Albertsons vs. Kroger comp spreads

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pseudo3d
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Re: Albertsons vs. Kroger comp spreads

Post by pseudo3d » January 14th, 2020, 10:21 am

retailfanmitchell019 wrote:
January 13th, 2020, 6:17 pm
To me, there were three major problems that led to Albertsons being split up in 2006.

1. Expansion into areas in the Southern and Great Plains states where there was a lot of established competition, not mention Wal-Mart Supercenters starting to become a threat. This explains why San Antonio, Houston and Tennessee expansions proved to be failures which they got rid of in the 2001-2002 restructuring.
The Des Moines stores were failures too. ABS bought 3 stores from discount chain Super One Foods in 1998, before converting those stores to Albertsons. The problem with those stores is that they were located in lower-income areas, and they had a fairly low store count in the area. Albertsons considered building a store from the ground up in a higher-income Des Moines suburb (Clive) but the plan was ultimately aborted. None of the former Albertsons in DSM are occupied by supermarkets today. Here is a former Super One/ABS/Dahls:
https://www.flickr.com/photos/fourstarc ... 7249780961

2. The infamous Lucky/Albertsons marriage. This was real problem in the Bay Area, as ABS had very little presence there before the ASC acquisition. As such, Bay Area shoppers were very angry with the name change to Albertsons.
Lucky was not only a venerable name in the Bay Area where it began, but over most of California. To California shoppers, the Lucky name always meant low prices. The rest of the ASC acquisition did fine for ABS.

3. The $2.5 billion acquisition of Shaw's from UK-based Sainsbury. ABS already had troubles with expansion failures and the Lucky merger, not to mention they already sold off the Osco Drug stores in New England, plus their major debt load.
Walmart Supercenter wasn't a huge force in Houston until the early to mid 2000s. Contrary to popular belief, Albertsons did have a fighting chance in Houston in the 1990s. Randalls was the market leader and had the best stores, but over-expansion of the chain had put a strain on new openings, ultimately leading to the purchase of it by Safeway. AppleTree, which had spawned from the original Safeway division, was essentially history, dwindling to a few independent stores. Kroger was launching the Signature stores during the 1990s and had a large market share but most of its stores were small and out of date. HEB didn’t even run full size supermarkets.

The ASC acquisition changed all that and Albertsons had to offload some divisions to put out the fires with Lucky. The end result was mostly that Kroger got a number of Albertsons stores to upgrade their fleet, especially as HEB had come to full blossom.

The Des Moines stores, on the other hand, were a mistake. The store format was completely at odds with what Albertsons wanted with their stores, but they pushed ahead and made all the changes to the stores (over time, if what newspapers say is correct). It's possible that Albertsons could’ve given the market the care it needed to make it but with the ASC acquisition, it wasn't possible.

San Antonio was a bit different, they had been in the market for years but it wasn't making much headway against H-E-B (especially as they built newer stores), and some outlier stores like New Braunfels and Kerrville remained up until 2011.

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Re: Albertsons vs. Kroger comp spreads

Post by Bagels » January 15th, 2020, 5:04 am

Albertsons history won't, and shouldn't, define it going forward. Future struggles will be because of poor decisions like spending millions to renovate three orphaned stores in Florida, trying to compete in Texas, etc.
arizonaguy wrote:
January 13th, 2020, 7:30 pm
Albertsons / Safeway have been running a stronger ad and coupon program in the Phoenix market than Fry's has for about the last year or so. Everyday pricing is still higher but the specials tend to rotate fairly frequently and I can get most of what I buy if I plan it correctly at Safeway for less than I can at Fry's. Albertsons / Safeway have also renovated a number of stores and consolidated some locations and now have some VERY high volume stores that are clearly doing more business now than they had in the past. Safeway stores prior to the 2015 merger seemed lifeless and sterile and I don't get that feeling in most of their stores now (there are still a few low volume stores in questionable neighborhoods that I think have a clock inching closer to closure on).

Fry's is living off of the fact that they have really been the dominant chain in Phoenix over the past 22 years or so in terms of store count, advertising, and until recently pricing. They still have more (and typically larger) stores than Albertsons / Safeway and still do high volumes but it is obvious that the operation is slipping. They have never had (and generally still don't have) great perimeters. Their strength was strong promotions and center store and both are weakening.
About a decade ago, Kroger changed its pricing strategy: be aggressive on items consumers purchase most (+have the best price on top purchased items), be competitive on everything else. They largely walked away from loss leaders (most of what's in the ad is funded through credits or incentives agreed upon by manufacturers ... notice how every grocery store recently had the full-line Progresso soup on sale for 99c). A few years back, Kroger said loss leaders were no longer as effective -- e.g. people who fill up their shopping carts with soda and nothing else -- and it was better to have low prices. They still do plenty of loss leaders, but the discounts aren't as strong as they were before (sans major grocery shopping periods- e.g. holidays, Super Bowel, etc.). Their annual report mentioned they prefer to have "prices that surprise and delight" -- e.g. items that will not be sold in large volumes.

Kroger got into a price war with Walmart a couple years back; it had previously cut its historical gross margin by 8-10 points, but was cutting it even further, spooking investors. Thus, it raised prices, which we're all discussing.

Albertsons, OTOH, fully embraces loss leaders. There was a stretch during 17-18 where Coke and Pepsi were both on sale every single week (soda is typically the largest loss leader). Earlier I mentioned that everybody (that participated in sales) had Progresso soup for 99c... Albertsons had it for 79c.

You can save a lot of money by buying low (taking advantage of loss leaders) and stocking up. But the reality is, most people don't. That Albertsons has better sales than Kroger... means absolutely nothing to most people. The lion's share of shoppers buy mostly what they need for one-week.

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