer along with a wood fired oven for bread and a very nice looking service bread display.

Other locations got the wall installed, but no service bread. Others got no wall, no bread island, and didn't even get new displays. I've seen some that keep the old bagel merchandiser, some that get a new one, etc. I've seen some with a "warm cinnamon roll" unit, most do not have this.

I've seen all kinds of lifestyle remodels that keep old refrigeration.

I even saw one or two lifestyle remodels that appeared to have kept the old produce cases, or installed new ones that looked just like the old ones, and didn't even bother to install the nice looking 45degree angled organic produce merchandisers.

A complete lifestyle store that is done well is very nice but it seems, especially as the program has progressed, many of the stores being remodeled have become more of a "redecoration" than an actual remodel, or they are an incomplete remodel.

Ralphs is known for having lots of low volume stores. I suspect many of these were inherited from Alpha Beta. I think they have also been closing many stores. Ralphs seems to have a major, major problem attempting to operate stores that appeal to a middle class demographic. They can get upper middle a lot better.

Some of Ralphs units are a bit sterile, but from what I've seen they run a neat and clean operation, not at all sloppy. Safeway and I guess Vons (due to the observations of some financial analysts over the summer) seems to be having some major execution problems due to labor shortages in the stores and as a result you are seeing messy displays, unkempt departments, and poor staffing levels.

With that said, I don't think Albertsons has much of a future in Southern California and Las Vegas. We will see how Stater does with more stores. I've seen some price surveys and Stater's prices may be slightly (5-10%) lower than Ralphs, Vons, and Albertsons, but I think in general when it comes to price Stater is more talk than actual game.

[klkla]

A complete lifestyle store that is done well is very nice but it seems, especially as the program has progressed, many of the stores being remodeled have become more of a "redecoration" than an actual remodel, or they are an incomplete remodel.

I think the program has evolved to where they are just now getting to the secondary stores that can't justify the return on investment for a full remodel. They just remodeled a Vons I pass going to work everyday in Echo Park (a lower income area west of downtown LA). It's a small classic Marina-style ex-Safeway and they had to do some obvious cost cutting (like reconditioning some older refrigeration units) but in whole the store is nice, especially for the neighborhood, and a big improvement on what was there before.

Some of Ralphs units are a bit sterile, but from what I've seen they run a neat and clean operation, not at all sloppy. Safeway and I guess Vons (due to the observations of some financial analysts over the summer) seems to be having some major execution problems due to labor shortages in the stores and as a result you are seeing messy displays, unkempt departments, and poor staffing levels.

I've never been a big Ralphs fan, I guess. I have had so many horrible customer service experiences in their stores over the years that it has soured my opinion of them. I've only shopped at a Ralphs three or four times since Kroger took over and things seemed a little better but I didn't see anything that would attract me to be a regular shopper there. I'm not a huge Vons fan, either. Their service is good but merchandise selection is very mediocre, even more so than Ralphs. I have not seen any of the execution issues you mention. In fact of the big 4 in LA, Vons is most likely to have clean, well stocked & faced stores but I've only shopped at the high volume stores in LA proper. It may not be like that in some of the slower suburban locations.

With that said, I don't think Albertsons has much of a future in Southern California and Las Vegas. We will see how Stater does with more stores. I've seen some price surveys and Stater's prices may be slightly (5-10%) lower than Ralphs, Vons, and Albertsons, but I think in general when it comes to price Stater is more talk than actual game.

I agree. Supervalu is losing their grip very quickly. At this rate I could see them selling their stores piecemeal to the existing players with Staters finally getting a large presence in Los Angeles county. They have already expressed interest publicly and just competed construction of a state of the art distribution center that could easy handle more stores.

It's funny what you say about Staters. Everything you hear from them makes it seem like their customers are in love with them because of their great service and low prices. But nobody I know that has actually lived near a Staters has ever had anything good to say about them. I have no first hand knowledge myself though but everyone I have ever talked to said the stores are old, dirty, poorly stocked and have bad service.

[storewanderer]

Well to be fair to Stater, I was in Santa Barbara last year and drove to Santa Clarita, the nearest Stater, to see what they were all about. They were just putting the finishing touches on a remodel of a former mid 90's Albertsons (deli back wall behind produce, bakery front wall beside produce, bread front wall against sidewalk adjacant to bakery... that layout) and the store looked great. The traffic in the store was heavy for the time of day I was there (late morning) but maybe the customer they attract shops more at that time of day. The perimeter looked great, the items I bought from the deli (chicken) and bakery (italian sub roll covered with cheese/pepperonchini and cookies) were very good; well above average and reasonably priced. The meat and produce also looked good. Meat was well above average. The store had a lot of sales; it seemed like 80% of the items in center store were on sale of some kind, with few to none of the sale tags listing a regular price or a "sale ends" date. The actual regular prices I saw were very weak, some were above Ralphs and Vons but they were across the board lower than Albertsons. The staffing level in the store seemed fairly high and the attitude of the staff was I'd say average for a store, but maybe above average for Southern California based on the service I received at the Vons, Albertsons, and Ralphs units I visited. Actually I did encounter some very friendly employees at a couple Ralphs units (both were Fresh Fare; I wonder if that makes a difference).

I think Stater will need to be very, very careful when (I mean if) they pick up more Albertsons Stores. They are one company who appears to have been successful buying Albertsons Stores, converting them, and operating them. Ralphs in northern California and Raleys in Las Vegas were not so fortunate with buying Albertsons Stores and those stores remaining in business. Save Mart in northern California is having major problems with former Albertsons Stores but their execution is terrible all around.

Those locations you refer to where you think Vons lifestyle stores are "too upscale" for the neighborhood is just the type of area where Stater, attempting to be more of a mid-segment grocer, could really pick up business. Nobody in SoCal seems to be interested in the middle; you have one group going for the ethnic shoppers and the others going for the higher end shoppers. I know the middle is an ever shrinking demographic in SoCal, but they are still there.

In terms of product selection, what I saw at Stater seemed better than Ralphs and Vons. California grocers seem to have a major issue with product selection (low selection).

[Super S]

Although I can't comment on California, the news about Albertsons does not surprise me at all. With the exception being their stores around Boise, Albertsons has really let a lot of their stores go downhill...removing fluorescent tubes, not adequately staffing stores, and not keeping them as clean as they used to. Who wants to shop in an expensive, dirty, poorly lit and poorly staffed store if there are better choices?

[krogerclerk]

Albertson's has seen its market share decline throughout its geographic footprint, whether it's New Albertsons(SuperValu) or Albertsons LLC. Albertson's appears to be heaviest impacted by Walmart and any competition that has a stronger commitment to price, be it Winco, independents or a Kroger banner. In markets that Walmart and a Kroger banner compete with Albertson's, Albertson's seems to be tanking, with a few exceptions. Witness the recent decision to exit a longtime Albertson's stronghold, Salt Lake City where Walmart is growing, Kroger-owned Smith's is based and a strong independent base exists. The Pacific Northwest is another area that Albertson's has had a long presence and seems to be fading.
The region is longtime Safeway stronghold and the lifestyle remodels seem to be well received there while Kroger under its Fred Meyer and QFC banners is the market leader in the major markets-Portland and Seattle with an more upscale, less price oriented approach than other Kroger divisions. The Pacific Northwest is only beginning to see the emergence of Walmart Supercenters and is less price sensitive than several more affluent markets such as Boston or San Francisco.

Albertsons LLC is somewhat schizophrenic in its plans for the future. The predecessor company exited the New Orleans market in the early 00's. In August, Albertsons LLC opened a new store in the suburb of Mandeville, on the north shore of Lake Pontchartrain in a former A&P. The LLC has sold almost half its store base in Florida to Publix, the overwhelmingly largest competitor, yet says it has no intentions to exit the market. Colorado and Arizona stores are losing ground to competition while New Mexico is relatively strong despite Walmart expansion and a near equal presence from Smiths.

SuperValu has practically handed the Las Vegas market to Walmart and Smiths/Food 4 Less, giving up its number one position in the market in less than a years time. Southern California seems to be following the same pattern. SuperValu has toyed with the Lucky banner in Vegas and SoCal, starting with a bare basics approach and now moving towards a price oriented full service supermarket with new Lucky stores, only being beat by the competion on price.
Only in Idaho and Montana is the Albertsons stronghold likely to stay put for sometime in markets that are traditional Albertsons and Buttrey strongholds, and much of that is maintained by store count greatly exceeding the competitions' counts.

[klkla]

Your analysis is spot on krogerclerk.

IMO it all comes down to execution and strategy. Dallas/Fort Worth comes to mind, as well, as another market where Albertson's had a huge lead in market share and lost it in just a couple of years and is now third in the market and falling fast.

While it's certainly easy to 'blame' WalMart the truth is other conventional supermarket chains have managed to thrive in areas where WalMart has grown (H-E-B in Texas and Plublix in the South East come to mind). Albertson's management (at the original company as well as SuperValu and Cerebrus) have nobody to blame but themselves.