Kroger to merge with Albertsons?

[Bagels]

Dominick’s failed because it was perceived as having high pricing and dingy stores. Many of the stores were in need of refurbishment when Safeway acquired the chain – but Safeway put the chain up for sale less than four years after it acquired it, and took over a decade to shutter it, with very little investment (refurbishment and replacement) spent on the store fleet during that time period.

Dominick’s did not fail because it lost its local identity – the chain’s struggles began long before Safeway acquired it. Nor did shoppers flock to Jewel or other “Chicagoland” origin stores – during the period Dominick’s saw a massive drop in market share, Jewel saw a small dip as well, with Walmart, Costco, Whole Foods and Meijer the largest beneficiaries.

Kroger was Mariano’s white knight. Numerous reports indicate that while the chain beat sales expectations, it never achieved the projected sales mix – between 1/4 and 1/3 of sales were on produce, which Mariano’s priced same as Walmart (thus losing money, as it was selling higher quality/more expensive produce without the pricing power Walmart has). Roundy’s was expected to file for bankruptcy and liquidate… until Kroger made an unexpected bid.

In Mariano’s, Kroger took a money-losing chain that never performed to expectations into a profitable one, while keeping the integrity of the concept. But this forum wants to believe that because Kroger couldn’t make the money-losing Mariano’s concept profitable as-is, Kroger failed. Not to mention it’s been nearly a decade since the Kroger take over, and the industry continues to evolve.

I’ll bet that Kroger’s pricing strategy will ultimately result in Jewel gaining marketshare…

[rwsandiego]

...Kind of like how Eagle nibbled at the outskirts of Chicagoland for many years (they got as far east as Norridge and Niles)....

Fun fact: According to an ad in the April 15, 1965 Chicago Tribune, Eagle had a store in Chicago on north Broadway as well as in Skokie, Glenview, Forest Park, Elmhurst Rolling Meadows and Des Plaines. By 1969, all had become Dominick's stores. The one on Broadway was rebuilt in the 1980's (maybe very early 1990's) and is now a Whole Foods.

If HyVee truly aspires to be in Chicago, picking up the Mariano's locations would not be a bad idea. However, many of the Mariano's that are not former Dominick's locations aren't always well-located.

I could see Kroger keeping some Mariano's and convert them to Jewel-Osco and replace some smaller Jewel-Osco stores by converting a nearby Mariano's to Jewel and selling the smaller Jewel. However, even the smaller Jewel stores are better located than the Dominick's-turned Mariano's which is why ASC and ABS never replaced them in the first place.

[pseudo3d]

Not to mention it’s been nearly a decade since the Kroger take over, and the industry continues to evolve.

Yeah, but what has really changed in the last ten years, or the last twenty for that matter? The late 1990s and early 2000s was when the victims of Wal-Mart really stack up and some major acquisitions happen, but other than that, we've basically hit the cap on how large grocery stores can be , and everything else is just changing tastes inside.

There's indications that pick-up and delivery may ultimately just be a fad with no major lasting changes, and what Kroger and Albertsons tried to sell the merger on, the threat of Amazon's grocery business, is turning out to be a dud.

[Bagels]

Yeah, but what has really changed in the last ten years, or the last twenty for that matter? The late 1990s and early 2000s was when the victims of Wal-Mart really stack up and some major acquisitions happen, but other than that, we've basically hit the cap on how large grocery stores can be , and everything else is just changing tastes inside.

There's indications that pick-up and delivery may ultimately just be a fad with no major lasting changes, and what Kroger and Albertsons tried to sell the merger on, the threat of Amazon's grocery business, is turning out to be a dud.

It's more complicated that that. Many examples: center aisle unit sales have sharply declined for years whereas perishables have increased. Bakery unit sales continue to decrease, as people seek out these goods at specialty stores. Deli unit sales decrease, etc. Shoppers are leaning toward more "healthy" foods, etc. Mariano's is a neighborhood grocery store, not a destination market. These types of changes will only hurt it.

[retailfanmitchell019]

If anything, the region’s desire to keep Walmart out probably did the most to hurt competition. If Walmart was able to establish a widespread presence, Ralphs wouldn’t be able to change $3.99 for an item Kroger sells for $1.99 at every other division.

What do you expect? It's SoCal, of course food prices are going to be higher than Middle America.
There are reasons why Walmart has low market share in SoCal (except the IE/Bakersfield/Imperial County): A strong union presence, liberal politics, ethnic format stores that charge lower prices (and have better quality) than Walmart, and most people in coastal SoCal aren't that price sensitive. In SoCal, the price sensitive shopper usually goes to Food 4 Less or an ethnic market.
Keeping Walmart out of most places in coastal SoCal has preserved competition. I doubt many coastal communities would like a Walmart in their backyard. For example, I drive by the Walmart in Encinitas on the way to my college. The parking lot there looks somewhat empty compared to other Walmarts.

[ClownLoach]

If anything, the region’s desire to keep Walmart out probably did the most to hurt competition. If Walmart was able to establish a widespread presence, Ralphs wouldn’t be able to change $3.99 for an item Kroger sells for $1.99 at every other division.

What do you expect? It's SoCal, of course food prices are going to be higher than Middle America.
There are reasons why Walmart has low market share in SoCal (except the IE/Bakersfield/Imperial County): A strong union presence, liberal politics, ethnic format stores that charge lower prices (and have better quality) than Walmart, and most people in coastal SoCal aren't that price sensitive. In SoCal, the price sensitive shopper usually goes to Food 4 Less or an ethnic market.
Keeping Walmart out of most places in coastal SoCal has preserved competition. I doubt many coastal communities would like a Walmart in their backyard. For example, I drive by the Walmart in Encinitas on the way to my college. The parking lot there looks somewhat empty compared to other Walmarts.

That Encinitas Walmart is an unusual situation and really is out of place. Hardly represents Walmart and their SoCal operations. It is very small, across the street from a massive, top volume Target and high performing Stater Bros. My experience in the El Camino Real corridor of Encinitas is that stores there are in the top 10% of their chains in sales volume... Except for that Walmart probably because it is too small to compete and the local clientele is, quite frankly, rich. But it still holds on. And the rents are so high that Walmart wouldn't want a larger store. Since it was a Home Depot "Expo" design center I would assume that Walmart bought the building (as Home Depot owned almost all their store sites).

As far as SoCal goes, Walmart has more top volume stores that do over $200M a year in the SoCal market than anywhere else in the world. The average SoCal Target does $50M or less because they have so many stores. Walmart has neighborhood market locations in SoCal that do over $50M. Walmart is massively successful in SoCal despite store count. In fact the high costs are why they do not have as many stores; if they did the profits wouldn't be there and the company wouldn't be as interested. They're getting two to three times the sales productivity in SoCal vs chain average. (It is also still interesting to see that Walmart was willing to close stores with over $100M in sales allegedly due to shrink, as well as a store that was pushing $250M a year with the infamous "plumbing problems")

[veteran+]

Which Walmart Neighborhood stores are you talking about?

I have never noticed very much traffic at any of these stores.

The last one I had been to was the one in Rancho Mirage and it was never busy. I am surprised it is still open, especially in that area.

[ClownLoach]

Which Walmart Neighborhood stores are you talking about?

I have never noticed very much traffic at any of these stores.

The last one I had been to was the one in Rancho Mirage and it was never busy. I am surprised it is still open, especially in that area.

I don't want to share specific locations as I do not want to reveal confidential information that was shared with me. But I know that there is a San Diego neighborhood market that is bringing in around $55M a year, and there are others in excess of $50M in SoCal although they are north of LA

[Bagels]

Which Walmart Neighborhood stores are you talking about?

I have never noticed very much traffic at any of these stores.

The last one I had been to was the one in Rancho Mirage and it was never busy. I am surprised it is still open, especially in that area.

I don't venture into too many Neighborhood Markets, but the Anaheim (ex-Ralphs) and Huntington Beach (I think it was previously a drug store) locations are generally massively crowded. And both are nearby large format stores. Looks like Walmart's cramming more general merchandise in these stores as they renovate them...

In comparison, a flagship Albertsons is just 1.5 miles up Beach Blvd., in a much nicer & more vibrant shopping center, and it's always a ghost town when I'm in there...

[ClownLoach]

Which Walmart Neighborhood stores are you talking about?

I have never noticed very much traffic at any of these stores.

The last one I had been to was the one in Rancho Mirage and it was never busy. I am surprised it is still open, especially in that area.

I don't venture into too many Neighborhood Markets, but the Anaheim (ex-Ralphs) and Huntington Beach (I think it was previously a drug store) locations are generally massively crowded. And both are nearby large format stores. Looks like Walmart's cramming more general merchandise in these stores as they renovate them...

In comparison, a flagship Albertsons is just 1.5 miles up Beach Blvd., in a much nicer & more vibrant shopping center, and it's always a ghost town when I'm in there...

I'm sure Walmart culled any unprofitable neighborhood market stores already. If it's still open it is either a barnburner of sales that would not transfer to a nearby full line supercenter, or a low rent/owned building. The busiest stores I am familiar with are in areas Walmart simply can't build a large store in. There are a couple of cases where the Walmart Neighborhood Market is across the street/freeway from a standard Walmart that has no room for expansion or regulations against it. I do know of one California Neighborhood Market that does more sales volume than the regular Walmart across the highway.

My personal favorite is still Santa Maria where there is a full size regular Walmart that shares a wall with a full size Walmart Neighborhood Market due to restrictions that were intended to prevent construction of a Supercenter. At some point the city might as well end the charade and let them tear down the wall to make it one store. It reminds me of the states where the liquor department has to be in a separate suite attached to the store itself, but it's all the food instead.

Curious about the Anaheim stores mentioned. Anaheim had 3, two were ex-Pep Boys locations and one was a former Asian supermarket. The one on Euclid across from Food4Less closed a year or two ago. I'm not familiar with one that was a Ralphs. I know the one on Beach Blvd. had a Ralphs across the street many years ago in the center that sat boarded up for 20+ years before becoming a food hall and fitness place. Huntington Beach was a large Thrifty that Rite Aid didn't keep for long, it was enlarged to absorb most of the adjacent strip mall. The Beach Blvd Albertsons mentioned was a Skaggs Alpha Beta at some point in time. There is a larger, newly remodeled Albertsons built to be a Lucky Savon combo a mile west along with a nice Ralphs Fresh Fare. I'm not sure which will get divested but I'm sure the Beach Blvd Albertsons will be the preferred store to go to Spinco. It is a nice store but I expect it to meet the bulldozer and be replaced by either an expansion of the medical facility next door or high density apartments like the ones that went up across the street.