Kroger to merge with Albertsons?

[retailfanmitchell019]

I see the Albertsons banner becoming a property of SpinCo to use on its stores, and it should be exclusive use. That would ultimately mean the death of the Albertsons banner.

I think SpinCo should go to Jim Pattison Group (Canada), who bough Roth's in Oregon and Chuck's Produce.

That would end in disaster, likely even faster than Haggen, and take down the Jim Pattison Group with it.

I'm curious, why would you think that would end in disaster?
Haggen was a disaster because they changed the store names while expanding 10x its size. Jim Pattison Group probably won't change the Albertsons name, and they are a big company in Canada. They own a lot of non-food assets (car dealers, Ripley Entertainment, and some TV and radio stations) I'd divest before buying SpinCo.

The death of the Albertsons banner would be a sad thing to see. It is what it is I guess. But nothing lasts forever. Just ask A&P, Montgomery Ward, Howard Johnson's, Oldsmobile.

[storewanderer]

I'm curious, why would you think that would end in disaster?
Haggen was a disaster because they changed the store names while expanding 10x its size. Jim Pattison Group probably won't change the Albertsons name, and they are a big company in Canada. They own a lot of non-food assets I'd divest before buying SpinCo.

At this point, Albertsons and other banners in market (eg. Vons LA or Safeway Seattle) is pretty much like Dodge and Plymouth, Chevrolet and Pontiac, or Ford and Mercury. I guess Pavilions or Haggen would be Buick.

Pattison doesn't run great stores. They are high priced, not very well maintained, have marginal perimeters, and iffy merchandising. Safeway ran circles around them in Canada for decades; poor stores like Save-On Foods are precisely why Safeway was so profitable up in Canada for so long before being sold to Sobey's. So if you want a sub-Safeway 00's experience, Jim Pattison Group will provide it. And it won't stay in business long in the US doing that.

Roth's has VERY high pricing, seems to have increased under this new ownership also.

Now if Loblaw were to enter the US then we'd be talking, that would be a huge, and a great, thing.

[ClownLoach]

I suspect that the experiments we have seen in Oregon and Washington as well as SoCal with rebranding stores as Safeway or Pavilions were part of this project. They don't want to repeat the mistakes of the past (the Haggen debacle and the Lucky rebrand disaster). It really seems like the Vons name in many parts of SoCal has disappeared or has been relegated to just one or two stores. The Temecula-Murrieta area has one Vons left and it's literally across the street from an Albertsons that recently got a full remodel to Colorful Lifestyle. They haven't spent a dime on the Vons probably since it was built. South Orange County has one Vons left, an old stinker in San Juan Capistrano that just got the "repaint around the old signs" remodel. The rest of the Vons stores through Orange County for the most part are old, smelly, disgusting stores that I'm sure they would love to deposit on the books of "SpinCo". So I suspect that we will see acceleration of rebrands prior to the SpinCo project - whichever brand is going to live on in Krogerson's will go up on the stores they want to keep - and the other brand will probably go up on the dogs they intend to dump. I also think that this is the end of the road for Pavilions. They will probably rebrand the ones they want to keep (Albertsons Market Street?) and bundle the rest into SpinCo with the Food4Less/FoodsCo operation. Spinning off a bunch of low end operations like F4L coupled with high end Pavilions stores should make for a completely inoperable mess that will fold as quickly as its formed, which is what they will want.

The war on retail real estate in the West is another big reason for this merger. Portland and Seattle are basically allowing nearly unlimited housing without parking to be built, making those giant Fred Meyer properties with acres of parking worth more closed, liquidated and demolished than as operating profitable stores. One of those stores replaced by 1000 condos will deliver $750,000,000 to a developer (before construction costs of course). Such projects are seldom rejected by the cities because of the massive property tax gains that will come from the new property - approving the destruction of retail space these days is like running a cash printing press for municipalities. This same practice of zero parking is now going into law across the entire state of California. Safeway has become an expert on these kind of teardown/redevelop transactions in the Bay Area and was starting the same work in Seattle - taking a nice existing store with ample parking and demolishing it, selling the land for a small fortune to a developer for a new ground level smaller store with subterranean parking at a discounted or nearly free lease. Kroger probably sees the same possibilities as developers keep pushing for disastrous policies of no required parking which will enable such construction throughout the entire West. And no, they're not stupid enough to build new Safeways and Ralphs and whatever other brand with zero parking - but they are going to be able to get away with much less parking than was required before. The sickest part of this kind of destruction is that not only does it destroy these communities, it eliminates small and family businesses, and it does nothing but worsen the housing problem. Just take one look at Portland and Seattle - the homeless explosion is people who were poor and probably having other challenges such as disability or illness but they were able to find affordable housing in those old houses or apartments. Now because parking requirements are removed suddenly it is possible for a developer to come in and buy a large single family property that was an affordable rental for someone, tear it down, and build 8 to 12 skinny row houses with zero parking on the same lot - none of which are close to being affordable. They say that the requirements of parking add to the price of housing making it less affordable. The truth is that the parking requirements are the only thing that stops these big developers from swooping in and buying everything they see, tearing it down, and rebuilding with 8X to 15X the original density at a massive profit while the rental tenants who got booted wind up unable to find any place to live. The only one saving money is the developer, and they aren't passing along any savings to the public.

[submariner]

Just a footnote, due to the major implications of this merger, I've made the topic sticky.






Please bring your own sanitizing wipes

[retailfanmitchell019]

Now if Loblaw were to enter the US then we'd be talking, that would be a huge, and a great, thing.

Great idea, it would mean the return of President's Choice to the US. I'm hoping they buy SpinCo.

[ClownLoach]

Also I think the absolute last thing they want is the Save Mart people to get their hands on SpinCo, because of the sheer number of Southern California stores that they will get. If they played their cards right and changed the pricing and operating model of the acquired stores and hung a Lucky sign on the building their sales would absolutely explode. They just have to do it correctly, and the current NorCal Lucky operation isn't it. The closest operator to that Lucky model in SoCal is Stater Bros. but there definitely would be room for another store run about the same way if they're looking for someone to imitate. But pretending that SpinCo would be an independent, agile, freestanding competitor is pure comedy. It'll either be acquired in three seconds or it'll sink faster than the Titanic. There is no way that Krogerson's will set it up for any kind of success.

[Bagels]

Remember how Kroger handled Ralphs - they closed at least a third of the stores - especially where two stores were only a mile or two apart. In Long Beach for example they had six stores in East Long Beach, two of which were newer builds prior to the merger. One that stood for over 40 years and had just been lavishly remodeled with a complete interior tear down to a Fresh Fare went lights out almost immediately because there was another store a mile down the road. FM clearly paid a fortune on that remodel as everything from the entire drop ceiling to a conversion to all recessed lighting, moving produce and meats, etc. was done on the remodel, not just the usual redecorating. Kroger didn't care. The Ralphs that was rebuilt with less parking than permitted due to the fact that the community rallied behind their promise to keep a first class quality store in the very diverse Anaheim St. Area was promptly closed and converted to a Food4Less. Basically when they were done with the area they left three Ralphs stores in the market and all of them operate at what would best be described as "over capacity" - long lines and crowded aisles. They took advantage of the fact that they dominated the area and reduced store count to lower their overhead. Prices aren't any better than before and the shopping experience is far worse in the remaining overcrowded stores. East Long Beach is a prime example of what we can look forward to everywhere in this Kroger-Albertsons merger disaster. I guarantee you that they will only put the worst stinkers (and maybe the Food4Less/FoodsCo/Ruler formats) into the SpinCo - and they will close three stores over the next ten years for every one store that gets spun. I would fully expect to see that at least 1,000 stores close in the aftermath of this deal.

That’s largely because Ralphs, Albertsons and Vons were bloated chains following their respective mergers. An LA Times article written in 2000, when Vons closed a six-year-old store it rebuilt in Compton following the riots, quoted sources inside Safeway who claimed that more than half its (Vons banner) stores were unprofitable. Grocery stores have high fixed costs and are volume driven, so the closures made plenty sense. And I’m not convinced the market would’ve been more competitive if these stores chains hadn’t merged. Changing demographics would’ve naturally their footprint, anyway. Ethic shoppers tend to choose Ethic grocers for their shopping need – numerous communities struggle to support just an Albertsons-Von and Ralphs, let alone a half dozen stores that are perceived as serving white people. Even Amazon can’t shake up the market.

If anything, the region’s desire to keep Walmart out probably did the most to hurt competition. If Walmart was able to establish a widespread presence, Ralphs wouldn’t be able to change $3.99 for an item Kroger sells for $1.99 at every other division.

[storewanderer]

Also I think the absolute last thing they want is the Save Mart people to get their hands on SpinCo, because of the sheer number of Southern California stores that they will get. If they played their cards right and changed the pricing and operating model of the acquired stores and hung a Lucky sign on the building their sales would absolutely explode. They just have to do it correctly, and the current NorCal Lucky operation isn't it. The closest operator to that Lucky model in SoCal is Stater Bros. but there definitely would be room for another store run about the same way if they're looking for someone to imitate. But pretending that SpinCo would be an independent, agile, freestanding competitor is pure comedy. It'll either be acquired in three seconds or it'll sink faster than the Titanic. There is no way that Krogerson's will set it up for any kind of success.

Anyone getting the Lucky banner would have a winner. I don't think they'll let that happen. But SpinCo needs some banner to use... what banner do you give it... Vons is starting to sound like a great banner to let SpinCo have as its own. The more I think about it, the more I think Vons may just be the banner for them to spin away. Who knows, maybe Vons will even make it to the east coast. Also, pretty cheap to buy Vons signs. Just 4 letters, no logo.

Save Mart has rights to the name "in its markets" (not clear if they could use the banner in Reno). Piccinini was a really smart business person but when it came to Lucky he made a big mistake. He wanted everything Save Mart. He should have taken that Lucky name and thrown the old red 90's Lucky logo up across his entire network of stores but they were already so overwhelmed doubling their size and with their decades tenured President Spangler retiring at the same time as the deal closed, it wasn't the best time to completely rock their existing stores. Still they should have put the Lucky banner on everything they bought from Albertsons NorCal Division. But it was a compromise to even put the Lucky name on half of the stores.

I completely forgot the "Lucky" operation in Utah. I guess that is 3 more stores of overlap (Tooele Lucky is a former Smiths, isn't overlap and can just go back to being a Smiths like it once was quite easily). I have to assume that would go with whatever gets F4L (2 are former F4L anyway and the third is like a F4L). I expect Kroger will want to keep Smiths fully in tact in core markets Salt Lake City, Las Vegas, and Albuquerque. But some of the far reaching arms of Smiths like Montana, Wyoming, and Reno may be a little questionable what will happen. I am very hopeful Smiths will remain in Reno and NorCal Safeway will go back to CA with its terrible pricing, but I am not sure geography is on Smiths side. Plus Tahoe would obviously stay Safeway... And, if the company decides it can convert Reno Smiths stores to Safeway and charge the outrageous CA pricing and people will actually pay it, why stay Smiths? Safeway would not make it in Dayton, Carson City, or Reno-Lemmon with its pricing. Expect 1 store divested in Sparks, probably the Safeway, and maybe one in South Reno (would be a tough call- brand new Safeway that broke records or one of the highest profit/sales per square foot Smiths in the division...). Problem is "SpinCo" can't viable operate one store in Sparks with the next closest store what, out in Elko or in Southern Oregon or something (or maybe some random FoodsCo in Sacramento or bay area). I'd fight to keep both stores in South Reno as WinCo and Wal Mart have significant share in those two zip codes; also there is a decent performing Sprouts; Raleys with its ONE fiasco bled share and is barely a player at this point in the South Reno market. I suspect Raleys ONE does less volume than Sprouts.

[retailfanmitchell019]

I completely forgot the "Lucky" operation in Utah. I guess that is 3 more stores of overlap (Tooele Lucky is a former Smiths, isn't overlap and can just go back to being a Smiths like it once was quite easily). I have to assume that would go with whatever gets F4L (2 are former F4L anyway and the third is like a F4L). I expect Kroger will want to keep Smiths fully in tact in core markets Salt Lake City, Las Vegas, and Albuquerque. But some of the far reaching arms of Smiths like Montana, Wyoming, and Reno may be a little questionable what will happen. I am very hopeful Smiths will remain in Reno and NorCal Safeway will go back to CA with its terrible pricing, but I am not sure geography is on Smiths side. Plus Tahoe would obviously stay Safeway... And, if the company decides it can convert Reno Smiths stores to Safeway and charge the outrageous CA pricing and people will actually pay it, why stay Smiths?

I think when all is said and done, there could be 2 banners used for Kroger. Albertsons could be used west of the Mississippi, Kroger east of the Mississippi. Jewel on the other hand? Up in the air.

[ClownLoach]

Follow up CNBC article about how Kroger has to win everyone over to get this approved.

https://www.cnbc.com/2022/10/14/alberts ... stors.html