Kroger to merge with Albertsons?

[Romr123]

Yes, there seem to be several regional operators in the South/East that might be an interesting combination---some amalgam of Lowes Foods/Food City/Ingles/Food Lion/Acme Ohio could be an interesting roll-up using a couple of nameplates (one for upscale stores/larger towns other for smaller stores/smaller towns). Haven't spent much time down there in nearly 20 years but at that point they seemed more similar than not.

[veteran+]

Yep, you are both spot on about Publix.

Their ideology and hubris will never allow them to get involved in a Union environment or be bought out. The DNA of this company is JENKINS (related or not) and it will remain so.

They are not innovators, plus it is the Publix way or get lost.

IMO, their cult like success is about historical "luck" and a PR and Ad campaign that has hypnotized their customers (whom do not have significant choices) and "the industry" that they are the utopia of supermarkets.

[pseudo3d]

IMO, their cult like success is about historical "luck" and a PR and Ad campaign that has hypnotized their customers (whom do not have significant choices) and "the industry" that they are the utopia of supermarkets.

That about describes H-E-B to a tee.

[veteran+]

IMO, their cult like success is about historical "luck" and a PR and Ad campaign that has hypnotized their customers (whom do not have significant choices) and "the industry" that they are the utopia of supermarkets.

That about describes H-E-B to a tee.

[rwsandiego]

Yep, you are both spot on about Publix.

Their ideology and hubris will never allow them to get involved in a Union environment or be bought out. The DNA of this company is JENKINS (related or not) and it will remain so.

They are not innovators, plus it is the Publix way or get lost.

IMO, their cult like success is about historical "luck" and a PR and Ad campaign that has hypnotized their customers (whom do not have significant choices) and "the industry" that they are the utopia of supermarkets.

A Chicago friend moved to Florida a few years ago and shops almost exclusively at Publix. Her reasons for doing so are convenience, lack of alternatives (a neglected Winn-Dixie across the street from Publix and a Walmart neighborhood Market whose parking lot is hard to get in and out of), and their employees are friendly. My cousin, also an ex-Chicagoan, says the same. Both have mentioned several times "Publix is fine, but it isn't as good as Jewel." You hear that a lot from ex-Chicagoans.

[ClownLoach]

Yep, you are both spot on about Publix.

Their ideology and hubris will never allow them to get involved in a Union environment or be bought out. The DNA of this company is JENKINS (related or not) and it will remain so.

They are not innovators, plus it is the Publix way or get lost.

IMO, their cult like success is about historical "luck" and a PR and Ad campaign that has hypnotized their customers (whom do not have significant choices) and "the industry" that they are the utopia of supermarkets.

Only reason I even said it is that if the regulators actually allow this Kroger-Albertsons deal to go through then I think it's going to look like the banking, airline and telecom industries for the next decade as everyone rushes to combine into a handful of national chains. Do I think that this is a good thing? No, not really. But we usually see a mad rush to combine companies after a mega-merger goes through. There may not be as much room for the regionals if a few more national chains get cobbled together as a result. Realistically unique chains like Publix would be one of the hardest to combine with anyone else, same for Wegmans, ShopRite, H-E-B, Market Basket and a few other "super" regionals. But there definitely is room to consolidate the industry and again if the KR-ACI merger is ever approved there will be many more to follow.

As far as an ESOP goes they're been bought out before. Even United Airlines was employee owned at one point in time but that was undone. I don't see that as an obstacle these days.

I think the unions are louder than they are powerful these days. If they saw that supporting deals like KR-ACI could result in the non-union stores being organized then they might withdraw their opposition.

[rwsandiego]

...it's going to look like the banking, airline and telecom industries for the next decade as everyone rushes to combine into a handful of national chains. Do I think that this is a good thing? No, not really. But we usually see a mad rush to combine companies after a mega-merger goes through....

Actually, after big bank mergers you see a rash of de novo, i.e. start-up banks popping up in markets where a regional or local bank gets acquired. After my former employer acquired a large local bank, we saw some of the divested branches become branches of a new bank. The execs from the former bank want to run a bank and take advantage of (or create) customer sentiment to do so. The barrier to entry is pretty low. The bankers raise capital, create a business plan, get a charter, find a turnkey technology vendor, and away they go.

There is really no reason for that not happening in the grocery industry. The grocer would need to raise capital, create a business plan, get a wholesale distribution deal, and find a turnkey technology vendor.

When Dominick's became defunct you saw a lot of independents take the spaces. You also saw Mariano's take a few and a new entrant to the market, Heinen's, take two. Cermak Produce transformed itself into Cermak Fresh Market and so did Tony's and are now full-fledged local chains. (Tony's is woman-owned as is Shop-n-Save, which partnered with the South Shore community to create a neighborhood-tailored market in the old Dominick's space). There will be failures, such as Joe Caputo (he overextended himself). Frankly, his markets weren't all that great to begin with.

Granted, there are only a few markets like metro Chicago (four: LA, New York, Houston, and Dallas) but it would seem the barrier to entry would be lower in a metro like San Diego, Phoenix, or Denver given their relatively small size (i.e. Phoenix at 4.8 million vs Chicago at 9.5 million and LA at 12.9 million). Seems like a little creativity among the wholesalers could spark some new chains.

[storewanderer]

Yep, you are both spot on about Publix.

Their ideology and hubris will never allow them to get involved in a Union environment or be bought out. The DNA of this company is JENKINS (related or not) and it will remain so.

They are not innovators, plus it is the Publix way or get lost.

IMO, their cult like success is about historical "luck" and a PR and Ad campaign that has hypnotized their customers (whom do not have significant choices) and "the industry" that they are the utopia of supermarkets.

Well, the customers did have choices... the choices mostly went out of business as Publix outperformed them in Florida.

What I find more interesting about Publix is their organic expansion outside Florida. In the modern times the only other chain that has had such a successful long running organic expansion program covering so many states/territories in the grocery business is Wal Mart. Wherever Publix expands, customers seem to view them as the "superior" option. Look at Atlanta as a good example. People saw Kroger as some kind of a low end operator and people there seem to just love Publix. In Nashville my observation was Publix wasn't doing great (Kroger always busier if nearby) but anyone you ask about Publix has a positive opinion of them.

Where I think Publix excels is in basics of Grocery 101. The stores are generally clean, orderly, well stocked, and well staffed. The stores do not feel run down. Perimeters are staffed/open when the store is open (which isn't very late). Publix strikes me as quite dependable. Service is interesting- great outside FL, awful in Miami (seems to be a Miami thing), and varying from marginal to okay in other parts of FL. My other observation is Publix allocates proper staffing dollars to its stores to have adequate staffing levels for the volume they do. They also seem to have a very tight grip on shrink (part of why I think their meat and produce areas are not good- they hardly put any product out in so many of their stores and pricing is high).

[storewanderer]

Only reason I even said it is that if the regulators actually allow this Kroger-Albertsons deal to go through then I think it's going to look like the banking, airline and telecom industries for the next decade as everyone rushes to combine into a handful of national chains. Do I think that this is a good thing? No, not really. But we usually see a mad rush to combine companies after a mega-merger goes through. There may not be as much room for the regionals if a few more national chains get cobbled together as a result. Realistically unique chains like Publix would be one of the hardest to combine with anyone else, same for Wegmans, ShopRite, H-E-B, Market Basket and a few other "super" regionals. But there definitely is room to consolidate the industry and again if the KR-ACI merger is ever approved there will be many more to follow.

As far as an ESOP goes they're been bought out before. Even United Airlines was employee owned at one point in time but that was undone. I don't see that as an obstacle these days.

I think the unions are louder than they are powerful these days. If they saw that supporting deals like KR-ACI could result in the non-union stores being organized then they might withdraw their opposition.

Publix is sitting around 1,300 stores. At this point they are about the size Safeway was when Albertsons bought it out. The thing about Publix is they are constantly expanding. They'll be to 1,500 stores soon as they keep expanding into new territories. Publix, unlike many other grocers, has a pretty low "store closure rate." They have demonstrated years of constant growth. This growth is a must for their ESOP, it helps them grow the value of the ESOP. They cannot do anything stupid or radical in terms of too fast of growth but when it comes to ESOPS, slow and steady wins the race. It is really similar to WinCo in that regard. You see a slow, constant expansion. You rarely see a store close. I do not really care for the Publix Store- if it was near me I don't think I would shop there much, but when I look at how they run things and their overall way of handling their operation/expansion I think they do an excellent job and are very well managed from a strategy and financial standpoint. The way they run things from an ESOP perspective is they are doing an excellent job managing the company for their ESOP holders.

I'm just not sure how much more consolidation there will be. I feel like the consolidation tends to involve struggling chains/chains that have a tract record of store closures and then they just sort of consolidate and keep dying. In the 90's in SoCal the whole Boys-Alpha Beta-Hughes-Ralphs thing and all the closures that came from that if you study it from the mid 90's through the early 00's feels like how this is playing out across the country. We know there are assets like Winn Dixie that are for sale but they are junk and nobody seems to want to buy them. There are also large territories covered by small family operators and/or wholesaler owned stores that are heavily tied in with various grocery wholesalers- you have URM out of Spokane, Associated Food out of Salt Lake City, AWG throughout parts of the middle of the country, things like Shop Rite back east, and these smaller operators are doing well and continue to invest in their stores and expand.

[rwsandiego]

...
What I find more interesting about Publix is their organic expansion outside Florida. In the modern times the only other chain that has had such a successful long running organic expansion program covering so many states/territories in the grocery business is Wal Mart. Wherever Publix expands, customers seem to view them as the "superior" option. Look at Atlanta as a good example...

Where I think Publix excels is in basics of Grocery 101. The stores are generally clean, orderly, well stocked, and well staffed. The stores do not feel run down. Perimeters are staffed/open when the store is open (which isn't very late). Publix strikes me as quite dependable....

In my focus group of three, what you said about stores being generally clean, orderly, well stocked, and well-staffed resonates. The other thing about Publix is consistency. Their stores are generally the same size (not very big) and same layout. Customers like that. Their employees, in my experience, are very friendly and helpful. Customers like that, too.

Would Publix translate well to other geographical regions? Who knows? Unlike Albertson's and Safeway, who had patches here and there, they started expanded in the southeast, an area they know well and went north. Would I suggest they acquire Krogbertsway cast-offs? No, I wouldn't. That would put them in unfamiliar markets, and they would probably fail. Chicago isn't like the markets where they have experience nor is Denver. It would also give them unfamiliar and varying store sizes.