🛒 Kroger-Albertsons Merger: Northwest, Rockies, & Alaska Impact

[Brian Lutz]

Bellevue (Overlake) would be another example of a store with two Safeways within a mile radius, and a QFC not much farther than that. The Redmond Fred Meyer has a Safeway about 1/4 of a mile away, and two QFCs (Bella Bottega and Redmond Center) within a couple of miles. Out of all of those, If I had to guess I'd expect that the Crossroads and Bella Bottega QFCs and possibly the Evergreen Village Safeway would be the ones that get kept, with the Bear Creek Village and Overlake Village Safeways and the Redmond Center QFC being divested.

[storewanderer]

These situations where two Safeway or Albertsons owned stores operate near one another should not be suspect to divest.

One scenario I wonder is let's say Baker City had the Safeway, the Albertsons, and a Fred Meyer. Do they have to divest both the Safeway and Albertsons or just one of the two in that case? I'd argue they have to divest both but I'm sure they'd have a different argument.

[ClownLoach]

These situations where two Safeway or Albertsons owned stores operate near one another should not be suspect to divest.

One scenario I wonder is let's say Baker City had the Safeway, the Albertsons, and a Fred Meyer. Do they have to divest both the Safeway and Albertsons or just one of the two in that case? I'd argue they have to divest both but I'm sure they'd have a different argument.

Not that we are privy to the filings but I suspect they will be trying to play the game that they only need to divest one because Fred Meyer is primarily a department store, and they'll try to argue food isn't its primary business. I don't see any case where they would be required to divest both the Safeway and the Albertsons in a town with both plus a FM otherwise what exactly did they acquire for $25B in costs? It's a reasonable expectation that they will grow market share, the issue the FTC and states have to address is the specific locations where they fear the threat of consolidation coupled with lack of viable competition will form a monopoly. If there are alternatives they're going to point at them and say "this is why we don't have to sell" unless it's totally unreasonable like Newport, OR with the FM next to Safeway.

Where they're going to have issues is anywhere that there is a Fred Meyer or QFC that is right next to or across the street from a Safeway or Albertsons which is surprisingly common. I think they're going to also try to divest where it isn't necessarily required in an effort to "concede" in an effort to save other stores. For example in a town with only a Safeway and Albertsons they might offer to divest the Albertsons (or Safeway, whichever is probably the worst) to make up for keeping more stores that are close to a Fred Meyer.

Shopping at some Fred Meyer stores is exhausting, like going to a Walmart Supercenter, because of the large format and amount of walking required to get your full list. If I lived up there I'm not so sure that I would even consider some of the Fred Meyer stores I've seen if I only needed a handful of items. So there is some truth to the argument that a Safeway or Albertsons isn't comparable and thus they should not be forced to divest around a FM store. I expect the list of 120 or so stores to be very much "hand picked" and like I said might serve more as a culling of Safeway-Albertsons only towns to get the store count down to 1, and then Safeway or Albertsons where there's no other conventional grocery competition in town thus a monopoly would form with the FM in same town. If the stores are spread apart they will probably also argue that they're two different kinds of stores and both should be kept.

[Brian Lutz]

I think there's a lot of the urban PNW (especially in the Seattle metro area) where the merger would leave basically zero non-Kroger competition besides Whole Foods and a few Asian grocers (There's one Walmart Neighborhood Market in Bellevue and no other Walmart stores anywhere in Seattle or the Eastside at this point, and I don't think they're convincing anyone that Target or Trader Joe's is viable competition), so I would expect a lot of forced divestitures in that area.

[Super S]

These situations where two Safeway or Albertsons owned stores operate near one another should not be suspect to divest.

One scenario I wonder is let's say Baker City had the Safeway, the Albertsons, and a Fred Meyer. Do they have to divest both the Safeway and Albertsons or just one of the two in that case? I'd argue they have to divest both but I'm sure they'd have a different argument.

Not that we are privy to the filings but I suspect they will be trying to play the game that they only need to divest one because Fred Meyer is primarily a department store, and they'll try to argue food isn't its primary business. I don't see any case where they would be required to divest both the Safeway and the Albertsons in a town with both plus a FM otherwise what exactly did they acquire for $25B in costs? It's a reasonable expectation that they will grow market share, the issue the FTC and states have to address is the specific locations where they fear the threat of consolidation coupled with lack of viable competition will form a monopoly. If there are alternatives they're going to point at them and say "this is why we don't have to sell" unless it's totally unreasonable like Newport, OR with the FM next to Safeway.

Where they're going to have issues is anywhere that there is a Fred Meyer or QFC that is right next to or across the street from a Safeway or Albertsons which is surprisingly common. I think they're going to also try to divest where it isn't necessarily required in an effort to "concede" in an effort to save other stores. For example in a town with only a Safeway and Albertsons they might offer to divest the Albertsons (or Safeway, whichever is probably the worst) to make up for keeping more stores that are close to a Fred Meyer.

Shopping at some Fred Meyer stores is exhausting, like going to a Walmart Supercenter, because of the large format and amount of walking required to get your full list. If I lived up there I'm not so sure that I would even consider some of the Fred Meyer stores I've seen if I only needed a handful of items. So there is some truth to the argument that a Safeway or Albertsons isn't comparable and thus they should not be forced to divest around a FM store. I expect the list of 120 or so stores to be very much "hand picked" and like I said might serve more as a culling of Safeway-Albertsons only towns to get the store count down to 1, and then Safeway or Albertsons where there's no other conventional grocery competition in town thus a monopoly would form with the FM in same town. If the stores are spread apart they will probably also argue that they're two different kinds of stores and both should be kept.

Baker City does not have a Fred Meyer. When Safeway and Albertsons merged, the Albertsons was spun off to Haggen originally, due to the fact that Safeway is across the street. However, when Haggen imploded, Albertsons bought the store back, and it reopened as Albertsons, creating a grocery monopoly. (I do not count Grocery Outlet as a traditional grocery store due to their business model and product selection) In my opinion, they should not have been able to get the Albertsons store back. And then you have areas that fell through the cracks during the merger, such as Battle Ground (which has a Fred Meyer in between a Safeway and an Albertsons that are a mile apart) and Salmon Creek (which now has a Fred Meyer in between two Safeways a mile apart)

Then you have areas to the north , where Safeway, Albertsons, QFC, Haggen, and Fred Meyer all exist in some towns. And there are some locations there as well that were spun off to Haggen that Albertsons got back.

I am not necessarily saying that all of the conventional store format locations should be divested in a market where Fred Meyer operates. I am saying though that there are a lot of existing stores that are pretty close together, and given the track record of Safeway/Albertsons/Haggen and high prices, and Kroger, who (at Fred Meyer) also seems to be shifting into this category since they started requiring a card/phone number for sale prices, I do not have confidence that the combined company is going to have a true benefit to the average shopper. The only reason why I have shifted some shopping back to Fred Meyer is due to how WinCo constantly has random issues with cleanliness, stocking levels, and quality in produce/dairy. If WinCo made improvements in those areas, I wouldn't be shopping at Fred Meyer at all. Fred Meyer, at least for now, still has lower shelf prices than Safeway.

[storewanderer]

They absolutely should not have been able to get that Albertsons back in Baker City but they took their case to the FTC and said nobody wants this store (really?) and we can take it back and employ more people and serve the community and they were allowed to take it back under those grounds (and various other stores).

These chains are counting Grocery Outlet, Dollar General, etc. as competition when they talk to the FTC. Anyone who sells consumables is considered competition.

Fred Meyer pricing does still seem lower than Safeway and I think a lot of their perishables (especially produce) are better.

[marshd1000]

I kind of wonder how the Kroger/Albertsons merger will play out in Burien and Renton, WA if allowed to proceed?! In Burien, the only full line grocers are the Fred Meyer on 1st Ave S & 143rd St and two Safeway stores. The closest Safeway to the Fred Meyer is at Burien Plaza on SW 148th St. The other Safeway is at 1st Ave and SW 128th St. I wonder if there will be only 1 divestiture or 2 in the case of Burien? It seems like the Burien Plaza Safeway would have to go to C&S and become a QFC. But would the SW 128th Safeway have to be divested? I give that a 50/50 chance of staying with Kroger and keeping the Safeway name. The other wild card would be the QFC store at Normandy Park’s Manhattan Village. If the Burien Plaza Safeway is divested, which seems likely, it also seems like this QFC would stay with the Kroger organization. But it couldn’t stay as QFC obviously. It wouldn’t seem right to have this transition to becoming a Safeway however giving the more upscale demographics of Normandy Park. There are only three options I could see. One is to revive the Fred Meyer Northwest Best banner to give it the Fred Meyer pricing but yet signal that it is a more gourmet Fred Meyer. Perhaps Kroger could create Safeway Market Street, like Albertsons Market Street in Boise but smaller. This would also be a more upscale or gourmet Safeway. But MAYBE, given the better Kroger management, as compared to Comvest, this QFC could become a Haggen? Yes, I get that Haggen had damage to it’s reputation because of the Safeway/Albertsons merger. But Haggen does have some very good stores outside it’s Bellingham base. Woodinville, Auburn/Lakeland Hills, and West Olympia come to mind. Also the the Bellingham/Fairhaven Haggen is smaller like the Manhattan Village QFC. So while Haggen had been in the Burien area before, given right execution, I think it could work on some of the QFC locations kept by Kroger, including University Village and the Mercer Island locations.

As for Renton, I could see the Downtown Renton, Fairwood and Sunset Blvd Safeway locations being divested to C&S and becoming QFC. I would see C&S keeping the QFC in the Renton Highlands on NE 4th Street also. As for the Safeways in Renton potentially divested in Downtown and Fairwood, they seem too close to a Fred Meyer to remain part of Kroger post merger. As for the Sunset Blvd store, it seems like it would lessen the Safeway/Albertsons stronghold currently in the Renton Highlands and give C&S another QFC in a different part of the Renton Highlands!

[storewanderer]

I kind of wonder how the Kroger/Albertsons merger will play out in Burien and Renton, WA if allowed to proceed?! In Burien, the only full line grocers are the Fred Meyer on 1st Ave S & 143rd St and two Safeway stores. The closest Safeway to the Fred Meyer is at Burien Plaza on SW 148th St. The other Safeway is at 1st Ave and SW 128th St. I wonder if there will be only 1 divestiture or 2 in the case of Burien? It seems like the Burien Plaza Safeway would have to go to C&S and become a QFC. But would the SW 128th Safeway have to be divested? I give that a 50/50 chance of staying with Kroger and keeping the Safeway name. The other wild card would be the QFC store at Normandy Park’s Manhattan Village. If the Burien Plaza Safeway is divested, which seems likely, it also seems like this QFC would stay with the Kroger organization. But it couldn’t stay as QFC obviously. It wouldn’t seem right to have this transition to becoming a Safeway however giving the more upscale demographics of Normandy Park. There are only three options I could see. One is to revive the Fred Meyer Northwest Best banner to give it the Fred Meyer pricing but yet signal that it is a more gourmet Fred Meyer. Perhaps Kroger could create Safeway Market Street, like Albertsons Market Street in Boise but smaller. This would also be a more upscale or gourmet Safeway. But MAYBE, given the better Kroger management, as compared to Comvest, this QFC could become a Haggen? Yes, I get that Haggen had damage to it’s reputation because of the Safeway/Albertsons merger. But Haggen does have some very good stores outside it’s Bellingham base. Woodinville, Auburn/Lakeland Hills, and West Olympia come to mind. Also the the Bellingham/Fairhaven Haggen is smaller like the Manhattan Village QFC. So while Haggen had been in the Burien area before, given right execution, I think it could work on some of the QFC locations kept by Kroger, including University Village and the Mercer Island locations.

As for Renton, I could see the Downtown Renton, Fairwood and Sunset Blvd Safeway locations being divested to C&S and becoming QFC. I would see C&S keeping the QFC in the Renton Highlands on NE 4th Street also. As for the Safeways in Renton potentially divested in Downtown and Fairwood, they seem too close to a Fred Meyer to remain part of Kroger post merger. As for the Sunset Blvd store, it seems like it would lessen the Safeway/Albertsons stronghold currently in the Renton Highlands and give C&S another QFC in a different part of the Renton Highlands!

This is a good analysis but the scope of banner changes involving QFC, Albertsons, and Safeway units is very drastic. This is going to be disruptive for all parties involved.

Though one banner won't change- Fred Meyer. I wonder where the confused castoff customers will end up going who are confused how their 50k square foot Safeway turned into a QFC and now has some weird lacking private label called Best Yet, then they go try the former QFC down the road that is now Safeway in a 25k square foot building that lacks the variety and assortment of the previous Safeway. I suspect the confused castoff customers will go straight to Fred Meyer.

[ClownLoach]

I kind of wonder how the Kroger/Albertsons merger will play out in Burien and Renton, WA if allowed to proceed?! In Burien, the only full line grocers are the Fred Meyer on 1st Ave S & 143rd St and two Safeway stores. The closest Safeway to the Fred Meyer is at Burien Plaza on SW 148th St. The other Safeway is at 1st Ave and SW 128th St. I wonder if there will be only 1 divestiture or 2 in the case of Burien? It seems like the Burien Plaza Safeway would have to go to C&S and become a QFC. But would the SW 128th Safeway have to be divested? I give that a 50/50 chance of staying with Kroger and keeping the Safeway name. The other wild card would be the QFC store at Normandy Park’s Manhattan Village. If the Burien Plaza Safeway is divested, which seems likely, it also seems like this QFC would stay with the Kroger organization. But it couldn’t stay as QFC obviously. It wouldn’t seem right to have this transition to becoming a Safeway however giving the more upscale demographics of Normandy Park. There are only three options I could see. One is to revive the Fred Meyer Northwest Best banner to give it the Fred Meyer pricing but yet signal that it is a more gourmet Fred Meyer. Perhaps Kroger could create Safeway Market Street, like Albertsons Market Street in Boise but smaller. This would also be a more upscale or gourmet Safeway. But MAYBE, given the better Kroger management, as compared to Comvest, this QFC could become a Haggen? Yes, I get that Haggen had damage to it’s reputation because of the Safeway/Albertsons merger. But Haggen does have some very good stores outside it’s Bellingham base. Woodinville, Auburn/Lakeland Hills, and West Olympia come to mind. Also the the Bellingham/Fairhaven Haggen is smaller like the Manhattan Village QFC. So while Haggen had been in the Burien area before, given right execution, I think it could work on some of the QFC locations kept by Kroger, including University Village and the Mercer Island locations.

As for Renton, I could see the Downtown Renton, Fairwood and Sunset Blvd Safeway locations being divested to C&S and becoming QFC. I would see C&S keeping the QFC in the Renton Highlands on NE 4th Street also. As for the Safeways in Renton potentially divested in Downtown and Fairwood, they seem too close to a Fred Meyer to remain part of Kroger post merger. As for the Sunset Blvd store, it seems like it would lessen the Safeway/Albertsons stronghold currently in the Renton Highlands and give C&S another QFC in a different part of the Renton Highlands!

This is a good analysis but the scope of banner changes involving QFC, Albertsons, and Safeway units is very drastic. This is going to be disruptive for all parties involved.

Though one banner won't change- Fred Meyer. I wonder where the confused castoff customers will end up going who are confused how their 50k square foot Safeway turned into a QFC and now has some weird lacking private label called Best Yet, then they go try the former QFC down the road that is now Safeway in a 25k square foot building that lacks the variety and assortment of the previous Safeway. I suspect the confused castoff customers will go straight to Fred Meyer.

And this insanity is why they need a different plan for a singular brand for all stores that are cast off in this merger, but QFC is not going to work because of its tainted and polarized brand identity. They're going to have to completely give up the Albertsons name for use everywhere and then clean up their image in the PNW.

[GMJim]

The issue I see is that they'll have to either divest all the Fred Meyer stores in Bellingham, or most/all of the Haggen stores. Since we know the FM stores aren't going to be sold, that means Haggen loses its hometown where the brand and format are at its best. At that point I have to think they'll have to make a side deal to sell the entire Haggen chain because it does have a good reputation up there, people love those stores in NW Washington. My guess is they're going to try to get away with just offering up the Safeway for sale but that probably won't get past the regulators. It would be sad to see the brand go away because of that merger. Anywhere that the brand has baggage isn't a key area for them anyway. They love it in Bellingham.

I think Kroger should be willing to divest Fred Meyer "Marketplace" stores, which are under 100000 sqft.

I've heard the original Haggen is pretty much the closest thing the PNW has to Wegmans. Beautiful stores. This is totally different from the Haggen that took expansion steroids.

If they came up with a side deal for Haggen I think that Good Food Holdings might be a good fit. I think that all the Haggens are up North enough that there wouldn't be any overlap with GFH's Met Markets.