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Safeway May Benefit From Albertsons' Deal

January 30, 2006

By George Anderson

Safeway has taken a fair amount of criticism over the years for its handling of chains it has acquired but, according to some, it may be the biggest beneficiary of a merger and acquisition deal it had nothing to do with.

According to a report in the East Bay Business Times, Safeway's stores in markets where Albertsons has stores may be able to take advantage of the normal transition stage that takes place during any change in ownership.

Neil Stern, senior partner at McMillan-Doolittle, agrees. "Any time you have a competitor go through a major change, you have the opportunity to solidify your customer base and poach some of their customers," he said.

Safeway has also timed its lifestyle store-remodeling program and marketing campaign to put itself in a good position to benefit from the uncertainty that comes with a change in ownership, said Mr. Stern.

Ted Taft, a partner in Meridian Consulting concurs. "Safeway has had lots of success with its new lifestyle stores," he said.

Moderator's Comment: Who other than those involved in the deal for Albertsons stand to benefit most from it? What will they need to do to gain a competitive advantage during the new ownership transition period? - George Anderson - Moderator

Discussion Questions:

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Instant Poll:

Which traditional grocer do you think stands to benefit most from the Albertsons sale?


The logical choice might be Safeway, but when has Safeway been able to take advantage of opportunities in the past with any sort of success? If Safeway does benefit, it will be short lived. In the long run, chains that are on both ends of the hourglass will benefit the most.

David Livingston, Principal, DJL Research

I think it is wise that Safeway does not expect "unearned" benefit from the Albertsons transition. However, if they proactively use this as an opportunity to leverage their frequent shopper card base to actively recruit and attract these shoppers who may be "shopping" for a new store in the interim, it could be a very productive program, if it is done as a longer term campaign, not as a short term promotion.

It is likely that many of the Albertsons shoppers also on the Safeway database as secondary shoppers. Using the database for these type of opportunities makes much more sense then overtly recruiting Albertsons shoppers will mass marketing ploys that cold alienate the existing Safeway primary shopper.

It will be very interesting to see how Safeway and others handle this, but all things being equal, I would have a bit more confidence in Kroger ceasing this special CRM opportunity more than any of the others on the basis of their advanced understanding of their consumer base by using dunnhumby analysis and other resources.

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Mark Heckman, Principal, Mark Heckman Consulting

No one competitor necessarily benefits from the Albertsons deal. Whichever chain clearly defines a customer base and provides value to that customer base wins.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

Here in the EastBay (from whence the article originated) the largest gainers are likely to be the smaller chains: Andronico's has been growing rapidly, and Whole Foods established a strong presence in Berkeley years ago when Co-Op went el foldo. Albertsons still has a large number of stores in the higher income areas here, and those (high end) stores would seem like a good fit in such areas.

I'm not at all sure that Safeway will be a long term beneficiary: the two stores are already in competition in most areas, and those people that want to shop at Safeway already can...nobody is going to like a store if they're forced to shop there.

And who knows, Albertsons may even be kept as a going concern, or better yet, BRING BACK LUCKY'S !


Albertsons competitors will have a great opportunity during the transition period to attempt to lure away consumers. This will most likely be most successful where Albertsons is the weakest. I doubt that Safeway/Dominick's in Chicago will have much luck, as Safeway hasn't figured out how to effectively do business in this area. And I expect that after SuperValu takes over Jewel, market share will continue to grow at Dominick's expense due to Jewel being managed locally.


Safeway Stores have been taking over customers from Albertsons for years! In Northern CA, Lucky Stores held there own before Albertsons came into the market. Kroger and the independent Stores are also ready to take up the slack from Albertsons, the only company that's not ready is Ahold.


Jewel-Osco (Albertsons) is dominant in the Chicago area with 43% market share and I assume their market share will even grow stronger with Supervalu at the helms...an upper Midwest company that will allow Jewel's Melrose Park office to do most of the decisions.

The challenge will be to see what happens to the Jewel-Osco combos and if the name Osco will stay in the combo stores. For years Jewel has had a few Osco stores selling general grocery products from the Jewel stores. Now that freestanding Oscos are not going to owned by a grocery chain, I see a drastic reduction in convenience grocery goods when the stores become CVS. I can see that as being a major disadvantage to CVS and an advantage to Dominick's Safeway. Many Dominick's are located near freestanding Oscos and thus Osco beefed up their grocery goods to compete with Dominick's! Now those people will have no choice but to go to the plain vanilla box Dominick's.

Also, Jewel-Osco has really revamped their store decor program in the past few years, adding rich colored hues and bright graphics to the stores, while Dominick's has taken many steps backwards in actually downgrading the Fresh Stores to nothing more than a strip fluorescent lit vinyl tile vanilla box.

Safeway will still have to overcome the marketing issues it experiences here in Chicagoland. Safeway buyers are in California, placing California items on our Chicago shelves, while Jewel emphasizes having a purchasing and marketing staff based right here in Chicago, so Chicago kosher products, lunch meats, breads, etc. are placed on the shelves at Jewel.

Safeway is a little late at instituting the Lifestyle stores here. SuperValu will be an even larger challenge to Dominick's here in Chicago.


I agree with the Chicago assessment. Jewel has tried under outside ownership whereas Dominick's has not. Across the country, I believe, the same strategy has worked for Albertsons - keep decision making at the local level to appease your customers. Seems to me that Safeway should worry more about that issue than raiding the Albertsons cupboard for a few months.


It is impossible to know how Supervalu will actually manage this transition, but early comments lead us to believe that they will halt the centralization at ABS and re-establish regional autonomy.

Where there still is a process and some people in place - Jewel, Shaw's, Acme to some extent, and certainly Bristol Farms, this will make the transition both fast and probably more effective than anything Albertsons would have done on its own. This is not good news for Safeway in Chicago, certainly, or for Ahold in the East.

But the vast Intermountain division and the other Albertsons banner stores are another story - the independent judgment and process was more minimized for a longer time, and I suspect Safeway and Kroger, as well as good in-market independents and regionals, will capture share. They probably would have anyway.

And for all the stores that Cerberus Realty acquired - a flurry of small acquisitions followed by a lot of stores becoming something that is NOT a supermarket will of course free up some share - especially Florida, Texas, and the Southwest.


Albertsons covers a lot of territory, so it may be reasonable to consider that the anticipated deal will open varying competitive opportunities in different markets. Here in the Southwest, I'd venture that smart regional players like Basha's, Sprouts, and Sunflower will gain a little ground.

As for Safeway, I believe its transition opportunity will also vary by region. It has a nice marketing campaign going at the moment. If it can execute on it at the store level, the company may be able to drive some incremental share of wallet while Albertsons is focused on the transaction.

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James Tenser, Principal, VSN Strategies

Neil Stern is right; in transition times all competitors are in a position to advance, provided they keep faith with the consumer.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

All of the major food and drug stores will be benefiting from the "hiccups" taking place during the transitory period as Albertsons/Sav-On changes management, culture, and even product offerings. These include Wal-Mart, Safeway, CVS, the clubs, etc. None of these competitors have to do anything except maintain a stable status quo, as customers consider shopping elsewhere and become alienated during the acquisition process. Transitions are expensive and tend to estrange customers, rather than retain them. In the very competitive food and drug retail marketplace, even the smallest change can require tremendous resource allocation to correct. For Supervalu et al. this will be difficult not to do as they try to manage this transition process. The key to their success will be recognizing changes that have isolated their customer base and then how fast they can implement damage control.

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Kai Clarke, CEO, American Retail Consultants

"All politics is local," said Tip O'Neill. He wasn't talking about groceries, but grocery shopping is about as local as you can get. The #1 opportunity for the Albertsons competitors: steal the talented Albertsons people ASAP, if you haven't already. And do everything you can to hold onto the best people you already have. The grand national strategies won't mean anything if the local management is lousy. If the new owners are smart they're already making a list of who's worth keeping and who isn't, and they'll raid the competition to replace the weak.

Mark Lilien, Consultant, Retail Technology Group

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