Kroger to merge with Albertsons?

[mjhale]

Also note that the FTC has no leverage over the buyers and can't make them do anything. They can't say "you can't close the store for X years" or anything like that.

The FTC can say that the surviving entity in the merger cannot open stores in overlap areas for x years. The combined Ahold-Delhaize was prevented from opening stores in overlap areas for some period of time after their merger. Supervalu via Shop and Save took most of the divested Food Lion stores in Martins (Giant-PA) operating areas. When Supervalu couldn't find independents that were interested in running the divested stores they closed them. That left some areas with only one grocery store or no grocery at all. Ahold-Delhaize had to go back to the FTC to get exceptions to the merger decree to reopen Martins locations in some of the old Food Lion stores. The FTC allowed it because there were no other interested parties for the old Food Lion stores and to allow for a single grocery in some towns when no one was interested.

My concern in this merger all along has been when you remove one major competitor what happens when the divested stores do not have the ability to go forward as a grocery store. This could come from lack of operating capital from a smaller player or just no one interested in divested stores for whatever reason in a given area. I am not one for heavy government oversight and regulation. However when it comes to a basic need like groceries I think we need to pay more attention when two massive players are trying to combine. Areas should have as much assurance as possible that grocery options will not disappear especially in areas that could potentially become under served or end up with no grocery options at all. Perhaps what ClownLoach notes upstream here about Apollo coming in to capitalize players who are involved in the merger will bring enough financial stability that those who get divested stores and are smaller players so they can still make a good go of it. I'm not a fan of private equity with its hands in it because they have to get paid somehow. However, maybe this is the trade-off at this point to push the merger through and still be able to preserve grocery options in overlap areas.

[retailfanmitchell019]

I am wondering if Save Mart could roll up some of the regionals in the South too. I am thinking specifically the TX-LA-GA-AL type territory. Not going to name any names but there are a few chains I am thinking of. Cannot believe we are at a cusp of what looks like a potential major expansion for Save Mart. But I also never expected them to bring in such highly qualified management. And there are going to be a lot more highly qualified people becoming available as victims of "synergies" and "cost savings" as part of any future mergers. Save Mart historically operated in such a lean manner with less management than it should have had that they will need to add a lot of people in the middle to expand and that will work out well for the various middle management (district, distribution, etc.) who supported stores that are going to be divested.

I'd bet you are thinking of Winn-Dixie, the dominant Deep South regional. Winn-Dixie is for sale anyway.

SpartanNash has talked on and off about selling its retail operations and just becoming a wholesaler. That could be Save Mart's chance to break into the Midwest, by acquiring Family Fare.

[storewanderer]

I am wondering if Save Mart could roll up some of the regionals in the South too. I am thinking specifically the TX-LA-GA-AL type territory. Not going to name any names but there are a few chains I am thinking of. Cannot believe we are at a cusp of what looks like a potential major expansion for Save Mart. But I also never expected them to bring in such highly qualified management. And there are going to be a lot more highly qualified people becoming available as victims of "synergies" and "cost savings" as part of any future mergers. Save Mart historically operated in such a lean manner with less management than it should have had that they will need to add a lot of people in the middle to expand and that will work out well for the various middle management (district, distribution, etc.) who supported stores that are going to be divested.

I'd bet you are thinking of Winn-Dixie, the dominant Deep South regional. Winn-Dixie is for sale anyway.

SpartanNash has talked on and off about selling its retail operations and just becoming a wholesaler. That could be Save Mart's chance to break into the Midwest, by acquiring Family Fare.

We will see what happens. Save Mart needs a deal first. Then they need to digest that deal. Save Mart's digestion of NorCal Albertsons nearly tanked the company but the people involved are all different now so we will see how this goes.

Best deal they could get is the right to use some banner (be it Albertsons, Vons, whatever) and keep as many stores with current branding as possible. Worst scenario is having to rebrand whatever they buy to Save Mart, that will probably not go well.

[retailfanmitchell019]

We will see what happens. Save Mart needs a deal first. Then they need to digest that deal. Save Mart's digestion of NorCal Albertsons nearly tanked the company but the people involved are all different now so we will see how this goes.

Best deal they could get is the right to use some banner (be it Albertsons, Vons, whatever) and keep as many stores with current branding as possible. Worst scenario is having to rebrand whatever they buy to Save Mart, that will probably not go well.

Albertsons is definitely the better banner to use, it is well-known throughout the West. Vons is only a SoCal/Vegas brand.

Assuming Save Mart takes the Albertsons banner (with most, if not all of its stores), I expect that to be their banner for Vons divests also, unless they take the Vons name too for use on SoCal stores.
I expect Kroger to kill off the Vons banner, converting the non-divested Vons stores to Ralphs (Safeway for Fresno stores, Smith's for Vegas stores).

[ClownLoach]

We will see what happens. Save Mart needs a deal first. Then they need to digest that deal. Save Mart's digestion of NorCal Albertsons nearly tanked the company but the people involved are all different now so we will see how this goes.

Best deal they could get is the right to use some banner (be it Albertsons, Vons, whatever) and keep as many stores with current branding as possible. Worst scenario is having to rebrand whatever they buy to Save Mart, that will probably not go well.

Albertsons is definitely the better banner to use, it is well-known throughout the West. Vons is only a SoCal/Vegas brand.

Assuming Save Mart takes the Albertsons banner (with most, if not all of its stores), I expect that to be their banner for Vons divests also, unless they take the Vons name too for use on SoCal stores.
I expect Kroger to kill off the Vons banner, converting the non-divested Vons stores to Ralphs (Safeway for Fresno stores, Smith's for Vegas stores).

I think the death of the Vons banner makes the most sense as well. They will have to make changes somewhere along the way because it's rather obvious that Albertsons should have just pulled the trigger on picking one banner in the first place after the merger. They have wound up with lopsided branding with big lumps of Albertsons in some areas, Vons in others. They can't divest a division by banner name in SoCal at all as some have suggested here. For example if they just said everything with an Albertsons sign goes then they abandon whole areas like Temecula valley, North San Diego etc. and South OC. But the opposite is true elsewhere. If they only separated all of Albertsons stores then they would still have gross overlap with Vons and Ralphs all over Los Angeles County, North Orange County and other areas. If it suddenly became all Albertsons and also a bunch of Vons and they all went to Save Mart or whoever else then when it is done the entirety of those areas would be less competitive than it is today and Ralphs/Kroger would actually move down to 2nd place in some areas. Why pay your way to move down from first to second? It would defy logic. Ultimately they kicked the can down the road on branding decisions (maybe a good idea with how they botched the Lucky deal and how bad the Haggen deal went down) but they should have united with one banner after a few years since they've basically been operating as one anyway. They could have educated their customers that there isn't any difference between a Vons or an Albertsons anymore and avoided fallout from rebranding. Now there is real risk that some stores could get rebranded twice if the transactions are spaced out.

[Super S]

In the Pacific Northwest, there will almost certainly be an elimination of at least one or two banners if this moves forward. It's going to be hard to justify having Fred Meyer, QFC, Haggen, Albertsons, and Safeway all remaining in the areas where all of those brands are presently in use.

[retailfanmitchell019]

In the Pacific Northwest, there will almost certainly be an elimination of at least one or two banners if this moves forward. It's going to be hard to justify having Fred Meyer, QFC, Haggen, Albertsons, and Safeway all remaining in the areas where all of those brands are presently in use.

In the PNW, I expect QFC and the remaining Albertsons stores (and maybe some Safeways and Haggens going against Fred Meyer) divested to Save Mart. I expect this to be the end of QFC, and possibly Haggen. I still think URM should buy Haggen.

[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.

May I ask, what part of Florida?

The more south you go the worse Publix gets.

Dunedin and The Villages.

[ClownLoach]

Also note that the FTC has no leverage over the buyers and can't make them do anything. They can't say "you can't close the store for X years" or anything like that.

The FTC can say that the surviving entity in the merger cannot open stores in overlap areas for x years. The combined Ahold-Delhaize was prevented from opening stores in overlap areas for some period of time after their merger. Supervalu via Shop and Save took most of the divested Food Lion stores in Martins (Giant-PA) operating areas. When Supervalu couldn't find independents that were interested in running the divested stores they closed them. That left some areas with only one grocery store or no grocery at all. Ahold-Delhaize had to go back to the FTC to get exceptions to the merger decree to reopen Martins locations in some of the old Food Lion stores. The FTC allowed it because there were no other interested parties for the old Food Lion stores and to allow for a single grocery in some towns when no one was interested.

My concern in this merger all along has been when you remove one major competitor what happens when the divested stores do not have the ability to go forward as a grocery store. This could come from lack of operating capital from a smaller player or just no one interested in divested stores for whatever reason in a given area. I am not one for heavy government oversight and regulation. However when it comes to a basic need like groceries I think we need to pay more attention when two massive players are trying to combine. Areas should have as much assurance as possible that grocery options will not disappear especially in areas that could potentially become under served or end up with no grocery options at all. Perhaps what ClownLoach notes upstream here about Apollo coming in to capitalize players who are involved in the merger will bring enough financial stability that those who get divested stores and are smaller players so they can still make a good go of it. I'm not a fan of private equity with its hands in it because they have to get paid somehow. However, maybe this is the trade-off at this point to push the merger through and still be able to preserve grocery options in overlap areas.

I think the Apollo plot is to facilitate deals all around. First the Albertsons-Kroger deal where they can provide financing and credit later but will end with no equity in the new Kroger. Then they could separately provide financing for store buyers, potentially swapping for equity in those smaller regionals. Then they will use their leverage from the equity stakes in various smaller regionals to force them to combine into a larger entity they can control. Obvious cost savings from merging together six or seven regionals into one with combined buying, management etc. which means that Apollo grows the value of their equity. Hence the post merger scramble to combine other smaller players begins. Sure, some Mariano's type small players could start up, similar to how Frazier Farm has emerged in San Diego, but the small get smaller when the whale of the industry doubles in size. They'll have less buying power than ever and there will be pressure to combine to create at least one new national player. I know I got a lot of attention when I mentioned Publix but you get the concept. The small regionals combine to another national or super regional. Sounds like Save Mart wants to be the super regional of the West now?

[ClownLoach]

In the Pacific Northwest, there will almost certainly be an elimination of at least one or two banners if this moves forward. It's going to be hard to justify having Fred Meyer, QFC, Haggen, Albertsons, and Safeway all remaining in the areas where all of those brands are presently in use.

With the Safeway banner applied to nearly every Albertsons now I don't see a place for QFC at all. They can easily become Safeway and that becomes the main PNW brand outside of the large format Freddy's. Haggen is really so small it isn't a significant factor.