🛒 Kroger-Albertsons Merger: National Impact

[storewanderer]

The sooner this merger dies the better. It will help both companies move forward. Of course Albertsons control shareholders desperately want the merger...

[ClownLoach]

The sooner this merger dies the better. It will help both companies move forward. Of course Albertsons control shareholders desperately want the merger...

I'm inclined to agree they're going to block it, because if they were going to accept more store sales as a remedy then they would have found a way to leak that information by now. I think some of these areas are just too problematic, like the Union/Non Union situation in Arizona and the near monopoly in Washington. There isn't any effective way to divest in those states that will work because there just isn't enough competition left in the form of mainstream supermarket companies.

They're threatening already to block Alaska from buying Hawaiian Airlines which only shares 5 routes and is at risk of bankruptcy. They'd rather see Hawaiian go out of business I guess, or more likely they want them to file bankruptcy and sell the assets to Alaska to save face. They can still get away with claiming to be against big mergers and say they're not able to overcome bankruptcy court decisions.

If they're willing to block two airlines that have a less than 1% overlap and a true compelling financial need to merge, then there is no chance that this deal survives.

And I'm not sold on Albertsons shareholders desperately wanting this deal anymore either. The involvement of Apollo and their infinite pool of cash means that there are many opportunities to raise the value of those shares above the purchase price. They could merge in their other owned entities like Cardenas to improve margins, probably not a great idea but it serves the function of boosting the balance sheets and reducing overhead. They could sell pieces off and acquire new pieces that are more effective. As we've speculated they could also break up the company. The point is that there are many options for Albertsons shareholders to increase their profits. Where I see more desperation is Kroger. If they don't have a path to grow larger without taking on bad assets like acquiring chains in bankruptcy to try to turn them around, which they don't like to do, then what exactly is their next step after this is blocked?

[pseudo3d]

The sooner this merger dies the better. It will help both companies move forward. Of course Albertsons control shareholders desperately want the merger...

And I'm not sold on Albertsons shareholders desperately wanting this deal anymore either. The involvement of Apollo and their infinite pool of cash means that there are many opportunities to raise the value of those shares above the purchase price. They could merge in their other owned entities like Cardenas to improve margins, probably not a great idea but it serves the function of boosting the balance sheets and reducing overhead.

There's very little chance that Apollo will merge in Heritage Grocers Group with Albertsons, likely the overlap with Tony's Fresh Market will cause some trouble with the FTC.

They could sell pieces off and acquire new pieces that are more effective. As we've speculated they could also break up the company. The point is that there are many options for Albertsons shareholders to increase their profits.

Grocery stocks are typically not movers and shakers in profit and stock, so short of Albertsons going into some weird non-grocery diversification, I don't see any BIG changes coming to Albertsons anytime soon. Similar to the proposed Rite Aid deal, I could see them sidling up to Aldi Süd and Lone Star Funds to negotiate Winn-Dixie. Aldi takes a bunch of stores and closes them to convert to Aldi, Albertsons takes the rest of the chain...but again, who knows?

Where I see more desperation is Kroger. If they don't have a path to grow larger without taking on bad assets like acquiring chains in bankruptcy to try to turn them around, which they don't like to do, then what exactly is their next step after this is blocked?

I've hypothesized before that Kroger had some major issues under the hood that may or may not get resolved. If anything, they're more in love with Ocado and grocery delivery than actual stores, yet aren't going to build anything in new markets, even though they were flirting the ideas less than a decade ago with Hawaii and Florida discussed.

They're gearing up for another round at the bargaining tables with the Houston Division, it's very unlikely they'll close the division but they'll usually flex on them by closing a store—yet they're already falling behind H-E-B, which surpassed them back about a decade ago.

[storewanderer]

And I'm not sold on Albertsons shareholders desperately wanting this deal anymore either. The involvement of Apollo and their infinite pool of cash means that there are many opportunities to raise the value of those shares above the purchase price. They could merge in their other owned entities like Cardenas to improve margins, probably not a great idea but it serves the function of boosting the balance sheets and reducing overhead. They could sell pieces off and acquire new pieces that are more effective. As we've speculated they could also break up the company. The point is that there are many options for Albertsons shareholders to increase their profits. Where I see more desperation is Kroger. If they don't have a path to grow larger without taking on bad assets like acquiring chains in bankruptcy to try to turn them around, which they don't like to do, then what exactly is their next step after this is blocked?

The control shareholders of Albertsons should give it a second look. I think their chain is in a stronger position today, than it was when they agreed to sell out to Kroger.

Kroger needs to engage in Organic expansion in various growing markets. I also think Kroger needs to seriously consider exiting California entirely. The Ralphs chain is clearly just too far behind the rest of Kroger in too many ways. F4L can just go too since it is so tangled into Ralphs. Not sure what they do with IL F4L; maybe let Apollo have those.

Or will we see C&S and Kroger try to join forces?

[storewanderer]

I've hypothesized before that Kroger had some major issues under the hood that may or may not get resolved. If anything, they're more in love with Ocado and grocery delivery than actual stores, yet aren't going to build anything in new markets, even though they were flirting the ideas less than a decade ago with Hawaii and Florida discussed.

They're gearing up for another round at the bargaining tables with the Houston Division, it's very unlikely they'll close the division but they'll usually flex on them by closing a store—yet they're already falling behind H-E-B, which surpassed them back about a decade ago.

COVID saved Kroger on that whole Ocado and pick up program that they threw so much money at. But I am not sure volumes are as good today in 2024 as they were in 2020-2022. Kroger has built a great pick up business but is it profitable? Is it new customers who previously didn't shop Kroger? I am surprised how often I see a pick up order being taken out to the parking lot at 9 PM at Smiths. Almost every time I go to any Smiths there is activity even that late. Safeway and Wal Mart pick up areas are long closed by 9 PM. Target one is open and has action sometimes late too.

Kroger will dictate terms to the Union and the Union will fall over and give them whatever they want then put out the directive to the membership to pass the offer. Just like what happened with King Soopers and Fred Meyer in recent years.

I see zero chance of Kroger Houston closing as a region exit. Even if I liked HEB much better, Kroger absolutely has a good positioning in the Houston market.

[pseudo3d]

I've hypothesized before that Kroger had some major issues under the hood that may or may not get resolved. If anything, they're more in love with Ocado and grocery delivery than actual stores, yet aren't going to build anything in new markets, even though they were flirting the ideas less than a decade ago with Hawaii and Florida discussed.

They're gearing up for another round at the bargaining tables with the Houston Division, it's very unlikely they'll close the division but they'll usually flex on them by closing a store—yet they're already falling behind H-E-B, which surpassed them back about a decade ago.

COVID saved Kroger on that whole Ocado and pick up program that they threw so much money at. But I am not sure volumes are as good today in 2024 as they were in 2020-2022. Kroger has built a great pick up business but is it profitable? Is it new customers who previously didn't shop Kroger? I am surprised how often I see a pick up order being taken out to the parking lot at 9 PM at Smiths. Almost every time I go to any Smiths there is activity even that late. Safeway and Wal Mart pick up areas are long closed by 9 PM. Target one is open and has action sometimes late too.

Kroger will dictate terms to the Union and the Union will fall over and give them whatever they want then put out the directive to the membership to pass the offer. Just like what happened with King Soopers and Fred Meyer in recent years.

I see zero chance of Kroger Houston closing as a region exit. Even if I liked HEB much better, Kroger absolutely has a good positioning in the Houston market.

When I was living in the Austin area I did see a Kroger vehicle in my neighborhood--once. I never saw any Kroger vehicles elsewhere (except for trucks on the Interstate passing through...I spied a Pick 'n Save truck northbound). I really doubt that Kroger has good volume in Austin. Maybe taking a tiny chip out of H-E-B's share.

They definitely won't pull out of Houston, but I remember how they threw Montrose under the bus during that time...they basically claimed it was unprofitable despite being a good performer for many years especially as the neighborhood gentrified and pouring money into a big renovation less than a decade prior.

Kroger needs to engage in Organic expansion in various growing markets. I also think Kroger needs to seriously consider exiting California entirely. The Ralphs chain is clearly just too far behind the rest of Kroger in too many ways. F4L can just go too since it is so tangled into Ralphs. Not sure what they do with IL F4L; maybe let Apollo have those.

They had that chance right in front of them. It would be like American Stores with Lucky, how they could convert only a few Alpha Beta stores to Lucky before selling the rest of Alpha Beta. Except now it would be "convert only a few Ralphs to Vons/Albertsons before selling the rest of Ralphs".

As far as organic expansion goes, they should work out from their core markets. San Antonio would be worth taking a crack at again (the market has changed in the last 30 years), maybe start asking if the Rouses are ready to sell (union or not).

Or will we see C&S and Kroger try to join forces?

Not going to happen. There's too much risk for the FTC or any lawsuits from private grocers, Kroger wouldn't want to supply its stuff to third-party grocers, and very little for Kroger to gain with C&S. (Unless it was the other way around, which isn't happening). The only things that's plausible is Albertsons cutting off the Northeastern parts for C&S or Kroger...but again that's probably the first thing that was considered.

[HCal]

I also think Kroger needs to seriously consider exiting California entirely. The Ralphs chain is clearly just too far behind the rest of Kroger in too many ways.

What ways are you referring to? As far as I can tell, Ralphs stores are fairly busy, and certainly doing better than Vons/Albertsons.

[ClownLoach]

I also think Kroger needs to seriously consider exiting California entirely. The Ralphs chain is clearly just too far behind the rest of Kroger in too many ways.

What ways are you referring to? As far as I can tell, Ralphs stores are fairly busy, and certainly doing better than Vons/Albertsons.

Ralphs can be fixed, but needs investment and local California based leadership that understands the market. Obviously they're lacking that. And whoever is doing these more recent remodels needs to be stopped as they're not helping anything. The same goes for the CA Food4Less operation, which continues in it's path of falsely assuming that Hispanic customers are okay with a dirty, smelly and high priced store. I don't know why they decided Food4Less is a Hispanic concept but it's a nasty insult to that community and they need to sell them off to a operator that understands the customers like Northgate or Vallarta. Or instead stop pretending it's a Hispanic concept and pivot to a proper low price warehouse concept like Winco.

[storewanderer]

I also think Kroger needs to seriously consider exiting California entirely. The Ralphs chain is clearly just too far behind the rest of Kroger in too many ways.

What ways are you referring to? As far as I can tell, Ralphs stores are fairly busy, and certainly doing better than Vons/Albertsons.

They are too small, most lack fuel stations, they were slower to adopt Clicklist/Pickup than other divisions, they have a lower percentage of stores with pharmacies than most other Kroger divisions (QFC has fewer, F4L has almost none); based on posts here they seem to have a poor reputation with customers (compared to other Kroger regions), the attitude of employees seems universally worse than other Kroger regions, I do not think their success/penetration with Kroger private label lines is as good as other regions...

In the early 2000's Ralphs could have been an example for the rest of Kroger to follow at least what I saw in NorCal. They had shiny stores with high quality perishables and employees with a great attitude and seemed operated/staffed well. Their front pages were great on ad specials... but beyond the front page of the ad they had a huge problem. The big problem? Pricing was way too high. I actually think the dumbed down/cheaper Kroger version of Ralphs probably would have survived in NorCal but it still would have had all of the problems I state above. Also at that time in the early 2000's Ralphs seemed to have much better knowledge on Ethnic/specialty type foods than any other Kroger division (not just Hispanic, but also Kosher, a little on Asian, etc.).

[storewanderer]

I also think Kroger needs to seriously consider exiting California entirely. The Ralphs chain is clearly just too far behind the rest of Kroger in too many ways.

What ways are you referring to? As far as I can tell, Ralphs stores are fairly busy, and certainly doing better than Vons/Albertsons.

Ralphs can be fixed, but needs investment and local California based leadership that understands the market. Obviously they're lacking that. And whoever is doing these more recent remodels needs to be stopped as they're not helping anything. The same goes for the CA Food4Less operation, which continues in it's path of falsely assuming that Hispanic customers are okay with a dirty, smelly and high priced store. I don't know why they decided Food4Less is a Hispanic concept but it's a nasty insult to that community and they need to sell them off to a operator that understands the customers like Northgate or Vallarta. Or instead stop pretending it's a Hispanic concept and pivot to a proper low price warehouse concept like Winco.

F4L is operating in a 1990's mentality. Hispanic shoppers like this big warehouse store because it looks cheap and located near where they live. Food Maxx operates under the same mentality (but it has worse pricing and less assortment in some categories than F4L, and less staffing). I think this is just a California thing caused by Safeway's outrageous pricing program and only wanting to operate in "good neighborhoods" that has been in place in the market for far too long. Albertsons closing so many Lucky Stores enabled these operators like Northgate or Vallarta or Cardenas or smaller Hispanic operators to pick up stores in these neighborhoods near F4L and open a proper service oriented Hispanic store which blows F4L away on fresh products but has center store pricing too high so F4L still remains a shopping choice for customers in those neighborhoods for certain center store items. The Hispanic shopper shops often and seems to love to shop around. So when they go to F4L for lower cost center store items (lower than the Northgate/Vallarta/Cardenas) they'll of course pick up whatever deals F4L has in produce/meat too.

Pricing is pretty strong at FoodsCo in Sacramento; it is on par with WinCo (some items more/some less) and as of late quite a bit cheaper than Food Maxx. On the negative, FoodsCo has a smaller SKU mix than either WinCo or Food Maxx throughout various parts of the store, but perhaps more/better private label. But the FoodsCo units in Sacramento aren't exactly marketed as Hispanic format stores. While a slight majority of the customers appear to be Hispanic, many other customers shop there as well. The only formal "Hispanic" format FoodsCo in NorCal is in Salinas with a large service meat counter, hot food, etc. Oakland has the Hispanic service counter features but is not marketed as a Hispanic store.