Kroger to merge with Albertsons?

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Re: Kroger to merge with Albertsons?

Post by Super S »

storewanderer wrote: November 14th, 2022, 10:04 pm
HCal wrote: November 14th, 2022, 9:26 pm
Now that I think about it, Kroger has never rebranded any major chains that they acquired... if not never, then at least not for the last few decades. They have only rebranded small chains (<25ish stores). This has been a very successful approach for them, and I see no reason why they would want to change it.

I can imagine people in the bay area wondering why the heck a company that makes private label products for a scrappy Hispanic-focused discount store is suddenly taking over a major supermarket chain.
Even some very small chains, they've kept. This is why there are still stores under banners like Gerbes, Scotts, Owens, Pay Less, etc.

Kroger's acquisitions the past 20 years have been in mostly new markets so there is no reason to rebrand. They did get rid of Kroger in RDU in favor of Harris Teeter, that has been their biggest "wave" as far as rebranding a market but that was one they even sold a Kroger to Food Lion, closed many Krogers, and converted the rest to Harris Teeter after closing for months (firing the Kroger employees in the process...).

And there may not be a reason to rebrand in new markets with this deal either. It really depends on the store divests and what banners go with what owner and how they want to approach that (do they want multiple parties operating with the Safeway name in bordering markets, for instance).

Majority of bay area customers don't even know FoodsCo exists. Too few stores in locations folks typically aren't going into unless they live/work nearby. In the immediate bay area (Oakland, Pittsburg, Richmond, San Francisco Stores), FoodsCo is catering to more African American and Asian American customers than Hispanic customers. Down in Salinas/Soledad it shifts and it is catering very heavily to Hispanic customers. FoodsCo is very appreciated by the locations where it has stores in NorCal. These stores provide far below market pricing and provide a store in locations where the alternative is going to be a small independent with a lower mix of products and far higher pricing and the customers know it. The employees who work in these stores also appreciate the stability of FoodsCo being there and staying open (too bad the Ralphs/Cala/Bell employees didn't get the same favor).
If this goes through, something is going to need to be rebranded in the Pacific Northwest. There are just too many banners, and I don't think Kroger has ever been in this situation. You will have Fred Meyer and QFC combining with Albertsons, Safeway, Haggen, as well as a few Smith's stores that are still operating in Idaho. Although no market has all six brands, five of the six are currently operating in the same markets as far south as Olympia. The long-established brands with the greatest geographic reach have the best chance of surviving: Safeway, Fred Meyer, and Albertsons. QFC and Haggen are limited to the Portland and Western Washington areas only. I don't know if the store names truly matter as much these days when you have the same private label products that people are already familiar with in use at existing banners.
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Re: Kroger to merge with Albertsons?

Post by pseudo3d »

storewanderer wrote: November 15th, 2022, 12:17 am
I am not so sure about the Albertsons banner and what future it has.
1. Las Vegas and Albuquerque are two strong markets for the Albertsons banner. Smiths is, however, much stronger. I expect Smiths banner to survive as the single banner in those two markets.
2. Albertsons banner is I expect will be eliminated in CA, OR, WA, CO, Dallas, LA, AR, and AZ if they do any branding consolidations.
South is going to be an issue in rebranding. I don't think Albertsons could simply be rebranded as Kroger in the Southern Division due to the union issue (and I don't think Kroger will unionize the Albertsons stores in Baton Rouge, either). Tom Thumb and Albertsons in Dallas aren't unionized but both are saddled with the reputations, with one being more upscale (and pricey) and Albertsons being the dowdier chain (hence the "new" Albertsons is being built as an Albertsons in a less-affluent part of town).
Bagels wrote: November 14th, 2022, 10:28 pm The two most questionable would be Shaws/Star and Safeway in DC. If I had to bet, I’d say Shaws/Star will keep their banners, but allegedly they’re so poor performing Albertsons has considered pulling the plug, so maybe they’d benefit from a rebranding.
Certainly Star Market seems to have been doing way better than the rest of the Shaw's chain. Under SuperValu, they re-introduced the Star Market name to the Boston area, and in 2019 a new store was added in the central core of Boston with Regina Pizzeria located inside a store instead of a stock pizza program.

Rebranding Shaw's/Star Market seems pretty unlikely under any circumstance.
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Re: Kroger to merge with Albertsons?

Post by Bagels »

storewanderer wrote: November 15th, 2022, 12:08 amI don't know either. Kroger new builds (outside Ralphs and QFC) seem to start at a minimum of about 60,000 square feet.

I have heard stores planned upwards of 90,000 square feet in recent years with the Kroger banner and those aren't Marketplaces. I think a Frys opened somewhat recently in AZ without Marketplace and is in the 90k square foot range.
Almost every new build store, including that Fry's, is a Marketplace, with a large selection of general merchandise (the press release for that Fry's notes it includes a full housewares selection and expanded selection of seasonal merchandise). But there have been some that aren't, and they're around 50K sq.
storewanderer wrote: November 15th, 2022, 12:17 amThe only scenario I see a rebrand in NorCal is if Kroger loses rights to Safeway name (gives it to whoever takes divest stores) or if Kroger rebrands all stores to Kroger nationwide.

I am not so sure about the Albertsons banner and what future it has.
The Albertson banner may shrink to a handful of stores, but I'd be stunned if Kroger gave it or the Safeway banner up. Kroger merely needs SpinCo to survive long enough for the merger to be approved... then they hope it'll disappear.
I think the lack of HT profitability is due to bad leases they signed. Those HT are not very good anyway. The divests will give them an opportunity to dump some of those if they really want to.... because there is definitely overlap with Safeway...
I agree - HT signed on as the anchor for nearly every single new power center built in Northern Virginia in the 2000s until the merger. I wouldn't be shocked if Kroger dumped many of the legacy HT stores and refurbished the legacy Safeway stores. I doubt we'll see the Kroger banner, but it'll be interesting if they go with Safeway or HT. Some of the Safeways have now received extensive top-bottom refurbs.
pseudo3d wrote: November 15th, 2022, 12:10 pm Certainly Star Market seems to have been doing way better than the rest of the Shaw's chain. Under SuperValu, they re-introduced the Star Market name to the Boston area, and in 2019 a new store was added in the central core of Boston with Regina Pizzeria located inside a store instead of a stock pizza program. Rebranding Shaw's/Star Market seems pretty unlikely under any circumstance.
You keep making logical fallacies. That SuperValu / Albertsons revived the Star Market banner and pumped extensive renovations into the stores, does not mean they were doing well. SuperValu was pretty desperate to dump the entire division by 2010 and beyond the Star Markets, Albertsons hasn't renovated Shaw's. I wouldn't be surprised if SuperValu / Albertsons did the Star rebrand & refurbishment program, similar to Albertsons LLC doing the Florida rebrand & refurbishment -- to attract a buyer for some core stores.
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Re: Kroger to merge with Albertsons?

Post by jamcool »

The last full Fry’s Marketplace store built was in Litchfield Park (Camelback @ Litchfield Rds)…it was supposedly the largest Fry’s store in AZ. They have a lot of problems keeping that store stocked (many empty shelves, especially during the weekend), too many people, too many online order pullers).
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Re: Kroger to merge with Albertsons?

Post by pseudo3d »

Bagels wrote: November 15th, 2022, 4:23 pm
pseudo3d wrote: November 15th, 2022, 12:10 pm Certainly Star Market seems to have been doing way better than the rest of the Shaw's chain. Under SuperValu, they re-introduced the Star Market name to the Boston area, and in 2019 a new store was added in the central core of Boston with Regina Pizzeria located inside a store instead of a stock pizza program. Rebranding Shaw's/Star Market seems pretty unlikely under any circumstance.
You keep making logical fallacies. That SuperValu / Albertsons revived the Star Market banner and pumped extensive renovations into the stores, does not mean they were doing well. SuperValu was pretty desperate to dump the entire division by 2010 and beyond the Star Markets, Albertsons hasn't renovated Shaw's. I wouldn't be surprised if SuperValu / Albertsons did the Star rebrand & refurbishment program, similar to Albertsons LLC doing the Florida rebrand & refurbishment -- to attract a buyer for some core stores.
How have I made any logical fallacies?! All I did was point out that rebranding Shaw's/Star Market to Kroger wouldn't really be a likely scenario. Sure, SuperValu may have changed Shaw's to Star Market, but it worked well enough to save the division from total failure. Most of the name changes were just that--name changes with maybe the Premium Fresh & Healthy remodel, which was pretty cheap.

The Albertsons stores in Florida that were remodeled into Safeway weren't remodeled because they weren't going to sell...they wanted to keep those stores. If they just wanted to dump them, they could've dumped them, instead they put a lot of money into them and distributed stuff from DCs far away (at great expense). A bunch of wayward stores that continued to be supplied by a third party (Gordon Food Service, I believe, which bought the DC...though I'm pretty sure they were carrying SuperValu products by the end) could probably survive indefinitely as long as they turned a profit (which they were). But putting the Safeway name and integrating it into the Eastern Division put a timer on the stores, that is, "expand or die", or at least get an alternative distribution. The idea of an Eastern seaboard full of Safeway stores from Dade to D.C. was a pipe dream (maybe they did intend to buy SEG at some point), and those stores were sold to Publix, just as other stores had been sold a few years earlier. But however ill-thought out that plan was, they didn't set out to renovate those stores in order to sell them.

The idea that Kroger would rebrand them still doesn't seem likely at this point. Despite the recent Kroger branding trying to closer unify the existing brands, none of the Kroger divisions are at risk for mass re-branding. Even Pick 'n Save is still Pick 'n Save after Krogerization.

Perhaps there might be a time when the Kroger name is applied from Albertsons in Boise to Safeway in San Jose to Ralphs in West Hollywood to Smith's in Las Vegas to King Soopers in Denver to Dillons in Topeka to Pick 'n Save in Milwaukee to ACME in Philadelphia to finally Star Market in Boston...but that won't happen for years, and Shaw's/Star Market won't be first on that list.
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Re: Kroger to merge with Albertsons?

Post by storewanderer »

Bagels wrote: November 15th, 2022, 4:23 pm Almost every new build store, including that Fry's, is a Marketplace, with a large selection of general merchandise (the press release for that Fry's notes it includes a full housewares selection and expanded selection of seasonal merchandise). But there have been some that aren't, and they're around 50K sq.
Frys in Downtown Phoenix opened in 2019- standard Frys, not a Marketplace
Frys at 19600 West Indian School in Buckeye, AZ is 106k square feet, opened in 2021, standard Frys, not a Marketplace
Frys at 26300 North Norterra in Phoenix, AZ is 109k square feet, opened in October 2022, standard Frys (fruit cart logo out front), not a Marketplace

Buckeye and Phoenix were both announced and planned as Marketplace Stores. I am not sure what happened. I think the failing clothing program was omitted from both stores and some non food SKUs were cut out. It appears frozen foods go on the side wall opposite bakery/deli/produce now (before that side wall was horizontal aisles for non foods). So they have really spread food from side to side. These are absolutely not Marketplace Stores. But my guess is the average customer won't know the difference.

It appears almost like Kroger is doing such a massive volume of food sales in Phoenix, they decided with these two new stores, to use all of the space to support that massive volume food business. They can no longer see the logic in allocating labor and space to a general merchandise program that generates minimal sales.

Almost any Kroger Store over about 65k square feet has a full housewares selection and expanded selection of seasonal merchandise. Even 30-40 Ralphs Stores if not more have those features.
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Re: Kroger to merge with Albertsons?

Post by storewanderer »

pseudo3d wrote: November 15th, 2022, 9:16 pm

The Albertsons stores in Florida that were remodeled into Safeway weren't remodeled because they weren't going to sell...they wanted to keep those stores. If they just wanted to dump them, they could've dumped them, instead they put a lot of money into them and distributed stuff from DCs far away (at great expense). A bunch of wayward stores that continued to be supplied by a third party (Gordon Food Service, I believe, which bought the DC...though I'm pretty sure they were carrying SuperValu products by the end) could probably survive indefinitely as long as they turned a profit (which they were). But putting the Safeway name and integrating it into the Eastern Division put a timer on the stores, that is, "expand or die", or at least get an alternative distribution. The idea of an Eastern seaboard full of Safeway stores from Dade to D.C. was a pipe dream (maybe they did intend to buy SEG at some point), and those stores were sold to Publix, just as other stores had been sold a few years earlier. But however ill-thought out that plan was, they didn't set out to renovate those stores in order to sell them.
When they sold Plant City warehouse, FL Albertsons started selling Flavorite items instead of Albertsons brand items, and leased a small area of the warehouse in FL that they had sold to distribute perishables until they were down to the what was it, 4 or 5 final stores with Albertsons banner. Once it was down to those last stores, they started to supply the stores from TX and they were part of Randalls Division. I went to that store in Tampa area right after it was announced for closure (the original FL Store) by Albertsons and it was stocked with Signature brands, some leftover Essential Everyday/Equaline stuff, and perishables were coming to it from Texas. It was still running the old POS systems from pre-Supervalu merger. Pricing in there was way below market for FL especially on meat and produce. Publix doesn't run deals on fresh products like Albertsons did.

Of course when that store closed then they said the other 3 stores were being remodeled then it came out they were rebranding them to Safeway.

What is weird is those last 3 stores were sort of lousy stores. Two were old 80's era at best Skaggs Albertsons type stores and the third was a large former Jewel. These stores as Albertsons were extremely outdated and didn't do much business. They just felt tired and forgotten. They were a little messy and sloppy despite what seemed like not much traffic. Fresh departments were of high quality but presentation and appearances were not very appealing.

The Safeway rebranding took those 3 tired stores and they spent a lot of money but in the end they still ended up with 3 tired stores, albeit fresher looking. Safeway tried to improve produce, dedicated a lot of space to "fresh cut" produce, expanded deli to have hot food bars, sandwich counters, sushi, etc., in store cafe seating, Starbucks, expanded bakery with various Safeway Signature items that were never seen before at any other Safeway, etc. It was a real show. Safeway ran a lot of loss leader ads, constant $10 off $50 coupons, and they ran high volumes. So high the stores were a mess and couldn't keep in stock. In the end despite the expansion/efforts these Safeways had dirty and poorly presented perimeters not unlike the previous Albertsons (but had a lot more to offer). No Club Card was in use but they did have the digital coupons and fuel points with redemption at I forget where (not sure it was Chevron, may have been). They also had Safeway.com delivery service using Safeway.com trucks. They had some sites identified to build a couple of new stores but nothing ever materialized. I suspect supplying from DC, with heavy loss leader ads, coupons, and customers who were coming from miles around to cherry pick all of the loss leaders and use the coupons (people used to the high Publix pricing), the stores were actually losing more and more money, the more volume they did. The fresh department operations despite having more to offer than Publix were sloppy (Publix is very polished) and these stores as Safeway had more of a discount following than a "superior quality store" following. Staff attitude in the Safeways was indifferent at best, again, not at the level of the typical Publix and way below the level of what Publix strives to be on service. These FL Safeways were real Safeways, but, something was just off.

There were also problems with the store remodels they did; the workmanship of the floors caused them to be filthy and falling apart; within a year of install they had to rip them out and replace them (then closed the stores not long after).

I really have no clue why they thought putting Safeway in Florida was a good idea. Almost seems like they were testing the waters for organic expansion of a Safeway banner, with distribution a long day's drive away, that didn't require a club card, and had aggressive promotions/constant $10 off $50 coupons. What would go wrong...? The way they ran the stores was not sustainable and I'm sure Publix kept laughing.

I don't know what kind of arrangement Bob Miller made with Publix when they sold those last 3 Safeways to Publix in FL. I have to think after they did the remodels, built up the store volumes, the stores were worth more at that point as Safeway, than they would have been as tired low volume Albertsons. Especially if presented to Publix with the scenario of- we have 3 Safeways we'd like to sell you in FL, here are the options:
1. These 3 Safeways do double-triple the volume now they did 2 years ago as Albertsons, also we did significant remodels to the stores including heavy work to back prep areas, new refrigeration, etc., so we now have doubled the price for the stores.
2. We are not sure if we want to sell these 3 Safeways or if we want to instead keep them and then go ahead and build 4-5 new stores in FL, we have identified some locations...(locations that just so happen to be near some of Publix most successful stores)... and throw $50 million at 4-5 new stores.
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Re: Kroger to merge with Albertsons?

Post by pseudo3d »

Looks like the dividend payout won't be happening before the end of the month.

I have mixed feelings about Kroger (their prices are competitive, they generally have better merchandising than H-E-B, and their stores are universally competently laid out—which I cannot say for H-E-B) but man, are they are a lousy merging partner. If they had gone with a company that presented little to no problems combining stores: SEG (again, just a few Baton Rouge-area stores at most), UNFI, Ahold Delhaize (would need to dump Mid-Atlantic and Shaw's/Star Market), SpartanNash, or some foreign company...this whole issue with dividend payouts and SpinCo and all that...wouldn't be necessary.
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Re: Kroger to merge with Albertsons?

Post by storewanderer »

pseudo3d wrote: November 16th, 2022, 10:50 pm Looks like the dividend payout won't be happening before the end of the month.

I have mixed feelings about Kroger (their prices are competitive, they generally have better merchandising than H-E-B, and their stores are universally competently laid out—which I cannot say for H-E-B) but man, are they are a lousy merging partner. If they had gone with a company that presented little to no problems combining stores: SEG (again, just a few Baton Rouge-area stores at most), UNFI, Ahold Delhaize (would need to dump Mid-Atlantic and Shaw's/Star Market), SpartanNash, or some foreign company...this whole issue with dividend payouts and SpinCo and all that...wouldn't be necessary.
Kroger/Albertsons approached this wrong. When they announced the merger they should have laid out exactly what they wanted to sell off and be reasonable about it. Saying they think they may have to divest as few as 125 stores was an absolute joke, they wrote into the merger agreement up to 650 stores and they should have just said that from the beginning. Laying it out straight would have sped up the process of getting the FTC to look at the deal and gotten Cerberus and friends their money faster.

But at the end of the day if this merger falls apart, Kroger will just go along. It may even be better for Kroger if this falls through; notice Kroger's stock hasn't done much since this merger announcement. This tells me Kroger's shareholders are not really enthusiastic about this deal as currently presented and management needs to work on getting them more excited about it. Which leads me to another thought what if Kroger shareholders vote against the merger (debt concerns or something)?

I am not so sure what happens to Albertsons if this merger falls apart. Given Cerberus wants out.... will they just stay longer if the merger falls through? They've been very patient and in my opinion the Albertsons business greatly improved during COVID. It could improve more and get Cerberus even more money.
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Re: Kroger to merge with Albertsons?

Post by pseudo3d »

storewanderer wrote: November 16th, 2022, 11:38 pm
pseudo3d wrote: November 16th, 2022, 10:50 pm Looks like the dividend payout won't be happening before the end of the month.

I have mixed feelings about Kroger (their prices are competitive, they generally have better merchandising than H-E-B, and their stores are universally competently laid out—which I cannot say for H-E-B) but man, are they are a lousy merging partner. If they had gone with a company that presented little to no problems combining stores: SEG (again, just a few Baton Rouge-area stores at most), UNFI, Ahold Delhaize (would need to dump Mid-Atlantic and Shaw's/Star Market), SpartanNash, or some foreign company...this whole issue with dividend payouts and SpinCo and all that...wouldn't be necessary.
Kroger/Albertsons approached this wrong. When they announced the merger they should have laid out exactly what they wanted to sell off and be reasonable about it. Saying they think they may have to divest as few as 125 stores was an absolute joke, they wrote into the merger agreement up to 650 stores and they should have just said that from the beginning. Laying it out straight would have sped up the process of getting the FTC to look at the deal and gotten Cerberus and friends their money faster.

But at the end of the day if this merger falls apart, Kroger will just go along. It may even be better for Kroger if this falls through; notice Kroger's stock hasn't done much since this merger announcement. This tells me Kroger's shareholders are not really enthusiastic about this deal as currently presented and management needs to work on getting them more excited about it. Which leads me to another thought what if Kroger shareholders vote against the merger (debt concerns or something)?

I am not so sure what happens to Albertsons if this merger falls apart. Given Cerberus wants out.... will they just stay longer if the merger falls through? They've been very patient and in my opinion the Albertsons business greatly improved during COVID. It could improve more and get Cerberus even more money.
I felt that when Albertsons wanted to buy Safeway they were pretty upfront about they wanted and how they could use this to their advantage and how the new divisions would be laid out.

In comparison, Kroger and Albertsons seem rather vague on what they want to do and how they intend to do it. They could start sorting out how the divisions worked...maybe combine the Mississippi Kroger stores with the Louisiana Albertsons (in fact, I believe some of those Kroger stores actually started out as Albertsons stores in the Houston division), make a "Gulf Coast" division...maybe that SpinCo could have whole chains, like having QFC or Randalls. Sure, Kroger might peel off a few of the best stores from the divisions, but it would help sell the concept, that SpinCo is a real company with real brands that has hope for the future, not some trash barge with brands on borrowed time that will be sold off or closed the minute the deal closes.

Of course, I can imagine that Kroger is very reluctant to sell off any of its brands, even if it gains much more in the process. If Ralphs got booted to SpinCo, for instance, even if the "best" stores were converted to Vons (which Kroger would own), that name could be used as well with converted Safeway/Albertsons/Fry's stores that get divested. However, Kroger is obviously not going into this process willing to throw a few of its own brands out to get...well, basically NorCal, Jewel-Osco, and the Northeast. It brings to mind how American Stores was forced to sell Alpha Beta (which, of course, eventually got rebranded to Ralphs) in order to buy Lucky...but that whole process came at a horrific cost, and if American Stores knew what they would sacrifice just to have Lucky, they probably wouldn't have bothered.

If Albertsons (Cerberus) is looking to make some cash and Kroger is looking to expand, selling off Mid-Atlantic and Shaw's/Star Market would not be an issue at all.
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