Kroger to merge with Albertsons?

[storewanderer]

So to be clear - they are indeed proceeding with trying to sell stores first, not spin them off. I think this goes along with some of the shoddy work we are seeing at certain Albertsons Cos facilities where they are getting bare bones remodels just so they appear to be decently maintained and easy to convert to another banner. Once again there seems to have been an aggressive push to remodel any of those formats where the giant Albertsons clover was all over the walls (Premium Fresh Healthy decor) and nearly all those stores got Modern decor which is noticeably free of any sort of branding except for one tiny sign in the lobby area. Seeing some of the more dilapidated Vons receive these very minimal remodels like east Murrieta which effectively lost is just bare walls decor but got minor fixes like lights and paint again makes me wonder if the intent is just improved maintenance to drive up the sale price without any real monetary investment. It's clear that SpinCo is not the first choice, it is the plan of last resort. And with significant purchases of stores the viability of any SpinCo becomes questionable.

This could have many outcomes because there could be many buyers of smaller groups. I think this would be more viable and seen to be less risky than the problematic Haggen deal of the past. For example maybe Raley takes on more Arizona and maybe Oregon stores, Stater or Save Mart take on more SoCal stores, etc. Since these are larger buyers taking smaller groups there is little to no chance of failure unlike the Haggen debacle. I don't think the FTC wants to see one buyer for all divests again.

I would imagine that their intent is to get a higher cash bid from buyers on the most viable stores where they know they have an overlap problem. I wonder if some of the oddities like dark stores are being offered up too. For example Albertsons bought back many Haggen locations in their bankruptcy, some of which were direct overlaps like in San Marcos, CA. They reopened the Vons diagonally across the street from an Albertsons then closed it again a couple of years later; I would assume they're paying rent still. They could argue that they increased competition by allowing Stater or whomever else to take these stores they tried to sit on previously.

I'll bet that they're going to get as much as possible for the best stores they know they won't be allowed to keep, and then hold on to the more problematic stores. When the time comes they'll argue to the FTC that the remaining 200-300 stores that wouldn't sell due to lease problems, bad facilities, developer interests, etc. are not really viable anyway and would close regardless of the merger so might as well let them avoid the process with SpinCo and let the stores close. Then they have accomplished the approximately 650 stores, got a higher cash return than the discount promised by the SpinCo program, and they effectively only lose 250-300 stores. I could easily see at least 300 stores in the West that are either functionally obsolete or are going to be in the path of a developers bulldozer.

Most Las Vegas Albertsons either have the Premium Fresh & Healthy Decor or that Albertsons LLC decor with Albertsons clovers all over the walls... quite a few Vons with Modern interior though. I wonder if they will propose just divesting Vons in Las Vegas and nothing else (that would be a real leap...).

I do not see Raleys as a buyer for any divested stores that would have positive results. Go to Raleys website and look at their pricing. If you want to see their "best" price scale which very few stores have- hit up the location in Carson City, NV. If you want to see their "usual" pricing scale- go with the location in Reno, NV on Robb Drive. If you want to see their worst pricing scale (not many on this scale) go with the location in Redwood City, CA.

I think divesting only 200-300 stores is a pipe dream. They will be lucky to get away with 650 divests in my opinion.

Very few grocery stores have closed in the past 3 years. It is possible the industry is in for a wave of closures, or it is possible some previously underperforming stores got such a business boost during COVID, kept enough business, that they are now performing okay. I still think this whole thing with developers and redeveloping grocery sites and shopping centers is going to come to a very fast stop very quickly.

[pseudo3d]

So to be clear - they are indeed proceeding with trying to sell stores first, not spin them off. I think this goes along with some of the shoddy work we are seeing at certain Albertsons Cos facilities where they are getting bare bones remodels just so they appear to be decently maintained and easy to convert to another banner. Once again there seems to have been an aggressive push to remodel any of those formats where the giant Albertsons clover was all over the walls (Premium Fresh Healthy decor) and nearly all those stores got Modern decor which is noticeably free of any sort of branding except for one tiny sign in the lobby area. Seeing some of the more dilapidated Vons receive these very minimal remodels like east Murrieta which effectively lost is just bare walls decor but got minor fixes like lights and paint again makes me wonder if the intent is just improved maintenance to drive up the sale price without any real monetary investment. It's clear that SpinCo is not the first choice, it is the plan of last resort. And with significant purchases of stores the viability of any SpinCo becomes questionable.

Albertsons' stores are getting cheap remodels or builds (I mean, the new-build in Irving is definitely, shall we say, not their finest work) because capex got cutbacks....and Irving is still probably going to be the better store than the Kroger down the street (located in an old Safeway, so we're talking somewhere around 40 years old).

[storewanderer]

Albertsons' stores are getting cheap remodels or builds (I mean, the new-build in Irving is definitely, shall we say, not their finest work) because capex got cutbacks....and Irving is still probably going to be the better store than the Kroger down the street (located in an old Safeway, so we're talking somewhere around 40 years old).

I notice they are sort of funny with equipment too. In Sparks recently they added in 2 more self checkouts (to bring it to a total of 6 self checkouts). They found 2 old units to match the 4 existing old units that they installed there maybe 6 years ago. These units are still quick and work fine in my opinion, but it is funny to me they do this vs. just bring in new self checkout units. When the 1989 Reno location got its major remodel it got those 6 year old self checkouts replaced with new units.

[Bagels]

Albertsons' stores are getting cheap remodels or builds (I mean, the new-build in Irving is definitely, shall we say, not their finest work) because capex got cutbacks....and Irving is still probably going to be the better store than the Kroger down the street (located in an old Safeway, so we're talking somewhere around 40 years old).

I notice they are sort of funny with equipment too. In Sparks recently they added in 2 more self checkouts (to bring it to a total of 6 self checkouts). They found 2 old units to match the 4 existing old units that they installed there maybe 6 years ago. These units are still quick and work fine in my opinion, but it is funny to me they do this vs. just bring in new self checkout units. When the 1989 Reno location got its major remodel it got those 6 year old self checkouts replaced with new units.

In fairness, grocery chains have been recycling / reusing aging self checkouts for years. Some of the Albertsons/Vons/Pavilions near me have received brand new machines, whereas others have received older units pulled from storage, a closed store or acquired second hand. At least locally, they’re consistent in terms of each store having the same units.

Ralphs, OTOH, has added extra self checkouts to some stores, and replaced others, with brand new units (same as Albertsons) that operate alongside others that are older and completely different.

I’m sure the older mid/late 90s and early/mid 00 self checkouts cost a fortune, hence the longevity. Reminds me how ATMs built in the 1980s lasted 30-40 years (with many having been replaced only recently) yet banks like Chase now replace them every few years. Or how the touchscreen airline check-in kiosks introduced in the second half of the 1990s have only been retired relatively recently whereas the replacements are making it only a few years before being upgraded. As the cost of the h igloo goes down….

[storewanderer]

In fairness, grocery chains have been recycling / reusing aging self checkouts for years. Some of the Albertsons/Vons/Pavilions near me have received brand new machines, whereas others have received older units pulled from storage, a closed store or acquired second hand. At least locally, they’re consistent in terms of each store having the same units.

Ralphs, OTOH, has added extra self checkouts to some stores, and replaced others, with brand new units (same as Albertsons) that operate alongside others that are older and completely different.

I’m sure the older mid/late 90s and early/mid 00 self checkouts cost a fortune, hence the longevity. Reminds me how ATMs built in the 1980s lasted 30-40 years (with many having been replaced only recently) yet banks like Chase now replace them every few years. Or how the touchscreen airline check-in kiosks introduced in the second half of the 1990s have only been retired relatively recently whereas the replacements are making it only a few years before being upgraded. As the cost of the h igloo goes down….

Until a few years ago, Smiths had 4 original (from when the stores opened around 2002 and 2005 or so) self checkouts in both of the Reno Stores. They did finally replace those units. As the number of self checkouts kept increasing they did have a variety of different units and in some cases different scanners too.

I also notice in Wal Mart remodels they are doing this thing where they keep some old self checkouts and some new self checkouts; in some cases in the same store there are different scanners and pinpads throughout the front end.

[retailfanmitchell019]

Ahold's Giant-PA format would transition fairly well to many western markets. It is a good store. Every one I've been in has been well run. Big mix, good pricing, decent perimeter. I really like that chain. It is my favorite of the Ahold chains by far. Raleys larger stores could easily be upgraded and improved into that format.

The Giant-MD format strikes me closer to along the lines of a Safeway but runs much higher volume stores. I think Giant-MD's perimeter is much weaker than a west coast Safeway's perimeter and they have some of the same things I see with Safeway like sloppy stores, inconsistent execution, long lines, etc. I always think with Giant-MD I must not be finding the right locations to go to because I am never impressed with them. I think Safeway units in the metro Seattle, Portland, and San Francisco markets could transition somewhat seamlessly to the Giant-MD format. However I think the Giant-MD format may run into issues with rural stores.

Stop N Shop and Food Lion I would not expand at all. Food Lion may actually work for Denver Division though... those stores are small enough and low volume enough that Food Lion just may be a fit.

I would use those Giant formats, nobody out west (expect for east coast transplants) knows what a Giant Food Store is. Food Lion I would not expand- they have a poor reputation.
I think Ahold should buy all Albertsons banner stores, and then use the Albertsons banner on divested Safeway stores they get. Put the Giant-PA style format in those stores though.
Kroger won't miss the Albertsons name, especially if they slap a Kroger sign on every store they operate.

[storewanderer]

I would use those Giant formats, but nobody out west (expect for east coast transplants) knows what a Giant Food Store is. Food Lion I would not expand- they have a poor reputation.
I think Ahold should buy all Albertsons banner stores, and then use the Albertsons banner on divested Safeway stores they get. Put the Giant-PA style format in those stores though.
Kroger won't miss the Albertsons name, especially if they slap a Kroger sign on every store they operate.

The old Raleys format from the 80's through the 00's, the "superstore" combination food/drug store with higher quality perishables and a larger mix than competitors, would have been fairly similar to that Giant-PA format. The main difference is Raleys had higher quality perishables/higher prices than Giant-PA. The current Raleys format is not really compatible with anything Ahold has. Raleys would have been a good acquisition target for Ahold through the 00's but since then Raleys has taken a very different path, cutting down their drug mix significantly, cutting the size of their new stores significantly, and buying questionable assets like Scolaris and Bashas and doing little to nothing to improve the below average stores they bought from those parties.

Safeway is kind of compatible with Giant-MD but is underperforming when they compete. No Ahold format really reminds me of Albertsons (hence why Ahold is kicking the heck out of Acme and other Ahold formats seem to be kicking the heck out of Shaws). Basically every Ahold format (except Food Lion I suppose) beats every Albertsons format that competes with it.

[retailfanmitchell019]

Safeway is kind of compatible with Giant-MD but is underperforming when they compete. No Ahold format really reminds me of Albertsons (hence why Ahold is kicking the heck out of Acme and other Ahold formats seem to be kicking the heck out of Shaws). Basically every Ahold format (except Food Lion I suppose) beats every Albertsons format that competes with it.

It's really Market Basket that is hammering Shaw's around Boston. They are the Stater Bros. of New England.

[storewanderer]

Safeway is kind of compatible with Giant-MD but is underperforming when they compete. No Ahold format really reminds me of Albertsons (hence why Ahold is kicking the heck out of Acme and other Ahold formats seem to be kicking the heck out of Shaws). Basically every Ahold format (except Food Lion I suppose) beats every Albertsons format that competes with it.

It's really Market Basket that is hammering Shaw's around Boston. They are the Stater Bros. of New England.

Market Basket is much more effective than Stater. They run super high volume stores. Pricing is very low. Staffing levels are high. Store hours are short. Perimeters are not great in my opinion (meat/produce you can find okay stuff; bakery/deli prepare to be disappointed).

[retailfanmitchell019]

Meanwhile Albertsons was even more screwed up

Albertsons ran like a fine tuned machine throughout the 1990s. They started to make mistakes by going into markets in the South and lower Midwest they should've never entered (MS, TN, MO), price sensitive areas in "Walmart Country".
That was small potatoes compared to what they did on November 3, 1999 by getting rid of the Lucky format and name. As you said in this topic, the Lucky customer walked in the next day with an open mind, but didn't like changes in the format and increases in pricing. Albertsons could've kept the Lucky format and pricing, rolling it out to the rest of their store base (especially in price sensitive areas). They could've also kept the President's Choice brand that Lucky carried (Jewel kept it until SuperValu), but no. Gary Michael, being the captain of the ship, decided to be arrogant by increasing prices and cutting labor.

It would only get worse, as Gary Michael was replaced by Larry Johnston (an executive from General Electric). Jack Welch's cronies have done damage to other companies like Home Depot, Chrysler, etc. GE isn't a retail business. Choosing a leader from outside the grocery industry, let alone the retail industry, to run a grocery business is a recipe for disaster. Larry, being arrogant and pompous, decided instead of doing things to benefit customers and employees (lowering pricing, cleaning up the stores), it would be best to kowtow to the yes-men on Wall Street and put the shareholders first. Larry did this by implementing a stupid club card to get lower prices (Albertsons marketed itself on not having a card to get lower prices), fooling around with pointless technology (handheld scanners, Albertsons.com delivery service), and dimming the lights to make stores feel dark. That was the beginning of the end for Albertsons. In 2004, Larry decided to acquire Shaw's for $2.5 billion. Larry could've used that cash to fix up troubled divisions in need of serious investment (NorCal, Denver, Florida), and lower pricing in the stores, but Larry decided sit on his hands when it came to those divisions, and throw $2.5 billion at Sainsbury for the Shaw's money pit, which wasn't even fully integrated into Albertsons.

Then Larry, knowing that he failed to run Albertsons like GE, decided to throw in the towel and carve up Albertsons in 2006, with SuperValu getting the stronger divisions (SoCal, Northwest, Intermountain, Jewel, Acme, and Shaw's), CVS getting the drug stores, and the remaining divisions (NorCal, Southwest, Denver, D/FW, and Florida) going private via Cerberus. Years later, SVU botched with the stronger Albertsons divisions, selling them to Albertsons LLC (who fixed up the unprofitable divisions, then fixing up SVU stuff). Cerberus then bought Safeway (who sold Canada to make this happen), and the rest is history.