Kroger to merge with Albertsons?

[arizonaguy]

Here's a little food for thought

IMHO, the entirety of monikers and their histories have been severely compromised. Merger after merger has deteriorated the value and reputation of these nameplates. Some have managed to retain some of their prestige more than others (King Soopers better than Ralphs with both at one time being A-list status in supermarket operations writ large).

These "names" used to really mean something to the shopper and even to the industry. Their individual reputations have been diluted year after year by these rapacious conquerors. These raider entities were comfortable in withholding capex and allowing units to be decrepit ambassadors of the "name". That is truly destructive advertising.

So it begs the question, do shoppers really care anymore about that destroyed "Name"? Does it really mean anything to shop at the once fabulous Ralphs? Or Pavilions? Or even King Soopers (holding on but no where close to its apex reputation)?

Just thinking out loud....................................your thoughts?

In a lot of markets, especially out West, the banners will be changing anyways. I think it would be the perfect time to just make everything that stays with Kroger "Kroger".

Save Mart probably isn't a great banner for expansion and so I agree that the Lucky banner might be a great one to expand to the acquired stores.

Fry's means nothing in Phoenix. Over 1/3 of the stores weren't even Fry's 30 years ago (they were bannered Smith's or Smitty's). Fry's can go from operating a pristine Signature Marketplace to operating some of the dumpiest, nastiest supermarkets I have ever been into (really an embarrassment for a company the size of Kroger). The fact is a high percentage of people living in the Phoenix area are transplants from elsewhere and simply shop at Fry's because they have the most locations and have historically had better pricing than Albertsons, Bashas' and Safeway. If Kroger changed the banners here it wouldn't matter at all.

In fact, Kroger is phasing out print ads in the following markets (per another site):

Atlanta
Michigan
Central
Mid-Atlantic
Cincinnati/Dayton
Nashville
Columbus
Roundy’s
Delta
QFC
Dillons
Fry’s - Tucson market only
Fred Meyer
Smith’s – Salt Lake City market only

[ClownLoach]

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.

Not trying to be argumentative, but the fact of the matter is, Kroger (Ralphs/F4L) is in a dead heat with ACI for #1 share in SoCal anyway. There are going to be more divests than you might think. My idea is for Ralphs to get every non-overlapping Vons/Pavilions and have every Albertsons brand store divested into Save Mart. Ralphs would solidify their position in LA/OC and become #1 in San Diego County. Vons actually outnumbers Albertsons in North SD (Penasquitos Creek is the southern border). F4L also goes to Save Mart, with some nicer F4L stores (like Santee) staying and converting to Ralphs.

Ralphs has a strong presence in South OC. You are right that the Temecula Valley is Albertsons country. Ralphs has already failed in a few spots in that area, do you try again?

I think Ralphs had the wrong locations in the Temecula valley, as well as parts of south OC and Oceanside-Carlsbad area. The two remaining Ralphs in the Temecula valley are both on outer fringes, one in a rural Murrieta area which serves the most expensive homes in the city, and a similar location in far east Temecula which is the closest store to Wine Country. These two stores do well however. Albertsons picked up the best real estate in the area, no question, with all of the best freeway or major arterial locations. Ralphs will want every one of these stores without question, and all but one are relatively overlapping with Stater Bros so they aren't a good acquirer. Stater Bros only has 4 stores, two of which appear to be divests from the Lucky-Albertsons merger, and they are not as successful as I thought they would be. Last place is Vons a distant 4th if it was it's own banner operating the two worst supermarkets in town. There is also a rapidly growing Asian population in the area and I suspect that all the conventional chains are doing their best to keep 99 Ranch/HMart stores out of the area. I expect the Temecula and Murrieta Vons to both be divested as they obvious money losers, and I believe that both will be acquired by Asian operators. Yes I am aware that is a non union acquisition, but they could also transfer all the union employees to other very close by stores, in one case the opposite street corner. I do expect to see non union chains acquire stores in this first wave that is self directed divestiture. I would expect to see union status maintained by decree in anything later from the FTC. This is another reason why they're going to clear the overlap list themselves before they get handed a different list they don't agree with.

[pseudo3d]

Here's a little food for thought

IMHO, the entirety of monikers and their histories have been severely compromised. Merger after merger has deteriorated the value and reputation of these nameplates. Some have managed to retain some of their prestige more than others (King Soopers better than Ralphs with both at one time being A-list status in supermarket operations writ large).

These "names" used to really mean something to the shopper and even to the industry. Their individual reputations have been diluted year after year by these rapacious conquerors. These raider entities were comfortable in withholding capex and allowing units to be decrepit ambassadors of the "name". That is truly destructive advertising.

So it begs the question, do shoppers really care anymore about that destroyed "Name"? Does it really mean anything to shop at the once fabulous Ralphs? Or Pavilions? Or even King Soopers (holding on but no where close to its apex reputation)?

Just thinking out loud....................................your thoughts?

I think they do. In some cases where the identity and ownership gets really jerked around toward the end (Smitty's-AZ had several different changes of hand) and really too small to justify an identity under a larger parent company, it makes sense, but if you're talking about being let go solely because of corporate change, Marshall Field's when it died was not really the same "Marshall Field & Company" of yore, yet it was still a very upsetting move.

Most today's well-known brands exist as identities that have been shuffled around through mergers and name changes. AT&T, Warner Bros., NBC, Burger King...but they all have value. While I do think Kroger probably intends to clean house on its brands (certainly some of the smaller, less well-known names), it will probably rebrand everything as Kroger if it's going to do anything merger or not (the list as proposed as @retailfanmitchell019 makes ZERO sense).

[ClownLoach]

Food for thought: last fall Kroger was using a different naming convention for Facebook sponsored posts only. In SoCal the name came up as "Ralphs by Kroger" and I thought then it represented a future rebranding in conjunction with the recent announced fruit cart icon. I think this was a test to see how their advertising click through rate was as part of deciding on future plans. It is clear that they may not necessarily want to just strip the signs today and hang Kroger tomorrow, but they're going to slowly bring in that Kroger name under every other banner to educate and reduce uncertainty for future purposes.

I really think there is something to be said for minimizing disruption caused by this merger as well as advertising the promised "immediate price reductions" upon close. There will be disruption and chaos in the marketplace with divested stores, and it doesn't matter if Save Mart or Wegmans or whoever else bought stores people will be upset if "their" store changes. It is clear from the bad situations such as the Lucky-Albertsons merger and the Haggen fiasco that consumers do not like uncertainty and become upset when changes bring it about. They'll accept change, after all they continue to shop at stores where remodels occur that uproot all the products. But when you throw uncertainty in there all bets are off.

For one example of present day uncertainty, there are numerous comments that you might find hilarious amongst the reviews of the marginal Pavilions being rebranded to Vons in Long Beach. Many expect the absolute worst, they think that they are going to shovel rotting produce and spoiled meat into the cases and all the product except 'Brand X' will be stripped from the shelves because the sign is changing. They somehow believe that this coat of paint will lower the standards to something five levels below Walmart. I'm surprised someone hasn't asked when they will spray mold spores in the coolers and make the store smell like rotten fish as part of the "de-Pavilionsing" of this store. Yet we know this is a store that was scheduled for remodel, it has operated as a "in name only" Pavilions for years, and as such it was not a candidate for the merchandising changes that would make it into "today's" Pavilions (basically a grocery store with a BevMo or Total Wine equivalent liquor dept. inside). In fact this area is so rich with heavily attended churches and such I could see families screaming about the excessive featuring of evil liquor products if this was a true Pavilions; they have one of the smallest liquor departments I've seen in any Albertsons Cos location let alone a 70,000+ Sq ft box. Plus the nearby Vons is a guaranteed divest so good idea to have another Vons nearby to capture customers loyal to the brand. The reality is the store isn't changing at all other than getting a sign, a coat of paint and a concrete floor. Furthermore if they did make it the current Pavilions concept the neighborhood would probably hate it with the removal of most GM SKUs to add these unwanted endless aisles of beer, wine and liquor. So this rebrand is basically the right thing for the store and the neighborhood. But above all else changing the name creates irrational levels of uncertainty and people are already convinced they'll never be able to walk through the doors again as soon as the sign finally changes.

On the subject of awareness, I read another comment on the Vons Facebook site complaining about their labor practices. It basically said "I would never shop at Ralphs because they're owned by those evil Kroger people, you Vons people aren't any better so it's Albertsons all the way for me! Your loss Albertsons gain!" which demonstrates the bizarre lack of knowledge of these chains merging almost a decade ago. Their own advertising encourages questioning when they continue to say Vons and Albertsons are "partnered for home delivery" implying they're separate companies working together. Stability prevents uncertainty. Uncertainty means lost sales and profit. This merger doesn't work if it creates any uncertainty in the customer base.

Many stores will change hands in this deal, and will change hands because of its proposal even if it dies later at the hands of the FTC or someone else. It is absolutely a competitive advantage to maintain the existing banners and begin to educate the customer on the merger through the promised price slashing. Once they unify the stores over half a decade or so with common layouts, remodels etc. then they will likely be safe to rebrand as Kroger or whatever dominant local banner is chosen.

It's for this reason as well as sale/merger timing that I realized that Save Mart (as the expected predominant acquirer of most overlapping locations) will probably have to bring back the Lucky brand at least in SoCal as the Vons, Pavilions, and Albertsons banners will not be made available at any cost. And I have every reason to think that they will continue to not be available after the merger.

We are going to have
Ralphs by Kroger
Vons by Kroger
Pavilions by Kroger
And yes, Albertsons by Kroger

Nothing will change brands at all. The only circumstances in which a brand goes is when the entire concept goes, which I expect will be the sale of F4L/FoodsCo in it's entirety. But conventional stores are not going to change for many years. No uncertainty. Positive marketing of lower prices to make customers both aware of the merger and feel good about it. Eventually a decision can be made but only after years of customer research.

Someday everything but Kroger may go away, but really this "by Kroger" strategy makes a ton of sense for this merger deal.

So to answer the question, yes, the banners are still vitally important to the business because they represent stability and familiarity to the customer. They may not have any real passion for Ralphs, but it still represents something to them versus the mysterious unknown of Kroger or whatever other unknown banner.

[retailfanmitchell019]

I think Ralphs had the wrong locations in the Temecula valley, as well as parts of south OC and Oceanside-Carlsbad area. The two remaining Ralphs in the Temecula valley are both on outer fringes, one in a rural Murrieta area which serves the most expensive homes in the city, and a similar location in far east Temecula which is the closest store to Wine Country. These two stores do well however. Albertsons picked up the best real estate in the area, no question, with all of the best freeway or major arterial locations. Ralphs will want every one of these stores without question, and all but one are relatively overlapping with Stater Bros so they aren't a good acquirer. Stater Bros only has 4 stores, two of which appear to be divests from the Lucky-Albertsons merger, and they are not as successful as I thought they would be. Last place is Vons a distant 4th if it was it's own banner operating the two worst supermarkets in town. There is also a rapidly growing Asian population in the area and I suspect that all the conventional chains are doing their best to keep 99 Ranch/HMart stores out of the area. I expect the Temecula and Murrieta Vons to both be divested as they obvious money losers, and I believe that both will be acquired by Asian operators.

Both Ralphs left in the Temecula Valley are/were "Marketplace" stores and are clones, with the exception of exterior elevation. The store in Temecula was built a year before Murrieta, interestingly. Ralphs had a store in Temecula across from the WinCo, that store closed after the strike.
The Vons on Rancho California is a former Albertsons, it was the 500th Albertsons store to open in fact, opening in March 1989.
The Temecula Valley is definitely the fastest growing region in the state: people have been priced out of LA/San Diego housing markets. This area, even though it uses LA media, it is more economically and culturally tied to San Diego.

Quite frankly though, I don't think this merger is going to be completed. And in that 70% chance the merger fails, I think Ahold is going to acquire the strong divisions of Albertsons (NorCal, Jewel, SoCal, PNW, Intermountain, Southwest) while the rest gets carved up and sold piecemeal.

[rwsandiego]

Here's a little food for thought

IMHO, the entirety of monikers and their histories have been severely compromised. Merger after merger has deteriorated the value and reputation of these nameplates. Some have managed to retain some of their prestige more than others (King Soopers better than Ralphs with both at one time being A-list status in supermarket operations writ large).

These "names" used to really mean something to the shopper and even to the industry. Their individual reputations have been diluted year after year by these rapacious conquerors. These raider entities were comfortable in withholding capex and allowing units to be decrepit ambassadors of the "name". That is truly destructive advertising.

So it begs the question, do shoppers really care anymore about that destroyed "Name"? Does it really mean anything to shop at the once fabulous Ralphs? Or Pavilions? Or even King Soopers (holding on but no where close to its apex reputation)?

Just thinking out loud....................................your thoughts?

I think the answer is "it depends." I don't think anyone would stop shopping Ralphs or Fry's if they were rebranded "Kroger." Whatever made them special is long gone. Plus, so many Phoenicians are transplants from somewhere else, the Fry's brand means nothing to them. Andronico's is a different story. They are a natural and gourmet food store that sells Safeway brands. Customers like them a lot. Wouldn't make sense to rebrand them. .

...Jewel is another one that I question if there is any reason to rebrand. Exactly how many "Kroger" stores actually compete with Jewel? I know there are a few on fringes of Jewel territory. I am not sure who has the best stores in that case. It may be appropriate to rebrand some of those "fringe territory" Jewel units to Kroger. I expect Mariano's ends up mostly divested/closed down and maybe F4L Chicago also ends up that way too.

If I was Kroger I'd rebrand the Bloomington-Normal and Urbana-Champaign Jewel stores to Kroger and leave the rest of the stores (especially those in metro Chicago) Jewel. Chicago is one of those cities where long-standing brands become institutions and institutions mean something. There's really no reason to re-brand to Kroger, which happened to exit from Chicago in the early 1970's.

Conversely, I would not re-brand Pick 'n' Save to Jewel. Jewel failed in Milwaukee twice. The first time was after buying Krambo's stores, which might have been re-branded Kroger by the time they were sold. The second time was when ASC opened several Jewel stores in the 1990's. The brand just didn't mean anything in Milwaukee. It didn't help that ASC bought and converted several Cub Foods stores, which were everything Jewel wasn't except for being big.

I also wouldn't change Acme or Star/Shaw's and I would keep Albertsons in Idaho. There's no point in changing them. Smith's in Idaho should change because Albertsons does have a presence there.

All that being said, hubris is a powerful force.

[ClownLoach]

I think Ralphs had the wrong locations in the Temecula valley, as well as parts of south OC and Oceanside-Carlsbad area. The two remaining Ralphs in the Temecula valley are both on outer fringes, one in a rural Murrieta area which serves the most expensive homes in the city, and a similar location in far east Temecula which is the closest store to Wine Country. These two stores do well however. Albertsons picked up the best real estate in the area, no question, with all of the best freeway or major arterial locations. Ralphs will want every one of these stores without question, and all but one are relatively overlapping with Stater Bros so they aren't a good acquirer. Stater Bros only has 4 stores, two of which appear to be divests from the Lucky-Albertsons merger, and they are not as successful as I thought they would be. Last place is Vons a distant 4th if it was it's own banner operating the two worst supermarkets in town. There is also a rapidly growing Asian population in the area and I suspect that all the conventional chains are doing their best to keep 99 Ranch/HMart stores out of the area. I expect the Temecula and Murrieta Vons to both be divested as they obvious money losers, and I believe that both will be acquired by Asian operators.

Both Ralphs left in the Temecula Valley are/were "Marketplace" stores and are clones, with the exception of exterior elevation. The store in Temecula was built a year before Murrieta, interestingly. Ralphs had a store in Temecula across from the WinCo, that store closed after the strike.
The Vons on Rancho California is a former Albertsons, it was the 500th Albertsons store to open in fact, opening in March 1989.
The Temecula Valley is definitely the fastest growing region in the state: people have been priced out of LA/San Diego housing markets. This area, even though it uses LA media, it is more economically and culturally tied to San Diego.

Quite frankly though, I don't think this merger is going to be completed. And in that 70% chance the merger fails, I think Ahold is going to acquire the strong divisions of Albertsons (NorCal, Jewel, SoCal, PNW, Intermountain, Southwest) while the rest gets carved up and sold piecemeal.

Appreciate the acknowledgement, Albertsons dominates the fastest growing area in California. The low cost of living in what is otherwise a very upscale area gives the average household an incredible disposable income of over $100K annually (really, I just got this from a economic report a few days ago). I estimate four out of five homes have 3 or more recent model cars, and at least half own a large RV or boat. Nobody wants to give up strong high comp stores like these, even marginal locations probably comp double digits annually. Thus situations like the Murrieta Vons that is a cesspool directly across the street from a technically Temecula Albertsons can coexist as the benefit to the company of great comp sales can lift the boats of a dozen other stores or more that could be "flat." Comps can be more important than profit to Wall Street when they are comparing and valuing companies versus their competition.

[jamcool]

Fry's is Kroger all but in name..same "kroji" TV ads as Kroger, Kroger signage everywhere, Jobs at Kroger machine in the front. And many newcomers to Arizona come from the Midwest-Kroger's current/previous retail area.

Ralphs is a different situation...the chain goes back to the late 1800s in SoCal, and is often remarked about in LA-oriented TV shows and movies.

[Bagels]

Fry's is Kroger all but in name..same "kroji" TV ads as Kroger, Kroger signage everywhere, Jobs at Kroger machine in the front. And many newcomers to Arizona come from the Midwest-Kroger's current/previous retail area.

Ralphs is a different situation...the chain goes back to the late 1800s in SoCal, and is often remarked about in LA-oriented TV shows and movies.

With the exception of F4L, Harris Teeter, etc., most banners are Kroger all but in name. Southern California has one of the nation's largest transient populations. It has completely rebuilt its entire economy from the 1990s (when - outside of Hollywood - it was largely aerospace, defense and manufacturing, vs. service, research & technology today). Much of the population that lives here wasn't born here, and a large chunk of the population at any given time won't be here more than just briefly.

Ralphs stores continue to disappear from not only increasingly ethic areas but also increasingly wealthy. Shopping at Ralphs -- or anywhere else along the West Coast -- in 2000 was a much different experience than going to Kroger in the Midwest. Not anymore -- the décor/layouts are similar, nearly all the product is the same - including deli/ bakery/ etc., etc. Swapping "Ralphs" for "Kroger" is merely cosmetic. When Albertsons replaced Lucky, it was more than just the name that changed.

[storewanderer]

The other thing I wonder is if Kroger will take the branding approach market by market. For instance start with smaller markets and go forward. I expect we may see them use how they handled Frys in AZ as a blueprint for how they do rebrands. Frys in AZ was clearly a very successful rebranding effort for the company, despite a painful process in the end they held market share, grew volume, and AZ served as a test market of sorts for things like Marketplace that have been a great expansion vehicle for Kroger all over the country, but they put a lot of money into that effort, and it was 24 years ago so what worked then may not work now. There are still many people in Kroger who were part of that rebranding effort and there is no doubt in my mind that their knowledge will be of great use for plotting rebrands. So it may make sense to do rebrands in AZ/NV/NM first since that would be closest to that knowledge base.

I think they need to start with overlapping conventional store markets. So basically the entire west, plus TX. Things like Jewel, NorCal, Shaws, and Acme can wait since they don't have conventional store overlap.

For instance, depending how the divest situation goes, let's just take Las Vegas.
Let's say they end up divesting off all but 8 Vons/Albertsons Stores in Las Vegas and keep every Smiths.
It won't be hard for them to just go ahead and rebrand those 8 Vons/Albertsons Stores to Smiths (or rebrand the entire market to Kroger at that time).

There are going to be a lot of smaller sub markets where the situation is similar. Albuquerque is another one. They will probably end up getting to keep 5 or so Albertsons in that market and keep every Smiths. Again a very easy rebrand to Smiths (or rebrand the entire market to Kroger at that time too).

The bigger markets like SoCal are likely just split into sub markets. Would conversions from Albertsons to Ralphs somehow not perform as well? There may be some risk there. Also I think converting Vons Stores to Ralphs would "bring down the Ralphs name" given so many Vons are just run down outdated stores.

Broadly speaking the best move is as few banner changes as possible, unless everything is just converted to Kroger. This merger definitely forces a decision.

I don't see "Ralphs by Kroger" or "Smiths by Kroger" etc. being used. That is just sloppy.

To compete in the online realm they need a single identity and it is clear already that Kroger is the identity they want to use.

Another thing I'd do right now is shift to a single loyalty card- a Kroger Plus Card (or some card with Kroger branding) even if not changing banners anywhere.