Kroger and Albertsons in talks of a merger

[Y2kTheNewOldies]

https://www.cnn.com/2022/10/14/business/kroger-albertsons-merger

Kroger and Albertsons, Owners of Grocery Chains Mariano's and Jewel, Have Agreed to Merge

According to CNBC, the deal is valued at $24.6 billion.

www.nbcchicago.com

Two of the nation’s largest grocers have agreed to merge in a deal that would help them better compete with Walmart, Amazon and other major companies that have stepped into the grocery business.


Kroger on Friday bid $20 billion for Albertsons Companies Inc., or $34.10 per share. Kroger will also assume $4.7 billion of Albertsons’ debt.


Albertsons shares had closed Thursday at $28.63 after surging on reports that a deal was imminent.

Here is more if the deal is approved.

Both companies' boards unanimously approved the agreement, which will need regulatory approval.


Kroger is the second largest grocer by market share in the United States, behind Walmart, and Albertsons is fourth, after Costco. Together, Kroger and Albertsons would be a closer second to Walmart.


Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands like Ralphs, Smith’s and Harris Teeter.

Albertsons and Kroger, 2 of the largest supermarkets in America, announce $24.6 billion merger

Kroger announced that it plans to buy Albertsons in a nearly $25 billion deal that could change the US retail industry and impact how millions of customers buy their groceries.

abc7.com

Note in Southern California Kroger owns Ralph's Supermarket and Albertsons owns Vons. In Northern California Albertsons own Safeway. Some of the pressure to merge is directed at online retail. These two companies have to respond to increasing competition by Amazon, Walmart and others that sparked them to merge.

Kroger will buy Albertsons for $34.10 a share - a roughly 30% premium above the grocery chain's average share price over the course of the past month. Shares of Kroger slid 2% in pre-market trading, while Albertsons soared more than 11%.

The two companies operate dozens of grocery chains. Kroger operates Ralphs, Harris Teeter, Dillons, Fred Meyer and others, while Albertsons owns Safeway and Vons.The companies said they will spin off nearly 400 stores to form a new rival in an effort to gain antitrust clearance.

 

[TheBigA]

My take is they're two very different cultures. Albertsons is more gourmet and elite. Kroger is more proletariat. When they bought Harris Teeter, the quality at Teeter went down. Anyone who dislikes consolidation of radio, TV, and newspapers will see more of that in this merger. Some Kroger cities also have Safeway. Safeway stores are cleaner. Happening at a bad time, with food prices already going up.

 

[PTBoardOp94]

On the other hand, the grocery business is one of the only industries in the United States where there are not a handful of national competitors. You drive to any strip mall in America and you see the same stores ... except for the grocer.

 

[anotherguyTN]

The only major national grocery chains in my area are Kroger, Save A Lot and Walmart. Everything else is regional chains. Albertson's isn't in this area so this merger probably won't cause any stores to close here.

 

[PTBoardOp94]

The only major national grocery chains in my area are Kroger, Save A Lot and Walmart.

And Save A Lot is not really a chain, it is a franchised brand similar to IGA.

 

[Mikey Radio]

The interesting thing about Kroger is that, like some other chains I guess, some of their stores are relatively small and basic and not terribly updated, while others just a few miles away are varitable palaces by comparison, with in-store Starbucks, fancier and modern decor inside the store, better quality produce, fresh fish and seafoods on ice - packaged to order, upgraded wine selections and sometimes even an in-store liquor shop and other amenities.

This is while many (not all) grocery store companies in some areas have typically spun off their older stores to a different brand name. They carry many of the same products and the same "house brands", but consumers then know if you go to their branded stores, you're going to get a certain level of quality, variety, cleanliness and maybe in-store amenities and perks. If you go to one of their sub-brands, however, you may find older stores that may be more functional than fancy, the produce and other offerings may not be as good and you may not find any custom meat or seafood areas - what's on the shelves or in the coolers are what they have to offer.

Think Wal-Mart as a somewhat-relatable example. At one time at least they had Walmart Supercenters, standard Walmart "discount stores", Neighborhood Markets, Walmart Express, Sam's Club and at one time were developing a gas station/convenience store model. This way, depending on the type or "brand" of the store, you'd know what you'd find there. With Kroger, they're all called "Kroger" though store size, age and quality can be all over the map.

 

[anotherguyTN]

This is while many (not all) grocery store companies in some areas have typically spun off their older stores to a different brand name. They carry many of the same products and the same "house brands", but consumers then know if you go to their branded stores, you're going to get a certain level of quality, variety, cleanliness and maybe in-store amenities and perks. If you go to one of their sub-brands, however, you may find older stores that may be more functional than fancy, the produce and other offerings may not be as good and you may not find any custom meat or seafood areas - what's on the shelves or in the coolers are what they have to offer.

Think Wal-Mart as a somewhat-relatable example. At one time at least they had Walmart Supercenters, standard Walmart "discount stores", Neighborhood Markets, Walmart Express, Sam's Club and at one time were developing a gas station/convenience store model. This way, depending on the type or "brand" of the store, you'd know what you'd find there. With Kroger, they're all called "Kroger" though store size, age and quality can be all over the map.

The Kroger stores in my area have all been remodeled and/or expanded in recent years and are really good, but they also have spun a few older stores off as Ruler Foods, which is like Kroger's version of Aldi with their branded items in many cases.

 

[Y2kTheNewOldies]

https://en.wikipedia.org/wiki/Lucky_Stores

Interestingly at one point in the late 1990's to early 2000's Albertsons took over Lucky Stores in California and relabeled them Albertsons. Note the former Albertsons stores in Northern and Central California was taken over by Save Mart Inc which relabeled them as Save Mart and Lucky.

Save Mart to Rebrand Most Albertsons with Flagship Banner

MODESTO, Calif. - Save Mart Supermarkets here expects to convert most of the stores it is acquiring from Albertsons LLC in Northern California and northern Nevada to its own banner, with only a handful likely to become FoodMaxx warehouse stores, Bob Piccinini, chairman and chief executive...

www.supermarketnews.com

Save Mart opens first Lucky California concept store in Daly City - Save Mart Supermarkets

Also Albertsons came back to Northern California by taking over it's former rival Safeway in 2015 and came back to Southern California and took over Vons (Safeways Los Angeles division).

Albertsons Owner to Buy Safeway for More than $9 Billion

<p>Cerberus Capital Management offered $40 per share for Safeway, with the deal expected to close by the end of the year.</p>

www.nbcnews.com

 

[landtuna]

Here in Phoenix Fry's food stores changed to Kroger's long ago and it has been seamless. The old Fry's Marketplace Stores are still open but have the Kroger name now. Albertson's bought Safeway awhile ago. While they run separate weekly newspaper ads, in all other respects they are the same store now. Interestingly though, Albertson's now carries the old Safeway dairy product brands.

Question: Did you hear about the mouse than lived in Purity before moving to Safeway?

 

[KeithE4]

Here in Phoenix Fry's food stores changed to Kroger's long ago and it has been seamless. The old Fry's Marketplace Stores are still open but have the Kroger name now. Albertson's bought Safeway awhile ago. While they run separate weekly newspaper ads, in all other respects they are the same store now. Interestingly though, Albertson's now carries the old Safeway dairy product brands.

Here in Mesa, the Fry's name is still being used, although the store brands are now labeled Kroger. And not only are both Albertsons and Safeway stores still open, but in my area, they are a mile apart. I thought one (likely the mostly-vacant Albertsons) would have been shut down years ago. Not yet, but I expect one or both to go away or be sold off after the merger.

 

[DavidEduardo]

The interesting thing about Kroger is that, like some other chains I guess, some of their stores are relatively small and basic and not terribly updated, while others just a few miles away are varitable palaces by comparison, with in-store Starbucks, fancier and modern decor inside the store, better quality produce, fresh fish and seafoods on ice - packaged to order, upgraded wine selections and sometimes even an in-store liquor shop and other amenities.

All of the chains have very adaptable store configurations and product selection. The factors are things like the ethnic makeup of a neighborhood, the income and education levels, regional diet preferences and even the effect of seasons and weather.

Pavillions is one of the Albertson brands for stores, and those tend to be all over 50,000 square feet with boutique departments, specialty delicatessens, on-site bakeries and other upscale amenities.

Where we are, there are several Albertson brands, and we can even select one to the east of us for a better selection of true Mexican brands and one to the west for greater deli selections.

In areas where average incomes are lower, the stores are smaller, with fewer, if any, luxury items and departments.

They even have different mailers and targeted advertising for different areas, sometimes with store-specific specials as well as ones offered at all stores in an area. In much of the Southwest, the Spanish language advertising has an entirely different set of specials. I was told by a marketing person at Ralph's (the big SoCal Kroger brand) that in LA they have different assortments in Korean, Chinese, Thai, Philippine, Vietnamese, Persian, Samoan and other large ethnic neighborhoods.

 

[Larry]

Interestingly though, Albertson's now carries the old Safeway dairy product brands.

I think Albertson’s uses the same private label brand at all the stores they own nationally (including here in Philly Acme) - Lucerne dairy, Signature (most private label), Open Nature and O Organics, etc

 

[KeithE4]

I think Albertson’s uses the same private label brand at all the stores they own nationally (including here in Philly Acme) - Lucerne dairy, Signature (most private label), Open Nature and O Organics, etc

Hopefully, those low-quality products will go away after the merger. Kroger's own house brand is far superior.

 

[anotherguyTN]

There is a Walmart in a largely Hispanic area of Nashville that I've been in that has a larger Hispanic food section than other Walmarts.

 

[landtuna]

I think Albertson’s uses the same private label brand at all the stores they own nationally (including here in Philly Acme) - Lucerne dairy, Signature (most private label), Open Nature and O Organics, etc

Lucerne was an old Safeway brand going back to the late 40's here in AZ.

 

[Ccook55]

Kroger is closing two metro Atlanta stores December 9--Decatur and in the Buckhead community (the second store nicknamed "Disco Kroger" as a disco called Limelight stood next to it back in the day). Volume and development were cited as reasons for the closures.

 

[gr8oldies]

Here in Phoenix Fry's food stores changed to Kroger's long ago and it has been seamless. The old Fry's Marketplace Stores are still open but have the Kroger name now. Albertson's bought Safeway awhile ago. While they run separate weekly newspaper ads, in all other respects they are the same store now. Interestingly though, Albertson's now carries the old Safeway dairy product brands.

Question: Did you hear about the mouse than lived in Purity before moving to Safeway?

My wife grew up in Phoenix and still will call our Kroger "Fry's" now and then. She still went to a Fry's when she visited a few years back, but her Kroger card was still valid. In Knoxville TN we have Kroger, Wal-Mart, the regional Food City, Aldi and Publix.

 

[DavidEduardo]

My wife grew up in Phoenix and still will call our Kroger "Fry's" now and then. She still went to a Fry's when she visited a few years back, but her Kroger card was still valid. In Knoxville TN we have Kroger, Wal-Mart, the regional Food City, Aldi and Publix.

I still have a Fry's card from when I had a home in Prescott. I can use it even now at Ralph's in the Palm Springs area. Obviously, they different named stores share the same database.

Here in La Quinta we were awaiting the opening of a new Pavillions right across from the existing Ralph's. Now, if the merger goes through, we'll likely never see the much nicer Pavillions and its better selection of quality items.

 

[Prescott Joe]

Consolidation and mergers almost always mean less competition and higher
prices for consumers. With everything going up, up and away these days,
the timing couldn't be worse!

 

[DavidEduardo]

Consolidation and mergers almost always mean less competition and higher
prices for consumers. With everything going up, up and away these days,
the timing couldn't be worse!

In this cases, and certainly in others, consolidation can result in economies of scale. The motivation for the merger is very clearly expressed in the press release: to be able to compete in products and prices with Walmart and Amazon.

Walmart already is larger than the combined Kroger and Albertson's network of stores. Amazon is smaller still, but has been growing in the supermarket product categories at double digit rates in the last few years.

When there are too many outlets for essentials, they system becomes inefficient because everyone from suppliers to the retailers has to duplicate systems multiple times in the same market area. At some point competition can't lower prices when too many entities are doing the same thing in the same area.

A good example, and a case study in quite a few MBA courses, is that of DHL. It iis a dominant package and overnight delivery service in Europe and some parts of Africa and Asia, but its attempts to become competitive in North America failed. There was not much DHL could do to provide lower costs to users of their service, and UPS and FedEx as well as the USPS were well entrenched with not a great degree of dissatisfaction.

DHL could, thus, offer no USP (Unique Selling Proposition) other than being new and, maybe, European. Despite building a good distribution system in the US, they could not gain market share... but they took enough from the other three providers that they cause shipping costs to go up. Eventually, they retracted and simply became a needed service for European customers or US customers shipping to some less frequented location on the Continent. So, the entry of a fourth package carriers caused prices to increase because they made everyone's system less efficient.