SpinCo

[storewanderer]

RE:Asian markets
The other big Asian operators are so wildly variable relative to the consistent execution at T&T. I love H-Mart but they are operator dependent to a shocking degree. Same at 99 Ranch - anything from sketchy to excellent. Seafood City, I can’t speak to inter-store consistency but I generally prefer a Chinese, Korean or Japanese mix (see also Uwajimaya).

RE: Loblaw format gap / City Market
Loblaw actually has three Lower Mainland stores like the one in North Van (I’m assuming you’re referring to the City Market on North Lonsdale) - there’s another over at Park Royal, and then one kind of off Broadway and Arbutus. If you dropped any of those format into similar Seattle or Portland neighborhoods they’d succeed.

If you took the average PNW Safeway and swapped out PC for their house brands, you’re right, there wouldn’t be a Loblaw perfect match in Western Canada, but there’s nothing so exotic about the format or scale that Loblaw would be likely to screw it up.



FWIW, I think any objection to a non-union operator would be thoroughly squelched by a well-capitalized ESOP.

99 Ranch locations I've been to are all corporate owned (they do have some franchise sites), and have these wide variances in operations still. T&T also seems the least "integrated" into Loblaws vs. the other formats. I think that is deliberate.

In the current political environment, I expect anything divested is going to be required to go to a Union operator full stop. That is going to be question one by the regulators. Is the buyer union and willing to maintain wage/seniority for all employees? No, okay, then, next please.

Recall the history of previous deals:
1. Albertsons/Buttrey late 90's: stores divested to Smiths. Independents complained they did not get a fair shake at the store divests.
2. Albertsons/Lucky later 90's: stores divested in blocks to Certified Grocers (this was solely because of the independents complaining about what happened in the Buttrey deal), Raleys, Ralphs, Stater. Union stores divested to the larger chains remained union if they were union and seniority was honored. Most of the stores divested to independents failed within 2 years.
3. Albertsons/Safeway: 10's: Did not go with Independents due to the tract record of failure. Stores divested to Haggen. Unified Grocers still got the supply business out of Haggen so that big business was happy with the deal. Union agreements were kept in stores that were union, seniority, wage, etc. This was a big "thing" that union stores must remain union to protect the union and the union jobs. And we see what happened...

Could use the Safeway/Alaska Marketplace divests in Alaska as another example... but I don't know if those were Union shops or not. I think the bigger issue there was flat out lack of interested parties in the divest stores.

My guess is in the current "all or nothing" and "my way or the highway" political environment, we are going to see the deal boil down to 1. It must be a Union operator and 2. It must be a stable Union operator (not another Haggen trying to grow 15x overnight). The independents will be knocked out, but they are not a protected class in the current political environment. The Unions are. The problem is I don't know of any large Union operators who can pick these up easily short of Ahold or Loblaw when you get down to it.

[retailfanmitchell019]

Recall the history of previous deals:
1. Albertsons/Buttrey late 90's: stores divested to Smiths. Independents complained they did not get a fair shake at the store divests.
2. Albertsons/Lucky later 90's: stores divested in blocks to Certified Grocers (this was solely because of the independents complaining about what happened in the Buttrey deal), Raleys, Ralphs, Stater. Union stores divested to the larger chains remained union if they were union and seniority was honored. Most of the stores divested to independents failed within 2 years.
3. Albertsons/Safeway: 10's: Did not go with Independents due to the tract record of failure. Stores divested to Haggen. Unified Grocers still got the supply business out of Haggen so that big business was happy with the deal. Union agreements were kept in stores that were union, seniority, wage, etc. This was a big "thing" that union stores must remain union to protect the union and the union jobs. And we see what happened...

Could use the Safeway/Alaska Marketplace divests in Alaska as another example... but I don't know if those were Union shops or not. I think the bigger issue there was flat out lack of interested parties in the divest stores.

Then there was the few divests made in the Kroger/Fred Meyer merger, which all failed:
Nash Finch bought two Smith's stores in Cheyenne, WY (they bought those two Albertsons after the Buttrey deal, then King Soopers built a new store there). Walmart kicked those two Nash stores out of business eventually.
Albertsons bought a City Market in Price, UT (now a Lin's Market supplied by AFS).
Fleming bought two City Market stores in Wyoming (Rock Springs and Green River, I don't know what Fleming turned those into), two Fry's in AZ (Prescott and Yuma, both became ABCO. Yuma is now a Food City), a Smith's in Sierra Vista, AZ (became ABCO, now a Food City).

Vons bought 3 stores and a land site in the ASC/Albertsons deal: a Lucky in Moorpark, two Albertsons stores (Redlands and Corona), and an Albertsons land site in Fontana (Vons built on it and it is still open). The one in Corona is now a Superior. Vons also did a store swap in Costa Mesa with Albertsons and Certified. Albertsons got a Lucky there that was starting construction. Many of the independents that bought Albertsons/Lucky stores were Hispanic operators.

You've mentioned how divests in the past have been by zip code. Divests during the merger were also by proximity, regardless of zip code or town being different. The Lucky on Vista Way in Oceanside was divested to Stater Bros. as there was an Albertsons (ex-Big Bear) two exits down I-5 in Carlsbad it competed with.

[arizonaguy]

Recall the history of previous deals:
1. Albertsons/Buttrey late 90's: stores divested to Smiths. Independents complained they did not get a fair shake at the store divests.
2. Albertsons/Lucky later 90's: stores divested in blocks to Certified Grocers (this was solely because of the independents complaining about what happened in the Buttrey deal), Raleys, Ralphs, Stater. Union stores divested to the larger chains remained union if they were union and seniority was honored. Most of the stores divested to independents failed within 2 years.
3. Albertsons/Safeway: 10's: Did not go with Independents due to the tract record of failure. Stores divested to Haggen. Unified Grocers still got the supply business out of Haggen so that big business was happy with the deal. Union agreements were kept in stores that were union, seniority, wage, etc. This was a big "thing" that union stores must remain union to protect the union and the union jobs. And we see what happened...

Could use the Safeway/Alaska Marketplace divests in Alaska as another example... but I don't know if those were Union shops or not. I think the bigger issue there was flat out lack of interested parties in the divest stores.

Then there was the few divests made in the Kroger/Fred Meyer merger, which all failed:
Nash Finch bought two Smith's stores in Cheyenne, WY (they bought those two Albertsons after the Buttrey deal, then King Soopers built a new store there). Walmart kicked those two Nash stores out of business eventually.
Albertsons bought a City Market in Price, UT (now a Lin's Market supplied by AFS).
Fleming bought two City Market stores in Wyoming (Rock Springs and Green River, I don't know what Fleming turned those into), two Fry's in AZ (Prescott and Yuma, both became ABCO. Yuma is now a Food City), a Smith's in Sierra Vista, AZ (became ABCO, now a Food City).

Vons bought 3 stores and a land site in the ASC/Albertsons deal: a Lucky in Moorpark, two Albertsons stores (Redlands and Corona), and an Albertsons land site in Fontana (Vons built on it and it is still open). The one in Corona is now a Superior. Vons also did a store swap in Costa Mesa with Albertsons and Certified. Albertsons got a Lucky there that was starting construction. Many of the independents that bought Albertsons/Lucky stores were Hispanic operators.

You've mentioned how divests in the past have been by zip code. Divests during the merger were also by proximity, regardless of zip code or town being different. The Lucky on Vista Way in Oceanside was divested to Stater Bros. as there was an Albertsons (ex-Big Bear) two exits down I-5 in Carlsbad it competed with.

There was also a Fry's in Phoenix (Thunderbird / 40th St) that became a Bashas' which failed and is now a Goodwill.

There was a Smith's in Tucson (Broadway/Houghton) that became a Safeway (then a short lived Haggen but Safeway re-acquired the site).

[pseudo3d]

The only way I can see the merger and SpinCo working is if SpinCo is constructed of real names. So here's one scenario, is that SpinCo has three regions: Northwest, Southwest, and Texas. In the Northwest region, QFC is spun off. Stores that would go under this would be QFC, Safeway, Albertsons, and Smith's (in Idaho). In Southwest, Ralphs is spun off. Stores that would go under this would be Ralphs, Vons, and Albertsons (in SoCal), and Fry's, Albertsons, and Safeway (in Arizona). It might cover Colorado as well. The Texas market will have Randalls, with some Tom Thumb/Kroger stores in DFW, Randalls in Austin (I doubt Kroger is interested in the Austin market with the poor spread of Randalls, and many of them are quite small even by Safeway standards), and Randalls in Houston, along with some overlap Albertsons/Kroger in southwest Louisiana. There's also the issue of Chicago.

However, Kroger doesn't want SpinCo to be a viable entity and they especially don't want SpinCo to run off with their prized brands. If it comes to that then Kroger is probably going to pull the plug.

[HCal]

I totally agree that SpinCo needs to have "real" brands in order to be succesful, in combination with the associated warehouses, manufacturing facilities and distribution network. It cannot just be a holding company for the castoffs. It also needs to have enough density of stores in each region that it operates to be a viable competitor.

The question is whether the FTC will recognize this and consider it. Historically, with supermarket mergers they have just looked at it market by market and required divestitures of individual stores, which makes sense as grocery retail is very localized. But they need to look at the bigger picture as well. Hopefully they learned this from the Haggen fiasco, but we will see.

[pseudo3d]

I totally agree that SpinCo needs to have "real" brands in order to be succesful, in combination with the associated warehouses, manufacturing facilities and distribution network. It cannot just be a holding company for the castoffs. It also needs to have enough density of stores in each region that it operates to be a viable competitor.

The question is whether the FTC will recognize this and consider it. Historically, with supermarket mergers they have just looked at it market by market and required divestitures of individual stores, which makes sense as grocery retail is very localized. But they need to look at the bigger picture as well. Hopefully they learned this from the Haggen fiasco, but we will see.

The bigger the merger is, the more problems there are. This is one reason why the Walgreens-Rite Aid drug store deal failed, is there just wasn't enough other competitors to pick up the slack, and I think it was at the time when the failure of Haggen was still on everyone's mind.

Albertsons/Safeway was a hard sell because a lack of other competition (a few stores got divested to independents and SuperValu, but not many) as it was. That's not to say it would've failed with Haggen vis-a-vis Comvest Group--it just would've been harder and less centralized (remember, Minyard Sun Fresh Market also got the Dallas-Fort Worth stores).

Meanwhile, the Ahold/Delhaize merger went much better because of the competition that already exists in the East Coast and they were able to sell stores to Publix, Big Y, ACME, SuperValu, Weis, Tops, and an independent called Saubel's.

And as big of a headache as Albertsons/Safeway was, the merger here is pretty much the exact same markets, plus some!

So in addition to all the markets that Albertsons/Safeway had (except for maybe in the Intermountain area), we've got Alaska, Chicago, Louisiana, Washington DC, and Houston to deal with also! All of these markets are facing an ever-dwindling number of third parties to pick up stores.

If Cerberus and Kroger want to make this work they'd better come up with a realistic plan for divesting stores, and not this "maybe 125 stores" nonsense. What does Kroger see in Albertsons anyway? If they wanted NorCal that badly they should start knocking on the door of Kingswood Capital Management.

[storewanderer]

And as big of a headache as Albertsons/Safeway was, the merger here is pretty much the exact same markets, plus some!

So in addition to all the markets that Albertsons/Safeway had (except for maybe in the Intermountain area), we've got Alaska, Chicago, Louisiana, Washington DC, and Houston to deal with also! All of these markets are facing an ever-dwindling number of third parties to pick up stores.

If Cerberus and Kroger want to make this work they'd better come up with a realistic plan for divesting stores, and not this "maybe 125 stores" nonsense. What does Kroger see in Albertsons anyway? If they wanted NorCal that badly they should start knocking on the door of Kingswood Capital Management.

Yes, this. This is the Albertsons/Safeway merger times... a lot... when it comes to divests. Who will be the next Haggen? Who will be dumb enough to take that bait? Will the FTC be dumb enough to go along with something like that AGAIN where a smaller chain buys more stores than it currently has in unfamiliar regions without distribution?

At this point the merger opposition is building. I read today another politician from WA came out against it.

Kroger had ample chances to buy Save Mart and passed. There was good reason for that. I just don't think Kroger is the right fit for Safeway NorCal Division.

[retailfanmitchell019]

We will see what SpinCo ends up with. Albertsons is a good known brand, if SpinCo plans to be in business long term it would be a great brand for them to use and frankly I don't think Kroger would miss the Albertsons brand much anyway. Vons is probably an okay brand too for them to use, I guess, if the majority of what they get are Vons to begin with. It wouldn't be a bridge too far to convert stores in AZ, NM, NV, CO to Vons. OR/WA to Vons would be a little awkward but it could work. East Coast or IL converting to Vons would be very awkward but I don't expect SpinCo to operate anything on the East Coast (I think UNFI/Shoppers is ready) or IL (too few potential divests to be worth it, best to spin to local smaller chains). I also expect this is the end of Randalls in Houston (probably not even worth divesting anything) and the TX Tom Thumb/Albertsons likely split up and go to smaller operators/ethnic chains vs. operated by SpinCo long term.

Based on geographic spread, I'd think Albertsons would definitely be the best brand to use for SpinCo. The Vons name is meaningless outside of SoCal and Las Vegas. Except for California transplants, nobody in WA, CO, AZ, OR, etc. knows what a Vons is.
I see the Albertsons name being used for everything SpinCo gets, including divested Vons stores in SoCal. As the Vons stores that stay with Kroger (for example many stores scattered around San Diego) are rebranded to Ralphs, that will mean the demise of the Vons banner.
As for Pavilions, I expect that name to go (via rebranding to Ralphs Fresh Fare or Albertsons). An alternative for Pavilions could be a sale of that name and its stores to Stater Bros., so they could have an upscale banner.
I expect Mariano's to go back to Bob Mariano. A wild card would be Hy-Vee, Schnucks, or Meijer buying the stores.
As for QFC, I've heard that the Albertsons name doesn't fit best on small, urban stores, but it wouldn't really make a difference at this point. This could also be a chance for URM/Rosauers to break into the Puget Sound.

Here's how I think SpinCo could be set up:
Name: SpinCo will not keep the "SpinCo" name, it sounds like a silly name to use. The official name will probably be "Albertsons Group" with or without an apostrophe.
Brands: SpinCo would probably keep the Signature brands, or rename those brands back to Albertsons, as it was before SuperValu turned that brand into Essential Everyday. That is, until Loblaws, Sobeys or Ahold scoops up SpinCo (Ahold would be the most likely of those three).
Logistics: SpinCo will take manufacturing and distribution centers from the current Albertsons.
I think LLC people should be running SpinCo. Bob Miller and the LLC people saved Albertsons. The difference between this and the 2006-2012 era LLC is that I don't think much stores will be closed. At this point, most Albertsons brand stores left are nice, strong performing stores.

[jamcool]

The Albertsons name
Putting Albertsons on all of the stores is going back to the Lucky rebrand situation. Albertsons only has stores in Phoenix and Tucson, everything else is the 100 year old Safeway banner (Albertsons entered the AZ market in 1990)

[storewanderer]

The Albertsons name
Putting Albertsons on all of the stores is going back to the Lucky rebrand situation. Albertsons only has stores in Phoenix and Tucson, everything else is the 100 year old Safeway banner (Albertsons entered the AZ market in 1990)

Main difference here is Albertsons did not have to rebrand those Lucky Stores to Albertsons. That was a pure ego move by Gary Michael the old CEO who wanted Albertsons to be a nationwide grocery brand. Albertsons had a choice and could have continued the popular Lucky name and format in CA; they did not and went with the marginal Albertsons brand which had always been a 4th tier player in California at best.

The longer things goes on and one thing after another (most recently this Express Scripts acceptance ending at Kroger owned pharmacies) I am becoming more and more convinced this merger is not going to happen.

But maybe it will happen...

With this SpinCo thing while we do not know the exact arrangement yet the general thought is some stores will have to be rebranded just due to the logistics of the situation. It is possible keeping the store banners is an option, but the point comes where it may not be possible and a rebrand may be mandatory. That is the scenario of putting the name Albertsons, Vons, or whatever, on all SpinCo Stores, comes in as a possible thing. Would rebranding a store in AZ that has been a Safeway for 60 years to Albertsons or Vons be something you'd do if you didn't have to? Absolutely not.

I am still suspicious Kroger is going to take this opportunity to rebrand everything to Kroger. Kroger has not confirmed what banners they want to use going forward. In that case SpinCo just may get to use all of these names however they want.

Realistically if Safeway was a better banner in all markets I'd almost propose Kroger banner like this but the problem is Safeway is such a second tier banner in so many markets compared to Kroger's existing banners:
Basically all non "Kroger" banner markets out west and including Kansas/Colorado/Nebraska- Safeway banner
Existing "Kroger" banner markets (including Jewel, Texas)- Kroger banner
The wild card in this is what do you do with the stuff back east... and Harris Teeter... probably just Kroger banner the whole thing.