🛒 Kroger-Albertsons Merger: National Impact

[ClownLoach]

A&P operated a 55k square foot food and drug chain in the Southeast called The Family Mart in the 1980s and attempted to re-enter Florida after leaving in the 1970s (link). When they left, Kroger bought them all and converted to Florida Choice, though Kroger left within a year or two. Grand Union on the other hand, was building stores into the early 1980s but was closing more than they opened by that time.

Neither The Family Mart or Florida Choice were successful. TFM was trying to grasp at straws to keep A&P alive in Atlanta and points south; as we all know, A&P holds the record (though Sears/Kmart is rapidly approaching) for the longest protracted Going Out of Business sale of any company (1975-2015). There were only 18 stores left when A&P pulled the plug in 1987.

Florida Choice represented a move away from where Kroger was at the time - they just couldn't make the stores work. If they tried today, the enormity of the stores may fit in with the Marketplace, but who knows. All of them did not come from A&P, as Kroger had built a few in 1986 prior to A&P pulling out, and some were converted SuperX Drugs. They were gone by 1988. During this same timeframe, Kroger had several Welcome warehouse stores, including at least one in Jacksonville; these also did not succeed.

Grand Union had its own internal issues.

I think A&P could've had a chance at survival had it not bought Pathmark after the cuts and sales in 2007.

This whole conversation started at the separate choices Albertsons and Kroger might take or could've taken after the merger, and I disagree with the prospect that a Florida entrance could've only come with a combined company--if the merger consummates, forget about ANY organic expansion for a long time! Would Kroger and Albertsons even last until the next trial?

FACT: Albertsons and Kroger have not filed any formal countersuit.
FACT: Albertsons and Kroger have not made any contingency plans to create alternate divestment partners.
FACT: Kroger's earning reports assume no merger.
FACT: There are a bunch of suits against states that Albertsons/Kroger still has to face.
FACT: The sooner they drop the merger, they drop the suits pending against them.

At this point I have to wonder if there is some sort of "due diligence" clause in their merger agreement that negates or reduces the $600M breakup fee if the merger is officially shot down by the court system (instead of being voluntarily withdrawn). That would explain why they say they're fighting for it, but not really taking any real action. Meanwhile Albertsons is cost cutting to maximize the earnings under Apollo direction, playing with operating hours and probably more of the consulting work Apollo demands to squeeze every last penny. If they get the breakup fee that's a bonus.

[pseudo3d]

At this point I have to wonder if there is some sort of "due diligence" clause in their merger agreement that negates or reduces the $600M breakup fee if the merger is officially shot down by the court system (instead of being voluntarily withdrawn). That would explain why they say they're fighting for it, but not really taking any real action. Meanwhile Albertsons is cost cutting to maximize the earnings under Apollo direction, playing with operating hours and probably more of the consulting work Apollo demands to squeeze every last penny. If they get the breakup fee that's a bonus.

If that was the case they'd be actively fighting Kroger and shills. I'm not sure the thing on operating hours though. It's rather in-line with their competition...probably moreso than before COVID.

[storewanderer]

They are telling CO that the number of divests is increasing.

They think this will get CO to drop its lawsuit against the merger.

https://www.msn.com/en-ae/money/compani ... r-BB1kwqUz

"An attorney for Kroger, Matthew Wolf, said during Monday's hearing in Denver that the company would be providing an "enhanced" new divestiture package "in the coming days.""

I wonder what that means.

Maybe they will add in more near useless private label brands. Perhaps they can bring the Mrs. Wrights, Cragmont, Busy Baker, Jerseymaid, Pantry Essentials, Nature's Cupboard, and Town House brands back and say C&S is getting those. 99 Only may have something to say about Cragmont, Nature's Cupboard, and Jerseymaid and Dollar Tree may have something to say about Busy Baker and Pantry Essentials.

Meanwhile that Open Nature brand they are saying they'll divest to C&S- they are removing products. The Open Nature Greek Yogurt got discontinued back in January. A few weeks ago new private label greek yogurt from the same plant in most of the same flavors that tastes exactly the same showed up in Lucerne containers. I wonder how many other Open Nature items they are repackaging to different private labels.

[pseudo3d]

They are telling CO that the number of divests is increasing.

They think this will get CO to drop its lawsuit against the merger.

https://www.msn.com/en-ae/money/compani ... r-BB1kwqUz

"An attorney for Kroger, Matthew Wolf, said during Monday's hearing in Denver that the company would be providing an "enhanced" new divestiture package "in the coming days.""

I wonder what that means.

Likely they'll gonna try to go for the 600+ store package to C&S instead of the 400+ store package. How many of those are in Colorado though...?

[ClownLoach]

They are telling CO that the number of divests is increasing.

They think this will get CO to drop its lawsuit against the merger.

https://www.msn.com/en-ae/money/compani ... r-BB1kwqUz

"An attorney for Kroger, Matthew Wolf, said during Monday's hearing in Denver that the company would be providing an "enhanced" new divestiture package "in the coming days.""

I wonder what that means.

Likely they'll gonna try to go for the 600+ store package to C&S instead of the 400+ store package. How many of those are in Colorado though...?

My guess is they'll try to meter out the remaining 230 or so divests based on which states are screaming the loudest. It still won't solve the fundamental issue that C&S is not an adequate competitor and the stores will languish and fail to retain their clientele. The fact is that any store they're voluntarily dumping on C&S is a store that would be closed if they were given full freedom to merge unrestricted.

[storewanderer]

They are telling CO that the number of divests is increasing.

They think this will get CO to drop its lawsuit against the merger.

https://www.msn.com/en-ae/money/compani ... r-BB1kwqUz

"An attorney for Kroger, Matthew Wolf, said during Monday's hearing in Denver that the company would be providing an "enhanced" new divestiture package "in the coming days.""

I wonder what that means.

Likely they'll gonna try to go for the 600+ store package to C&S instead of the 400+ store package. How many of those are in Colorado though...?

My guess is they'll try to meter out the remaining 230 or so divests based on which states are screaming the loudest. It still won't solve the fundamental issue that C&S is not an adequate competitor and the stores will languish and fail to retain their clientele. The fact is that any store they're voluntarily dumping on C&S is a store that would be closed if they were given full freedom to merge unrestricted.

Does getting more lousy performing stores help C&S though, or will it just make things that much harder for them?

Maybe they need to divest the Safeway banner off to C&S... exclusive use of it throughout the US. I suspect the majority of the stores being divested have the Safeway or Vons banner. At this point customers know Vons=Safeway and rebranding a Vons to Safeway wouldn't confuse anyone. Banner is already split under a different owner in Canada. Of course they'll never do that because it is way too strong of a banner.

Safeway banner sits around 900 stores. I expect they will be divesting about 75 of those in AZ, 85 of those in CO, 100 of those in WA, 70 of those in OR, and another 15 or so total in CA/AK/NM/NV/ID/WY. So divesting about 1/3 of Safeway banner is what I predict.

I am looking forward to seeing an updated C&S agreement to see what exactly else they are going to divest off to C&S.

And the Kroger attempt to pawn off the lousy QFC banner and chain on C&S- maybe someone should say no on that- they can divest off the (better) Safeway assets in metro Seattle. I'm sure the few good QFCs, Kroger will keep and rebrand because the good QFCs are only "good" due to not having much competition so less likely to be divested.

Maybe they'll get real generous and divest off the "Lucky" banner too. Since pretty much all of those are probably getting divested. Another one with split ownership due to the Save Mart situation...

[ClownLoach]

Likely they'll gonna try to go for the 600+ store package to C&S instead of the 400+ store package. How many of those are in Colorado though...?

My guess is they'll try to meter out the remaining 230 or so divests based on which states are screaming the loudest. It still won't solve the fundamental issue that C&S is not an adequate competitor and the stores will languish and fail to retain their clientele. The fact is that any store they're voluntarily dumping on C&S is a store that would be closed if they were given full freedom to merge unrestricted.

Does getting more lousy performing stores help C&S though, or will it just make things that much harder for them?

Maybe they need to divest the Safeway banner off to C&S... exclusive use of it throughout the US. I suspect the majority of the stores being divested have the Safeway or Vons banner. At this point customers know Vons=Safeway and rebranding a Vons to Safeway wouldn't confuse anyone. Banner is already split under a different owner in Canada. Of course they'll never do that because it is way too strong of a banner.

Safeway banner sits around 900 stores. I expect they will be divesting about 75 of those in AZ, 85 of those in CO, 100 of those in WA, 70 of those in OR, and another 15 or so total in CA/AK/NM/NV/ID/WY. So divesting about 1/3 of Safeway banner is what I predict.

I am looking forward to seeing an updated C&S agreement to see what exactly else they are going to divest off to C&S.

And the Kroger attempt to pawn off the lousy QFC banner and chain on C&S- maybe someone should say no on that- they can divest off the (better) Safeway assets in metro Seattle. I'm sure the few good QFCs, Kroger will keep and rebrand because the good QFCs are only "good" due to not having much competition so less likely to be divested.

Maybe they'll get real generous and divest off the "Lucky" banner too. Since pretty much all of those are probably getting divested. Another one with split ownership due to the Save Mart situation...

This hints at a different divestiture plan entirely. I wonder if C&S is out...

https://www.supermarketnews.com/retail- ... thing-else

[storewanderer]

I doubt C&S is out, I think this just gets them more stores. They have a signed purchase agreement and until FTC formally denies them as a buyer I do not see them going away. Great deal for C&S. If I were them no way I'd be "out" with the bargain price...

If C&S does go away I expect SpinCo to resurface as an idea.

Sort of like you know the hot dog eating contest where someone ate 400 hot dogs and is queasy but kept them all down and is still coherent, but they decide to eat 200 more hot dogs and.... yeah. Divesting more stores to C&S is only going to cause more pain.

[bryceleinan]

I still think they have this backwards out west… SpinCo based on Fred Meyer/Smith’s/Ralph’s/Fry’s/King Soopers would probably be the best thing. I’m not quite sure what they do in Utah and Montana though - possibly keep the Smith’s name there? In this scenario, Kroger gets all the Safeway locations, and operates pure grocery. Marketplace stores could theoretically go to SpinCo.

[pseudo3d]

I doubt C&S is out, I think this just gets them more stores. They have a signed purchase agreement and until FTC formally denies them as a buyer I do not see them going away. Great deal for C&S. If I were them no way I'd be "out" with the bargain price...

If C&S does go away I expect SpinCo to resurface as an idea.

Sort of like you know the hot dog eating contest where someone ate 400 hot dogs and is queasy but kept them all down and is still coherent, but they decide to eat 200 more hot dogs and.... yeah. Divesting more stores to C&S is only going to cause more pain.

I think that if the plan was just to "give C&S 200 more stores and this can go through" then that would've been done months ago. All those stores are going to be marginal so it's probably C&S's reluctance than Kroger's hoarding.

Problem is those 200 extra stores are still under contract by C&S with right of first refusal. So now Kroger effectively has three options:
1. Renegotiate the contract to free up those extra 200 stores for new buyers (which will be hard).
2. Add additional stores beyond the 600+ from C&S to divest (which Kroger would be reluctant to do, as those would cut into better stores).
3. Go with the original plan A and renegotiate the contract so that C&S Wholesale has to buy all 600 stores.

My guess is they'll try to meter out the remaining 230 or so divests based on which states are screaming the loudest. It still won't solve the fundamental issue that C&S is not an adequate competitor and the stores will languish and fail to retain their clientele. The fact is that any store they're voluntarily dumping on C&S is a store that would be closed if they were given full freedom to merge unrestricted.

They know which stores are on the chopping block, they made vague statements of X Kroger brands, Y Albertsons brands per state back when this was first was first announced. They're not going to create new divests in problem states.

I personally hope they're trying to do option 3 and ends up causing C&S to walk away entirely.