Which other players will benefit the most from the Kroger / Albertsons Merger?

[arizonaguy]

Assuming the merger goes through, I'm curious who stands to benefit the most.

I'd assume that Stater Bros. will probably be the biggest winner followed by WinCo, Raley's / Bashas', HEB and Save Mart. I also think chains invading or competing in Kroger territory not affected by the merger such as Hy Vee, Publix, Meijer and Giant Eagle stand to gain from the merger. Ahold / Delhaize, on the other hand, may finally face greater competition than it is used to in its territory provided Kroger can fix the mess that the Mid Atlantic / New England operations are.

Walmart has shied away from Neighborhood Markets recently but this may give them a route to grow neighborhood markets or at least pickup / delivery hubs in the PNW, California and Chicagoland.

[retailfanmitchell019]

Assuming the merger goes through, I'm curious who stands to benefit the most.

I'd assume that Stater Bros. will probably be the biggest winner followed by WinCo, Raley's / Bashas', HEB and Save Mart. I also think chains invading or competing in Kroger territory not affected by the merger such as Hy Vee, Publix, Meijer and Giant Eagle stand to gain from the merger. Ahold / Delhaize, on the other hand, may finally face greater competition than it is used to in its territory provided Kroger can fix the mess that the Mid Atlantic / New England operations are.

As storewanderer has said, I think Hy-Vee should enter Denver and abort its plan for the South. Denver has some Midwestern transplants that may be familiar with Hy-Vee. Denver really needs another traditional chain after the Albertsons brand was dissolved there (and now that Safeway could turn into King Soopers in that area), along with the fast population growth in CO.
Hy-Vee has clean, large stores with great quality.
I think Hy-Vee's western distro should be placed in Casper, WY. From there, they could put stores in Denver; Cheyenne, WY; Billings, MT; Bozeman, MT; Rapid City, SD; Scottsbluff, NE; Colorado Springs; Pueblo, CO all within a 6 hour drive.

[babs]

Only the lawyers and investment bankers will benefit.

As for who benefits in retail? This merger will accelerate the fragmentation of the grocery business. Warehouse clubs, high end grocery stores, and low end stores like WinCo and Aldi will grow market share. Mainstream grocery will lose share and be replaced.

[retailfanmitchell019]

Only the lawyers and investment bankers will benefit.

As for who benefits in retail? This merger will accelerate the fragmentation of the grocery business. Warehouse clubs, high end grocery stores, and low end stores like WinCo and Aldi will grow market share. Mainstream grocery will lose share and be replaced.

At this point, how is a traditional supermarket defined? Gelson's could be considered a traditional supermarket. So can Wegmans. So can New Seasons up in your area. Those places sell Campbell's soup, Cherrios, Pepsi, Pampers, etc.

[storewanderer]

Only the lawyers and investment bankers will benefit.

As for who benefits in retail? This merger will accelerate the fragmentation of the grocery business. Warehouse clubs, high end grocery stores, and low end stores like WinCo and Aldi will grow market share. Mainstream grocery will lose share and be replaced.

I don't expect Raleys to benefit, other real issues with that operation and Basha is such a non-factor in AZ already, they basically are already out of business in places where Kroger, Albertsons or Safeway competed with them. The Raleys banner, format, pricing, and attitude in Arizona would probably not work well. Giant Eagle is a lousy chain and won't benefit. Publix is likely to benefit as Kroger is busy with the merger, Publix will just double down and open additional stores. Hy-Vee could benefit if they would expand; now is the time- Wichita, Denver, Wyoming, Montana as suggested by retailfan- this is the time. Hy-Vee needs to go for it.

Some independent groups with strong operators who show an interest to grow could benefit from this merger either through taking castoff stores, taking rural stores Kroger may end up not being interested in, and also in gaining employees who would prefer to work for a smaller chain.

Associated Foods Stores-Utah and URM Stores come to mind as two distributors who have a lot of strong, growing operators they are supplying and also respectable bases of corporate operated stores that could be expanded. These two operators put out stores that are better than Safeway/Albertsons in every way, and beat Kroger on quality/atmosphere (but not price/private label mix).

Affiliated Amarillo may have some opportunities too, but I'm not sure how many Safeway/Albertsons shoppers they can capture. Those stores seem to cut mix, focus heavily on private label, and have weak perishables; pricing is great though.

[HCal]

At this point, how is a traditional supermarket defined? Gelson's could be considered a traditional supermarket. So can Wegmans. So can New Seasons up in your area. Those places sell Campbell's soup, Cherrios, Pepsi, Pampers, etc.

I would consider Gelson's and Wegmans to be traditional supermarkets. They may be more expensive, but they sell mainstream brands and not primarily organic/natural products like Whole Foods or Lassen's.

But babs, I totally agree with you that this will hurt conventional supermarkets. Prices at the new Kroger will probably increase somewhat, and people will shift to other formats. However, that is already happening anyway, and would have continued regardless, so perhaps this merger won't have much of an impact.

[storewanderer]

But babs, I totally agree with you that this will hurt conventional supermarkets. Prices at the new Kroger will probably increase somewhat, and people will shift to other formats. However, that is already happening anyway, and would have continued regardless, so perhaps this merger won't have much of an impact.

In some regions, new conventional stores will sprout up where there is the demand, desire, and structure (strong wholesaler) in place. In California, other than Stater opening stores, I don't see it happening. I see more ethnic stores coming. But at the end of the day many of those ethnic stores serve the same basic product mix as a conventional; yes thousands of SKUs aren't there but conventional supermarkets in the US are rather over-assorted anyway.

I expect Kroger to make some token price cuts on staple foods (primarily private label) and produce in the Safeway stores to try and stimulate some volume, reduce spoilage, and get customers more comfortable with center store pricing. I also expect deep discount advertised perimeter items and things like $5 Friday promotions to go away as Kroger typically doesn't do that.

Keep in mind they promise to invest $500 million in price and $1.3 billion in improving the Albertsons Stores (this is probably the money for rebranding).

[Romr123]

I'd say that Meijer is helped by Kroger being distracted in many of its areas (plus no appetite from the distracted Kroger to expand west of 127 in Michigan). Their expansion areas recently (Cleveland/Pittsburgh/St. Louis) only face token Kroger competition so they continue on as they have. Schnucks--neutral unless they get ambitious about moving into Chicago with divestitures (which will likely turn into a bloodbath for them--they're unaccustomed to not being top dog in a metro). Neutral to helpful for the warehouse clubs, Slightly positive for Aldi (their mid-country core has minimal impact and upheaval; they may be able to pick off some locations in the west/NE). Walmart--all in all neutral (positive in that a distracted Kroger won't be materially better than WM any more for selection/quality; negative in that there is going to be some price pressure they've not seen).

[storewanderer]

I'd say that Meijer is helped by Kroger being distracted in many of its areas (plus no appetite from the distracted Kroger to expand west of 127 in Michigan). Their expansion areas recently (Cleveland/Pittsburgh/St. Louis) only face token Kroger competition so they continue on as they have. Schnucks--neutral unless they get ambitious about moving into Chicago with divestitures (which will likely turn into a bloodbath for them--they're unaccustomed to not being top dog in a metro). Neutral to helpful for the warehouse clubs, Slightly positive for Aldi (their mid-country core has minimal impact and upheaval; they may be able to pick off some locations in the west/NE). Walmart--all in all neutral (positive in that a distracted Kroger won't be materially better than WM any more for selection/quality; negative in that there is going to be some price pressure they've not seen).

I also think this will hurt Target in CA if Kroger sharpens pricing in these Safeway operations. Target runs very high grocery volumes in CA, especially NorCal, as many customers have realized Target has groceries at 40% less than Safeway everyday. I expect Kroger to fix that pricing issue in short order.

I think Schnucks knows better than to expand. Actually Schnucks could stay put and Kroger could buy them after they get Albertsons integrated.

Will Kroger be distracted in its original territories though? I think the main distraction/disruption is going to be in markets with overlap. Many parts of Kroger are not impacted and will just keep being Kroger and doing what they do, particularly the parts that compete with Meijer.

[Super S]

WinCo is going to end up as the only true supermarket not under Kroger or Walmart ownership in some areas of the Pacific Northwest if this goes through. WinCo needs to take a look at its operations and see where there is room for improvement. They have a reputation for low prices, but in some cases are equal to Fred Meyer depending on the items. Winco to some extent maintains their stores at an acceptable level. While I don't think they necessarily need to remodel to keep up with trends (many still use the original Cub interiors to this day, including some opened as WinCo) they do need to pay a little more attention to cleanliness and the quality of their produce, meat, and dairy. They also need to get a better private label program, something WinCo seems to be struggling with lately. If the quality and operations suffer, there is a point where people aren't going to go there to save a few bucks. I have seen a mixed bag with WinCo lately in all of the areas I mentioned, but there have been enough issues with out-of-stocks on random items and poor quality produce and dairy that I have shifted some shopping back to Fred Meyer. Price doesn't mean as much when there is a noticeable difference in quality.

WinCo has the advantage of having infrastructure, including large stores and distribution centers. They typically shine best on center store items. But they tend to settle into a pattern with their stores and don't seem to execute some areas as well as they could, and the bag-your-own concept as well as not accepting credit cards doesn't always resonate well with people. While I don't see the Kroger-Albertsons merger lowering prices by a significant amount, (based on other mergers I have seen) I do think that other retailers need to keep an eye on what happens.