Last week’s revelation of the grocery stores that would be sold under a proposed Kroger-Albertsons merger has generated almost as many questions as it answers.
On the one hand, Washingtonians finally know which of the state’s 124 locations that Kroger, owner of QFC and Fred Meyer, and Albertsons, which owns Safeway and Haggen, have offered to “deliver” to C&S Wholesale Grocers based in New Hampshire in order to win regulatory approval for the controversial $25 billion merger.
On the other hand, buyers and workers still have little clarity about the local impacts of a deal that would give nearly half of bigger Approximately 160 Seattle-area Krogers and Albertsons in a company whose core retail operations include the interestingly named Piggly Wiggly chain.
It would probably be the biggest change ever in a Seattle-area food landscape that has already seen plenty of disruption, most recently with the PCC Community Markets battles.
Buyers and workers still do not know if they are finding Theirs The Kroger or Albertsons neighborhood store on the list is 617 nationwide — up from 579 on Tuesday — meaning they have to prepare for big changes or expect business as usual.
What is a loyal QFC shopper to make, for example, of the fact that all but one QFC—the store in Seattle’s University Village—would go to C&S, which is also buying the QFC brand or “the flag”?
Will those stores remain like QFC, or “will we become Piggly Wiggly people?” joked a worker last week at C&S-affiliated QFC in Seattle’s Wallingford neighborhood, who declined to give their name to protect their employment.
And what happens to the locations that are not sold to C&S? Should Fred Meyer fans be relieved that none of those stores are part of this grand bargain? Whether Safeway shoppers and staff should be comforted or worried that two-thirds of the stores in Everett, Seattle, Bellevue and Tacoma will remain with Kroger-Albertsons?
Does this mean Kroger-Albertsons plans to upgrade those stores with, say, better technology and improved security?
That would be welcome at places like Othello Safeway in Seattle’s Rainier Valley, which has long struggled with crime and maintenance, said Sarah Valenta, a Rainier Valley resident who oversees community and business development at HomeSight. a non-profit organization focused on housing and small. businesses.
If keeping the locations means Kroger-Albertsons plans to “invest in our community, that’s encouraging,” she said. As Othello Safeway now stands, “it honestly sometimes feels like you’re in post-apocalyptic times walking in there,” Valenta added.
Such uncertainty about a post-merger food landscape is hardly surprising.
Few Seattle-area shoppers probably know much about C&S, which is primarily a wholesaler with a relatively small retail operation of about 160 locations primarily in the Midwest, Northeast and Southeast.
The sale package has been criticized as insufficient by federal and state regulators, who question whether C&S has the capacity to compete with a combined Kroger-Albertsons — despite repeated assurances from the three companies.
And then there’s the conundrum of sales itself: why are some locations going and others staying? And what does the mix tell us about the prospects for each location?
According to business experts, the strip store mix reflects a complicated bargain between Kroger, Albertsons and C&S Wholesale, as well as federal and state regulators who must approve the merger and could veto the entire deal.
Not only are sellers and buyers trying to get the best possible locations for the best price, they are trying to assemble a pool of locations that they hope regulators will see as maintaining competition in markets where Kroger and Albertsons now compete, said Jarrad. Harford, chairman of the department of finance and business economics at the University of Washington’s Foster School.
“It’s a very difficult puzzle to solve,” Harford said, of the painstaking location-by-location negotiations to put together a sales package that “satisfies regulators and is something C&S is willing to pay for.”
One way to understand the list of sales is to consider how they fall into four buckets, said Kevin Boeh, a mergers and acquisitions expert at the Foster School.
First is the bucket of stores the companies were forced to sell to satisfy regulators’ concerns about losing competition — for example, a Safeway that’s “nearby, in the same mall or just down the street from a Fred Meyer.” said Boeh.
A second bucket, Boeh said, contains locations that Kroger and Albertsons could have sought to offload — locations that, for example, were too close to a competing grocery retailer or a hybrid retailer, such as Walmart, that also sells items food.
Many of the Kroger and Albertsons locations on the sales list “are literally next door to a Target Grocery, a Trader Joe’s or a Walmart Supercenter,” Boeh said.
A third bucket contains locations that C&S may have found particularly attractive—for example, stores in affluent neighborhoods with little competition nearby, such as QFC on Novelty Hill in Redmond.
Boeh speculates that these are “high-dollar locations [where] maybe the QFC tag isn’t working … or maybe the Safeway tag isn’t working,” and C&S thinks it can profitably upgrade the location to something more along the lines of a “Met Market, Whole Foods, Sprouts … kind of thing.”
A fourth bucket, Boeh said, is locations NO on the list — stores that, for whatever reason, Kroger and Albertsons feel will do better under their new combined structure.
Boeh points to the Cle Elum Safeway, which has little local competition and massive volume from Interstate 90, as an example of Kroger and Albertsons’ guardians — “incredible stores where we just have a lock on the market.” Likewise at QFC in University Village.
However, while it may be possible to decipher the reasons for the sale package, it is much more difficult to predict whether the package can work as a retail operation.
Some shoppers remain concerned that C&S may struggle to operate its new stores in such a challenging market that, according to Kroger and Albertsons, much larger growth through a merger was the only path to survival.
Even with the scattered stores, C&S will have perhaps one-sixth the retail footprint of a combined Kroger-Albertsons.
“If [Albertsons] and Kroger claim they aren’t big enough to compete, how can C&S Wholesale, a smaller company with little retail experience, be expected to be competitive?” asked Mark Sindelar, whose local QFC, on Novelty Hill Road in Redmond, is listed for sale.
Experts such as Boeh and Harford agree that the future for strip stores, such as those for places that did not make the list, will depend in part on the strategies and capabilities of their respective owners after the merger.
Harford, for example, thinks C&S, with its extensive wholesale operations, probably already has the scale needed to negotiate competitively with food manufacturers.
However, he and Boeh believe that the fortunes of individual stores also depend on external factors beyond management’s control.
These include increased competition from players such as Amazon and Walmart and some new consumer preferences for, say, home delivery over in-person shopping.
But they also include factors unique to each store, such as road access and neighborhood demographics, that were probably already helping or hurting sales even before a merger was proposed.
As Harford says, “if you’re always going in there and it looks like a ghost town, that’s not a good sign.”