Pavilions Long Beach converting to Vons

[storewanderer]

I'm going to go further on my previous post. I believe the 650 store maximum is absolutely assuming that the stores being sold, spun, or turned into paper airplanes are lower volume units.

I'm going out on a limb and going to assume with all those small rural Safeway and Albertsons stores scattered around - I would bet there are only about 800-900 ACI stores that even deliver decent volume. The rest are low volume, low sales, and low value.

And where are the higher volume stores? Conveniently where the competition is.

If the 650 divest number was hit and all of those stores were in the upper half of sales volume - which we should assume would be the case in overlapping markets - then you're left with a very unproductive chain of low volume stores that we know are the type Kroger doesn't even like to operate. And we know that when a divestiture is involved then the buyers take full advantage of the sellers and pay a tiny fraction of what they're worth in the best possible scenario. We saw from the Haggen bankruptcy that they bought many stores for $1 each, dozens and dozens, and many for less than $100K each. Why in the world would we think Kroger would feel good about still paying $22-23B for ACI minus 650 stores when the 650 represent higher volume AND sold/spun valued at $2B maximum? $23B for about 1500 stores while the competitors get 650 for $2B or less?

It ain't gonna happen. Not even close. Pick your favorite big town, point to one or two stores and that's the absolute maximum they'll give up or otherwise no deal and they push for an ACI breakup behind the scenes.

So again these wild divestiture proposals of selling all of ACI Arizona, or anything that physically says Albertsons, or all of ACI SoCal which is a far higher store count than all of Ralphs/F4L SoCal, or all of Safeway in the PNW - there isn't any possibility of these coming to fruition.

The purchase price ends up reduced based on proceeds from stores sold based on the SpinCo language which may or may not even be relevant anymore. I don't think they are going to "give away" stores like you describe to get this deal done. They are having to divest too many stores to justify "giving them away" as past divest programs have. Part of this deal is making some money on divesting stores.

This depends. If they go ahead and get to 900 stores divested by adding a bunch of random Safeway units in towns of under 6k people that barely crack $350k a week in sales volume and are dingy old little stores that customers hate due to the awful pricing and bad mix over the years and also stores with a higher mix of long-tenured (higher paid) employees; I think they may well be willing to divest the larger number of stores.

Your analysis basically proves why the deal is flawed in the first place as proposed and why the deal makes no sense and is likely to collapse. Even divesting only 650 stores they would need to reduce some manufacturing/distribution capacity. They previously promised giving "infrastructure, people.." to SpinCo which implies to me that certain manufacturing plants/distribution could end up divested with blocks of stores.

As far as Long Beach goes I was wondering about that Ralphs at the Lakewood/Long Beach border. It is recently remodeled and it is quite a nicely merchandised (albeit somewhat messy and it could be cleaner) store with a big mix of products. The thing with this store is this store is like a typical Kroger banner operation elsewhere. I don't think divesting it would be a good plan given it is "their kind of store." I noticed security at both doors there.

[ClownLoach]

I'm going to go further on my previous post. I believe the 650 store maximum is absolutely assuming that the stores being sold, spun, or turned into paper airplanes are lower volume units.

I'm going out on a limb and going to assume with all those small rural Safeway and Albertsons stores scattered around - I would bet there are only about 800-900 ACI stores that even deliver decent volume. The rest are low volume, low sales, and low value.

And where are the higher volume stores? Conveniently where the competition is.

If the 650 divest number was hit and all of those stores were in the upper half of sales volume - which we should assume would be the case in overlapping markets - then you're left with a very unproductive chain of low volume stores that we know are the type Kroger doesn't even like to operate. And we know that when a divestiture is involved then the buyers take full advantage of the sellers and pay a tiny fraction of what they're worth in the best possible scenario. We saw from the Haggen bankruptcy that they bought many stores for $1 each, dozens and dozens, and many for less than $100K each. Why in the world would we think Kroger would feel good about still paying $22-23B for ACI minus 650 stores when the 650 represent higher volume AND sold/spun valued at $2B maximum? $23B for about 1500 stores while the competitors get 650 for $2B or less?

It ain't gonna happen. Not even close. Pick your favorite big town, point to one or two stores and that's the absolute maximum they'll give up or otherwise no deal and they push for an ACI breakup behind the scenes.

So again these wild divestiture proposals of selling all of ACI Arizona, or anything that physically says Albertsons, or all of ACI SoCal which is a far higher store count than all of Ralphs/F4L SoCal, or all of Safeway in the PNW - there isn't any possibility of these coming to fruition.

The purchase price ends up reduced based on proceeds from stores sold based on the SpinCo language which may or may not even be relevant anymore. I don't think they are going to "give away" stores like you describe to get this deal done. They are having to divest too many stores to justify "giving them away" as past divest programs have. Part of this deal is making some money on divesting stores.

This depends. If they go ahead and get to 900 stores divested by adding a bunch of random Safeway units in towns of under 6k people that barely crack $350k a week in sales volume and are dingy old little stores that customers hate due to the awful pricing and bad mix over the years and also stores with a higher mix of long-tenured (higher paid) employees; I think they may well be willing to divest the larger number of stores.

Your analysis basically proves why the deal is flawed in the first place as proposed and why the deal makes no sense and is likely to collapse. Even divesting only 650 stores they would need to reduce some manufacturing/distribution capacity. They previously promised giving "infrastructure, people.." to SpinCo which implies to me that certain manufacturing plants/distribution could end up divested with blocks of stores.

As far as Long Beach goes I was wondering about that Ralphs at the Lakewood/Long Beach border. It is recently remodeled and it is quite a nicely merchandised (albeit somewhat messy and it could be cleaner) store with a big mix of products. The thing with this store is this store is like a typical Kroger banner operation elsewhere. I don't think divesting it would be a good plan given it is "their kind of store." I noticed security at both doors there.

I'm surprised they remodeled the Cherry/Carson Ralphs although the area gained a Northgate a few years ago and maybe they felt like pushing to compete against that store. It was a redevelopment project of a former drive in theater and I'm pretty sure they got about 30 years of tax credits etc negating the rent. Plus they closed a very old F4L not too far away in their argument with the city over a very poorly written hero pay act. Although Kroger looked like the villain, there were a lot of exclusions put in that basically meant it only applied to mainstream traditional supermarkets and not Walmart, Costco, Target, or even the ethnic operators. I believe it opened around 1996 and if the tax credits expire in 30 years then the clock might still be ticking on this store. When it first opened it had an incredible bulk candy shop aisle.

The divestiture issue is that any acquirer can absolutely fleece Kroger/Albertsons on these stores because they know that if they don't sell them voluntarily they'll be ordered to sell them involuntarily, which sometimes does equate to as little as $1 even with an owned building. Why do you think there are vultures circling like the private equity backed Save Mart people? They know that they can expand at the expense of Kroger/Albertsons. The entire negotiation process is basically "how low will you go?" They'll keep driving the price down until they fear that a competitor might out bid them. These bargain acquisitions are game changers and that's why outsiders like Save Mart and Ahold have interest. They know they will acquire cheap but then have years of losses while they grow share to profitability, but if it adds up well then there is little up front risk. It worked for Stater Bros, in my opinion they were only a fringe operator until they acquired so many stores in the Lucky merger deal which set them up to gain more in the strike. But that was probably one of the best ever gains of share to erupt from merger divestitures; lightning doesn't strike twice.

So I restate the case that they will not bring in any significant revenue to drive down the $25B cost. They could easily shed 7% as stated which does sound about right, but no chance the deal price drops 7%. They might get 2% if they're really lucky. And the promise to not close facilities is basically why we haven't heard the more influential unions like the Teamsters speaking out about it. If they have to make any real concessions in store count they'll have to revoke the no facility closure pledge, and with that the Teamsters will start a war. So you are correct that the merger is not viable if they actually have to divest any significant number of stores. Hence my argument when I see proposals here that read like 600-700 divests just on the West Coast. These suggested deals all elevate the store counts of competitors so high that Kroger spends $25B to drop from #1 or #2 to #3 or worse in share. I'm not going to call out anyone specifically but there was one I read that effectively would remake SoCal store count share as #1 Save Mart or Spinco, #2 Stater Bros and #3 Ralphs/Vons/Albertsons combined; obviously never gonna happen.

[storewanderer]

I'm surprised they remodeled the Cherry/Carson Ralphs although the area gained a Northgate a few years ago and maybe they felt like pushing to compete against that store. It was a redevelopment project of a former drive in theater and I'm pretty sure they got about 30 years of tax credits etc negating the rent. Plus they closed a very old F4L not too far away in their argument with the city over a very poorly written hero pay act. Although Kroger looked like the villain, there were a lot of exclusions put in that basically meant it only applied to mainstream traditional supermarkets and not Walmart, Costco, Target, or even the ethnic operators. I believe it opened around 1996 and if the tax credits expire in 30 years then the clock might still be ticking on this store. When it first opened it had an incredible bulk candy shop aisle.

The divestiture issue is that any acquirer can absolutely fleece Kroger/Albertsons on these stores because they know that if they don't sell them voluntarily they'll be ordered to sell them involuntarily, which sometimes does equate to as little as $1 even with an owned building. Why do you think there are vultures circling like the private equity backed Save Mart people? They know that they can expand at the expense of Kroger/Albertsons. The entire negotiation process is basically "how low will you go?" They'll keep driving the price down until they fear that a competitor might out bid them. These bargain acquisitions are game changers and that's why outsiders like Save Mart and Ahold have interest. They know they will acquire cheap but then have years of losses while they grow share to profitability, but if it adds up well then there is little up front risk. It worked for Stater Bros, in my opinion they were only a fringe operator until they acquired so many stores in the Lucky merger deal which set them up to gain more in the strike. But that was probably one of the best ever gains of share to erupt from merger divestitures; lightning doesn't strike twice.

So I restate the case that they will not bring in any significant revenue to drive down the $25B cost. They could easily shed 7% as stated which does sound about right, but no chance the deal price drops 7%. They might get 2% if they're really lucky. And the promise to not close facilities is basically why we haven't heard the more influential unions like the Teamsters speaking out about it. If they have to make any real concessions in store count they'll have to revoke the no facility closure pledge, and with that the Teamsters will start a war. So you are correct that the merger is not viable if they actually have to divest any significant number of stores. Hence my argument when I see proposals here that read like 600-700 divests just on the West Coast. These suggested deals all elevate the store counts of competitors so high that Kroger spends $25B to drop from #1 or #2 to #3 or worse in share. I'm not going to call out anyone specifically but there was one I read that effectively would remake SoCal store count share as #1 Save Mart or Spinco, #2 Stater Bros and #3 Ralphs/Vons/Albertsons combined; obviously never gonna happen.

Most NorCal Ralphs had that bulk candy aisle you describe after remodels. Cala/Bell had a different bulk vendor that was more grain-focused (Sun Ridge Farms, haven't seen them in a while, Save Mart had them in some stores before COVID). That was a great department, it had some of the difficult to find gummy stuff that was mainly at the mall stores, at a much lower price. Some stores maintained the freshness a lot better than others. I wasn't surprised when they scrapped them not long after exiting NorCal.

My observation was that Cherry/Carson Ralphs looked fairly healthy. It is probably too big for Ralphs. I noticed Wal Mart added fuel at its store around there a bit closer to the airport.

The thing to keep in mind about the divesting is if it is done in fire sale mode where they sell 70 stores in AZ/NV/NM piecemeal it is going to be a fire sale of how low can you go because these are disjointed stores that justify a discount. But if they sell the entire division (including associated distribution, a dairy, whatever else) then suddenly it is a much more valuable asset to sell. Suddenly it should not be seen as a fire sale but rather the sale of an entire working asset. It just so happens much of that asset (but not all of it) needed to be divested. So this is where I am coming from when I call out full divisions being divested. If full divisions are divested they do not necessarily go as fire sales. The idea is full divisions would draw enough buyers that the price of the asset would be more along the lines of what it is actually worth. I do not see full divisions being divested at fire sale prices; if it came to that or scrap the deal, the deal gets scrapped. I understand where you are coming from about the types of buyers who appear to be attracted to this transaction, but the better the asset package quality, the more potential buyers will come.

If full divisions are divested, Kroger doesn't spend $25B on assets. The purchase price will depend on the value of what is divested.

I think what got Stater was the strike. Had the strike not happened, Stater would not be having the success they've had. They wouldn't have done so many store remodels back in the 2000's. They wouldn't have been in a position to do so many new stores. They were absolutely an opportunistic buyer in 1999 and got stores for a very low price to make that deal go through. They got very lucky with the strike. They have worked very hard to improve their operation with the windfall of profits they got from the strike which was an excellent management decision. Stater never made much money before the strike, it was sort of like a breakeven company. It helped that Stater has held on to so many career employees over the years, and automatically won deep loyalty from every employee there during the strike due to not putting its people through that awful strike that it still benefits from to this day.

[retailfanmitchell019]

I think what got Stater was the strike. Had the strike not happened, Stater would not be having the success they've had. They wouldn't have done so many store remodels back in the 2000's. They wouldn't have been in a position to do so many new stores. They were absolutely an opportunistic buyer in 1999 and got stores for a very low price to make that deal go through. They got very lucky with the strike. They have worked very hard to improve their operation with the windfall of profits they got from the strike which was an excellent management decision. Stater never made much money before the strike, it was sort of like a breakeven company. It helped that Stater has held on to so many career employees over the years, and automatically won deep loyalty from every employee there during the strike due to not putting its people through that awful strike that it still benefits from to this day.

If the strike had not happened, would Stater have gone the way of a chain like Bashas?

[storewanderer]

If the strike had not happened, would Stater have gone the way of a chain like Bashas?

I am going to say no because Stater seemed to have a lot of long tenured and very professional employees in its stores and the operation just seemed more stable than Bashas.

While many Stater Stores were rather outdated and plain looking back before the strike, they were still clean and maintained (not necessarily run down, all equipment was working, etc.). They also were fairly busy stores.

Bashas in the 2000's on the other hand was sitting on a ton of very miserable stores, outdated, poorly kept, employees who were disengaged and seemed unhappy (the few who were on duty), and clearly had way too many stores doing way too little volume.

But flipping that around had Wal Mart and a strong Kroger division attacked Stater the way they attacked Bashas in the 2000's, it would have been very tough for Stater too... but Stater had some things to defend itself: the service element, the service meat program, a huge push on store efficiency (you really feel the employees value your time as a customer when you do business with Stater), and higher cleanliness maintenance standards...

[arizonaguy]

If the strike had not happened, would Stater have gone the way of a chain like Bashas?

I am going to say no because Stater seemed to have a lot of long tenured and very professional employees in its stores and the operation just seemed more stable than Bashas.

While many Stater Stores were rather outdated and plain looking back before the strike, they were still clean and maintained (not necessarily run down, all equipment was working, etc.). They also were fairly busy stores.

Bashas in the 2000's on the other hand was sitting on a ton of very miserable stores, outdated, poorly kept, employees who were disengaged and seemed unhappy (the few who were on duty), and clearly had way too many stores doing way too little volume.

But flipping that around had Wal Mart and a strong Kroger division attacked Stater the way they attacked Bashas in the 2000's, it would have been very tough for Stater too... but Stater had some things to defend itself: the service element, the service meat program, a huge push on store efficiency (you really feel the employees value your time as a customer when you do business with Stater), and higher cleanliness maintenance standards...

Bashas' biggest problem was a massive overexpansion at a time when Walmart was getting much stronger on grocery. In the late 1990s and early 2000s they opened at least a dozen or two new build stores (many of which have closed), purchased a handful of divested stores in the Fry's / Smith's marriage (that they were very unsuccessful with and closed not too long after), and picked up a couple dozen or so former Southwest Supermarkets and ABCO Desert Market stores (after both of those two chains went under). They did all of this while neglecting their existing store base and employees. They also opened a massive new warehouse / distribution center. They were essentially acting like a massive publicly traded company expanding like crazy while they really didn't have the money to do so. To this day I believe Bashas' has closed more stores in Arizona than Fry's, Albertsons and Safeway combined which goes to show how many terrible stores / poor decisions were made in the late 1990s / early 2000s (probably opened and closed at least 50 stores between 1995 - 2010).

[ClownLoach]

I'm surprised they remodeled the Cherry/Carson Ralphs although the area gained a Northgate a few years ago and maybe they felt like pushing to compete against that store. It was a redevelopment project of a former drive in theater and I'm pretty sure they got about 30 years of tax credits etc negating the rent. Plus they closed a very old F4L not too far away in their argument with the city over a very poorly written hero pay act. Although Kroger looked like the villain, there were a lot of exclusions put in that basically meant it only applied to mainstream traditional supermarkets and not Walmart, Costco, Target, or even the ethnic operators. I believe it opened around 1996 and if the tax credits expire in 30 years then the clock might still be ticking on this store. When it first opened it had an incredible bulk candy shop aisle.

The divestiture issue is that any acquirer can absolutely fleece Kroger/Albertsons on these stores because they know that if they don't sell them voluntarily they'll be ordered to sell them involuntarily, which sometimes does equate to as little as $1 even with an owned building. Why do you think there are vultures circling like the private equity backed Save Mart people? They know that they can expand at the expense of Kroger/Albertsons. The entire negotiation process is basically "how low will you go?" They'll keep driving the price down until they fear that a competitor might out bid them. These bargain acquisitions are game changers and that's why outsiders like Save Mart and Ahold have interest. They know they will acquire cheap but then have years of losses while they grow share to profitability, but if it adds up well then there is little up front risk. It worked for Stater Bros, in my opinion they were only a fringe operator until they acquired so many stores in the Lucky merger deal which set them up to gain more in the strike. But that was probably one of the best ever gains of share to erupt from merger divestitures; lightning doesn't strike twice.

So I restate the case that they will not bring in any significant revenue to drive down the $25B cost. They could easily shed 7% as stated which does sound about right, but no chance the deal price drops 7%. They might get 2% if they're really lucky. And the promise to not close facilities is basically why we haven't heard the more influential unions like the Teamsters speaking out about it. If they have to make any real concessions in store count they'll have to revoke the no facility closure pledge, and with that the Teamsters will start a war. So you are correct that the merger is not viable if they actually have to divest any significant number of stores. Hence my argument when I see proposals here that read like 600-700 divests just on the West Coast. These suggested deals all elevate the store counts of competitors so high that Kroger spends $25B to drop from #1 or #2 to #3 or worse in share. I'm not going to call out anyone specifically but there was one I read that effectively would remake SoCal store count share as #1 Save Mart or Spinco, #2 Stater Bros and #3 Ralphs/Vons/Albertsons combined; obviously never gonna happen.

My observation was that Cherry/Carson Ralphs looked fairly healthy. It is probably too big for Ralphs. I noticed Wal Mart added fuel at its store around there a bit closer to the airport.

The thing to keep in mind about the divesting is if it is done in fire sale mode where they sell 70 stores in AZ/NV/NM piecemeal it is going to be a fire sale of how low can you go because these are disjointed stores that justify a discount. But if they sell the entire division (including associated distribution, a dairy, whatever else) then suddenly it is a much more valuable asset to sell. Suddenly it should not be seen as a fire sale but rather the sale of an entire working asset. It just so happens much of that asset (but not all of it) needed to be divested. So this is where I am coming from when I call out full divisions being divested. If full divisions are divested they do not necessarily go as fire sales. The idea is full divisions would draw enough buyers that the price of the asset would be more along the lines of what it is actually worth. I do not see full divisions being divested at fire sale prices; if it came to that or scrap the deal, the deal gets scrapped. I understand where you are coming from about the types of buyers who appear to be attracted to this transaction, but the better the asset package quality, the more potential buyers will come.

If full divisions are divested, Kroger doesn't spend $25B on assets. The purchase price will depend on the value of what is divested.

I think what got Stater was the strike. Had the strike not happened, Stater would not be having the success they've had. They wouldn't have done so many store remodels back in the 2000's. They wouldn't have been in a position to do so many new stores. They were absolutely an opportunistic buyer in 1999 and got stores for a very low price to make that deal go through. They got very lucky with the strike. They have worked very hard to improve their operation with the windfall of profits they got from the strike which was an excellent management decision. Stater never made much money before the strike, it was sort of like a breakeven company. It helped that Stater has held on to so many career employees over the years, and automatically won deep loyalty from every employee there during the strike due to not putting its people through that awful strike that it still benefits from to this day.

That Walmart has had every version I can think of in fuel stations, and they've built and torn down at least three times in that stores approximate 20 year history. I remember one was called Mirastar but it was a Walmart operation and took their gift cards but no cash - long before anyone ever thought about not accepting cash. I think that was very unpopular.

I agree on getting a better return by selling whole divisions, but they've already made some kind of deal with the Teamsters not to touch anything involving KR or ACI manufacturing, distribution, etc. which has to be the only reason they're not opposed to the merger. A coalition of unions with the Teamsters and UFCW both opposing would absolutely be the end of any merger deal, period. Plus KR isn't stupid, they know that by keeping all acquired facilities they restrict the potential buyers to more well capitalized, existing organizations that can afford to replace the infrastructure. They'll have to invest more which means nobody can come to town and create a new ultra low cost store to aggressively take share because they bought all this infrastructure for 75% off. In theory for the teamsters if let's say Save Mart came to SoCal and bought a good chunk of stores they'll need another warehouse and the Teamsters will be standing by the door ready to unionize it when it opens - more members and dues for them. They've made the bed and now they have to lie in it. They get to try to sell stores individually or in various sized groups and that's it. Nothing supporting comes with the stores. As such they will still pay 5X to 10X for each store they keep versus the price they sell divests for. The more they divest the worse the deal is for Kroger. That's why they want to control the divest situation, because all these buyers know that once the FTC has the power to make a list and say "stores 1234, 5678, 9876 & 2345 get sold or no merger" they have complete power over the price they pay and even if KR/ACI force them to buy in bundles of stores they'll still bid low because why pay full price when it's entirely feasible that the government could order it to be sold for as little as $1 and a letter of credit showing the buyer can actually operate it.

As far as Stater goes, I do not believe that they would have had the capability to keep acquired customers without all the larger format stores they acquired. Traditional Stater locations were old and small, with minimal perimeters aside from meat. Most around 20K with lousy selection. They got a lot of newer Lucky and Albertsons around 45K to 50K and in the first few years they didn't know how to operate them or buy for them at all. It was obvious in Long Beach where they had a few aisles entirely of paper towels and toilet paper. The first couple of years there were crickets chirping in that dead empty store that was decent as Albertsons although not as busy as the smaller Lucky across the street. But once they got an expanded assortment going that worked for them business started to come in. The strike sent tons of traffic their way and the stores that did best were of course the larger format ones. I know many people who did drive past one or two small format Stater during the strike because of the poor shopping experience to go to a larger store that was a former Albertsons or Lucky. They were greatly enriched by the strike for sure, but without those larger format buildings running well I am sure many customers would have returned to their Ralphs or Vons after because Stater couldn't deliver a comparable shopping experience. As we all know, the strike permanently damaged the market share of the big 3 and they closed many stores after which again Stater took advantage of and acquired more larger sites to relocate small format stores into. It seems that today Stater is about 60% larger formats and 40% small older stores, and they're still willing to spend tens of millions on full expansion remodels like we saw in Oceanside plus relocate smaller stores to new, larger buildings like Riverside-Arlington recently. They also continue to purge small format stores at lease ends or when opportunities arise (they closed a older Westminster/Santa Ana store and subleased it to Northgate recently for example).

So I maintain that Stater Bros wouldn't have been nearly as successful if they hadn't been able to get their hands on so many larger stores which enabled them to reinvent their operation just in time for a windfall of sales. Remove that and I wonder if they would still be around... It seemed like they were the Alpha-Beta of the Inland Empire and probably would have gone away just like they did.

[storewanderer]

That Walmart has had every version I can think of in fuel stations, and they've built and torn down at least three times in that stores approximate 20 year history. I remember one was called Mirastar but it was a Walmart operation and took their gift cards but no cash - long before anyone ever thought about not accepting cash. I think that was very unpopular.

I agree on getting a better return by selling whole divisions, but they've already made some kind of deal with the Teamsters not to touch anything involving KR or ACI manufacturing, distribution, etc. which has to be the only reason they're not opposed to the merger. A coalition of unions with the Teamsters and UFCW both opposing would absolutely be the end of any merger deal, period. Plus KR isn't stupid, they know that by keeping all acquired facilities they restrict the potential buyers to more well capitalized, existing organizations that can afford to replace the infrastructure. They'll have to invest more which means nobody can come to town and create a new ultra low cost store to aggressively take share because they bought all this infrastructure for 75% off. In theory for the teamsters if let's say Save Mart came to SoCal and bought a good chunk of stores they'll need another warehouse and the Teamsters will be standing by the door ready to unionize it when it opens - more members and dues for them. They've made the bed and now they have to lie in it. They get to try to sell stores individually or in various sized groups and that's it. Nothing supporting comes with the stores. As such they will still pay 5X to 10X for each store they keep versus the price they sell divests for. The more they divest the worse the deal is for Kroger. That's why they want to control the divest situation, because all these buyers know that once the FTC has the power to make a list and say "stores 1234, 5678, 9876 & 2345 get sold or no merger" they have complete power over the price they pay and even if KR/ACI force them to buy in bundles of stores they'll still bid low because why pay full price when it's entirely feasible that the government could order it to be sold for as little as $1 and a letter of credit showing the buyer can actually operate it.

As far as Stater goes, I do not believe that they would have had the capability to keep acquired customers without all the larger format stores they acquired. Traditional Stater locations were old and small, with minimal perimeters aside from meat. Most around 20K with lousy selection. They got a lot of newer Lucky and Albertsons around 45K to 50K and in the first few years they didn't know how to operate them or buy for them at all. It was obvious in Long Beach where they had a few aisles entirely of paper towels and toilet paper. The first couple of years there were crickets chirping in that dead empty store that was decent as Albertsons although not as busy as the smaller Lucky across the street. But once they got an expanded assortment going that worked for them business started to come in. The strike sent tons of traffic their way and the stores that did best were of course the larger format ones. I know many people who did drive past one or two small format Stater during the strike because of the poor shopping experience to go to a larger store that was a former Albertsons or Lucky. They were greatly enriched by the strike for sure, but without those larger format buildings running well I am sure many customers would have returned to their Ralphs or Vons after because Stater couldn't deliver a comparable shopping experience. As we all know, the strike permanently damaged the market share of the big 3 and they closed many stores after which again Stater took advantage of and acquired more larger sites to relocate small format stores into. It seems that today Stater is about 60% larger formats and 40% small older stores, and they're still willing to spend tens of millions on full expansion remodels like we saw in Oceanside plus relocate smaller stores to new, larger buildings like Riverside-Arlington recently. They also continue to purge small format stores at lease ends or when opportunities arise (they closed a older Westminster/Santa Ana store and subleased it to Northgate recently for example).

So I maintain that Stater Bros wouldn't have been nearly as successful if they hadn't been able to get their hands on so many larger stores which enabled them to reinvent their operation just in time for a windfall of sales. Remove that and I wonder if they would still be around... It seemed like they were the Alpha-Beta of the Inland Empire and probably would have gone away just like they did.

Mirastar was owned by Tesoro. This was a straight copy of the Murphy Express gas station design that has done well all over the US, but for whatever reason, Mirastar never performed well the way Murphy Express did. Tesoro kept going back and forth about not wanting corporate operated stations, at points gave them all to multi site operators (like Anabi Oil), then Speedway took a bunch of sites back, just a mess. At one point they closed about half of the Mirastars, converted half of the ones left to unattended sites, and eventually converted them to USA Gasoline. When they converted them to USA Gasoline, they stopped accepting Wal Mart gift cards. These were then put under Speedway with Marathon but as dealer sites and never got rebranded to Speedway Express. About 20 of them ended up with 7-Eleven who promptly shut them all down because they could only use USA for 180 days after buying Speedway so they would have needed to rebrand these former Mirastar sites (which all had USA branding when they got them). The last few of those closed in 2022. Reno had one of the last ones. The entire site was demolished including the underground tanks removed.

I think the divests will end up including some distribution and manufacturing this time unless the buyer rejects them. Another option would be a supply agreement for the buyers. I think that is bad and the buyers just need the warehouses. Another thing is making a buyer actually pay for all of those pieces hopefully helps attract a more stable buyer. When Ralphs bought NorCal divests they did not have a warehouse but quickly opened a small warehouse in Stockton, so I suppose a buyer could go that route. That warehouse is still open as a C&S warehouse. When Raleys bought Las Vegas/New Mexico divests they also had no warehouse and they were trying to supply Las Vegas from Sacramento and were using a wholesaler for New Mexico (switched wholesalers multiple times).

Stater's sweet spot seems to be that 45k square foot model store. The smaller stores lack due to just being too small. Anything larger and they can't merchandise it.

[Romr123]

The Stater I'm most familiar with is Sunrise/Vista Chino in Palm Springs, and I'd agree...it's probably a 50k store and just on the ragged edge of being not properly merchandised...aisle widths are a trifle too wide...it's subtle but it doesn't quite feel right. No pharmacy or bank branch (which there would be plenty of room for and would soak up 500 sqft). They compete with a plenty roomy Albertsons catty-corner.

[veteran+]

The Stater I'm most familiar with is Sunrise/Vista Chino in Palm Springs, and I'd agree...it's probably a 50k store and just on the ragged edge of being not properly merchandised...aisle widths are a trifle too wide...it's subtle but it doesn't quite feel right. No pharmacy or bank branch (which there would be plenty of room for and would soak up 500 sqft). They compete with a plenty roomy Albertsons catty-corner.

Yeah, know those stores well.

I used to shop at that Albertsons often because I liked the size (actually a bit too roomy and spread out, merchandising wise) and the variety (flavors, sizes, etc.) was best in town. The prices were way too high and customer service was blah).

Walked into Staters several times without buying anything.