Kroger to merge with Albertsons?

[bryceleinan]

I’m curious as to who C&S supplies in Oregon and NorCal… I know they didn’t have a great track record with the IGA in Reno.

[storewanderer]

I’m curious as to who C&S supplies in Oregon and NorCal… I know they didn’t have a great track record with the IGA in Reno.

C&S still supplies the two Scolaris... they get meat/produce/dairy from other suppliers though.

C&S supplies most small chains in NorCal with center store grocery items in mainstream categories. Then for gourmet/organic/natural most of these small chains supplement and use other suppliers like Kehe or UNFI. These small chains also typically get meat, produce, bakery, deli, and most of dairy from suppliers other than C&S. Chains they supply include Holiday/Sav-Mor, Kroger (FoodsCo), Nugget, Mar Val, Food 4 Less, most IGA Stores (a few of those do use Supervalu), and various others. Everything that is exceptional about Nugget, and great about Holiday, has nothing to do with and does not come from C&S. I think some of the Food 4 Less units get all of their products from C&S including meat/produce (it is to be polite, below average quality).

I don't know of any stores C&S supplies in OR other than the Klamath Falls Holiday. The Shop K Kart operator up in SE WA switched to C&S though, 2-3 stores. C&S has not attracted many customers in OR/WA. They are supplying perishables to Target and some school lunch programs out of a new warehouse in OR or WA, I forget which, way way way under capacity facility.

[storewanderer]

C&S taking these stores over will be worse than the Haggen joke. Haggen when they took the stores over had 18 stores, but those 18 stores Haggen ran were excellent stores and Haggen was a highly experienced operator with deep experience operating in the Pacific Northwest where close to 1/2 of the divests were.

C&S has retail experience in a few random places back east running junk past bankrupt stores short term. From what I can gather here many divests will be in the Pacific Northwest, Colorado, and in SoCal/AZ. C&S has little to no experience even supplying stores in those markets let alone operating stores in those markets.

I also note the price it appears C&S will pay is $5 million per store. Haggen paid close to $10 million per store. I think this will be a higher quality group of stores than Haggen got also (unless QFC and F4L are 100% divested - both of those are basically junk). So they seem to practically be giving these stores away to push this deal through. I don't know why they are so hard up to push this deal through.

This is very, very bad. I don't know what happened to Save Mart. Maybe this news will not actually materialize into fact.

The only thing I can say about this is C&S will have a clean slate with these stores to do what they want. Or just keep running them how they were run before. C&S has no structure from which to legitimately run corporate retail stores. C&S is not very integrated as a company and different C&S warehouses have different technology and different programs to support the stores they supply from whatever company they acquired the warehouse from. C&S NorCal still uses a bunch of old Fleming technology and stuff to support the stores it supplies. The Best Yet private label from Fleming is still there and C&S has done little to nothing to grow that line (they should discontinue it and just go with Food Club since Food Club has so many more SKUs).

[storewanderer]

I will also note and I hope UFCW notes too that there is already past circumstance involving C&S and previous Kroger owned stores and rapid failure.

When Kroger exited NorCal, most of the remaining Cala/Bell Stores in San Francisco were sold to the former regional manager Harley Delano and these stores were then run as Delano's IGA and supplied by C&S. Most of these stores despite being in captive locations and being solidly performing Cala/Bell Stores (Kroger had already shut down the dog stores by this point) performed very poorly as Delano's IGA. Cala/Bell already had very high pricing and not so great perishables so Delano's IGA was relatively comparable to Cala/Bell minus the Ralphs brand items and maybe without as many promotions. However it still did not work and despite C&S being the supplier and using IGA these stores mostly failed and failed very quickly at that.

Delano IGA did not do any changes to the stores- kept all the old equipment, cash registers, decor, etc. Many of these stores failed rapidly and ended up closed. Most have since reoccupied by other grocers. One is still open under Delano in Fairfax, and Delano also since opened a small store in Davis using sold old Cala/Bell decor.

[storewanderer]

and AFS affiliates with some of the divested Albertsons/Safeway stores in MT/WY).

Wait, which AFS affiliates failed in MT/WY?

Ridley's closed one store (a non-lifestyle Safeway, obviously a store with a tract record of poor performance for Safeway).

Then "Missoula Fresh Market" which was a start up in Missoula to take two divested Safeways and I think may have been having trouble, sold its stores to Yoke's, who comes out of Spokane and is a URM Stores customer. So these are still open and still under a small regional chain just not supplied by AFS. Geographically Missoula makes a lot more sense for URM than AFS. URM is so similar to AFS, they are both excellent suppliers that do an excellent job supporting the stores they supply with very competitive programs.

Which others failed?

AFS failure rate was higher involving previous Salt Lake City market Albertsons Stores. Between multiple closures of "Fresh Market" banner stores, plus two stores that went to Ridley's down in Orem closing the tract record is a bit more spotty on that purchase. That was a mess for AFS and the members had to pay for it, but they regrouped and got things together. It did not sink them. AFS is stronger than ever today and the strength of independent grocers and small regional chains in the AFS markets is very strong.

[retailfanmitchell019]

Wait, which AFS affiliates failed in MT/WY?
Which others failed?

Stokes, who bought the Butte, MT Albertsons:
https://www.kxlf.com/news/local-news/20 ... -to-close/
The Safeway Stokes bought in Anaconda, MT is still open.
Ridley’s is still open in Casper (down to 1 store), Laramie, and Sheridan, WY.
So, technically a 50% failure rate for AFS buying ABS/SWY divests in 2015.

[ClownLoach]

C&S taking these stores over will be worse than the Haggen joke. Haggen when they took the stores over had 18 stores, but those 18 stores Haggen ran were excellent stores and Haggen was a highly experienced operator with deep experience operating in the Pacific Northwest where close to 1/2 of the divests were.

C&S has retail experience in a few random places back east running junk past bankrupt stores short term. From what I can gather here many divests will be in the Pacific Northwest, Colorado, and in SoCal/AZ. C&S has little to no experience even supplying stores in those markets let alone operating stores in those markets.

I also note the price it appears C&S will pay is $5 million per store. Haggen paid close to $10 million per store. I think this will be a higher quality group of stores than Haggen got also (unless QFC and F4L are 100% divested - both of those are basically junk). So they seem to practically be giving these stores away to push this deal through. I don't know why they are so hard up to push this deal through.

This is very, very bad. I don't know what happened to Save Mart. Maybe this news will not actually materialize into fact.

The only thing I can say about this is C&S will have a clean slate with these stores to do what they want. Or just keep running them how they were run before. C&S has no structure from which to legitimately run corporate retail stores. C&S is not very integrated as a company and different C&S warehouses have different technology and different programs to support the stores they supply from whatever company they acquired the warehouse from. C&S NorCal still uses a bunch of old Fleming technology and stuff to support the stores it supplies. The Best Yet private label from Fleming is still there and C&S has done little to nothing to grow that line (they should discontinue it and just go with Food Club since Food Club has so many more SKUs).

Totally agree C&S is a joke, but I think that the other shoe will drop and it's going to be Save Mart getting the majority of the SoCal locations being divested. Every article so far has been clear that most of the stores going to C&S are PNW and Mountains. Like I mentioned before I think they're taking those two areas they can work with, plus the reject stores that would probably be closed in a typical merger deal. So I think they get some quality units in the PNW, mixed with worthless QFC and the worst units in SoCal which again are the closure bait type spots that ACI has been stringing along for no good reason.

The more complicated SoCal situation would be a strong area of focus for the FTC and that's why I think a second deal is going to be announced. The absence of Apollo financing in the first deal is the giveaway to me... They didn't just walk in and sink a bunch of money into Albertsons to influence a deal in which their stores get sold piecemeal for pennies. They came in to make money and debt peddling is how they make their profits.

Fact is that this deal indicates that the high interest rates out there have scuttled any legitimate buyers from purchasing these stores (with the possible exception of Save Mart coming for SoCal which I still think is in the works). So this is the absolute best they could come up with, a non operator which the FTC is going to question until they fall apart.

I think this first deal is a straight dump of stores that frankly were going to be dumped anyway, merger, no merger, merger without the silly no closure promise, etc. I do not believe we will find anything surprising when a list of stores comes out.

A second deal with Save Mart still just seems like a sure thing. Even with the recent negative feedback from observers up there I think they would be better off expanding their chain with some productive SoCal stores which will give them a greater scale and buying power. And they have the only banner that could potentially work it's way into SoCal without people questioning it, all the acquired stores get the Lucky name. But I think that deal will be fully contingent on a KR-ACI merger being completed. No merger, no sale.

[storewanderer]

Wait, which AFS affiliates failed in MT/WY?
Which others failed?

Stokes, who bought the Butte, MT Albertsons:
https://www.kxlf.com/news/local-news/20 ... -to-close/
The Safeway Stokes bought in Anaconda, MT is still open.
Ridley’s is still open in Casper (down to 1 store), Laramie, and Sheridan, WY.
So, technically a 50% failure rate for AFS buying ABS/SWY divests in 2015.

Butte also had two Smiths (Buttrey/Albertsons divests) that closed. Miserably low volumes. I don't quite know what happened to Butte Stokes. First they said they were expanding the hardware store, then they didn't do that but instead made a smaller hardware store and leased out the rest of the space. Stokes mother store is in Burley, it is also a former Albertsons, joined into a former Rite Aid for the True Value side, it is a pretty nice store, very large and complete. So this Butte lost 3 grocery stores thanks to these FTC divesting episode failures.

I don't count Missoula as failures since they are still open, even if not under AFS, but still under an independent regional/wholesaler. I am actually kind of surprised Missoula held on as long as it did. It is tough to take over Safeway Stores. Customers are very used to the Safeway offer. It is not easily replicated despite that it isn't really anything great.

[storewanderer]

Totally agree C&S is a joke, but I think that the other shoe will drop and it's going to be Save Mart getting the majority of the SoCal locations being divested. Every article so far has been clear that most of the stores going to C&S are PNW and Mountains. Like I mentioned before I think they're taking those two areas they can work with, plus the reject stores that would probably be closed in a typical merger deal. So I think they get some quality units in the PNW, mixed with worthless QFC and the worst units in SoCal which again are the closure bait type spots that ACI has been stringing along for no good reason.

The more complicated SoCal situation would be a strong area of focus for the FTC and that's why I think a second deal is going to be announced. The absence of Apollo financing in the first deal is the giveaway to me... They didn't just walk in and sink a bunch of money into Albertsons to influence a deal in which their stores get sold piecemeal for pennies. They came in to make money and debt peddling is how they make their profits.

Fact is that this deal indicates that the high interest rates out there have scuttled any legitimate buyers from purchasing these stores (with the possible exception of Save Mart coming for SoCal which I still think is in the works). So this is the absolute best they could come up with, a non operator which the FTC is going to question until they fall apart.

I think this first deal is a straight dump of stores that frankly were going to be dumped anyway, merger, no merger, merger without the silly no closure promise, etc. I do not believe we will find anything surprising when a list of stores comes out.

A second deal with Save Mart still just seems like a sure thing. Even with the recent negative feedback from observers up there I think they would be better off expanding their chain with some productive SoCal stores which will give them a greater scale and buying power. And they have the only banner that could potentially work it's way into SoCal without people questioning it, all the acquired stores get the Lucky name. But I think that deal will be fully contingent on a KR-ACI merger being completed. No merger, no sale.

I am not actually sure who could be more effective with F4L: C&S or Save Mart. Food Maxx and franchise F4L are so similar I think it is a bit of a toss up as to which is worse. Neither will do as well as Kroger F4L does due to higher prices/smaller mix/inferior private label program/inferior perimeter program compared to Kroger F4L.

It is possible the FTC may be blocking Apollo from financing someone and that could be why some potential regional chain buyers may not be having success. As recently as a few weeks ago Kroger CEO Rodney said something to the effect of the FTC will look at the balance sheets of the buyers and the divests will make regional chains who take them over stronger. And now this week we have a completely inexperienced buyer with no successful tract record operating stores at all let alone in these territories supposedly buying almost all of the divests?

C&S is good at storing goods for people like Target who don't have their own perishables warehouses and good at operating warehouses for larger chains but that is where their expertise seems to end. Private label, merchandising- just not good enough. Programs for fresh products- absolutely terrible. I have no idea how they will be able to run former Safeway units successfully (which is what I expect the majority of what they get to be).

[bryceleinan]

Totally agree on the C&S mess up in Oregon. I’m trying to picture who would be stronger operators in the towns I’m familiar with. Florence is a good example - they have a busy Safeway, Fred Meyer, and a Grocery Outlet. McKay’s out of Coos Bay could theoretically run the Safeway, and probably do a better job than C&S could. Newberg is another example - an operator like Roth’s or even Waremart/Winco could make a go of the Safeway.