What is Albertsons (Safeway) doing in Florida?
Back in June of 2008 when Albertsons agreed to sell 49 of its locations in Florida to Publix, it seemed a foregone conclusion that the chain’s days in the Sunshine State were numbered. Yesterday, the Tampa Bay Times reported that the Albertsons banner was being removed from the last three stores that carried it in the state. The strange thing is that, instead of just closing and selling off the locations, Albertsons Companies is reopening the stores as Safeway units.
The conversion to Safeway is expected to be completed by spring. The locations will feature newly remodeled interiors that include digital signage, menu boards, a natural/organic area and a Starbucks. The stores located in Altamonte Springs, Fort Lauderdale and Largo will be supplied long distance by a company distribution center in Houston, TX.
Safeway, which positions itself somewhere in the middle of the competitive grocery landscape, will likely face the same challenges that Albertsons did before.
Jeff Green, a retail analyst who spoke with the Tampa Bay Times, speculated that the stores were being reopened as Safeways to see how they would compete against Publix. Could Albertsons Companies be looking for a way back into Florida? If not, why bother with the millions invested in remodeling the stores?
Discussion Questions
What do you think Albertsons Companies is hoping to accomplish by converting its remaining three stores in Florida into Safeway locations? Does Safeway have a better chance of succeeding and expanding in Florida than Albertsons?
Poll
BrainTrust
Paula Rosenblum
Co-founder, RSR Research
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Doesn’t make a lot of sense to me at all. Florida grocery shopping is typically driven by proximity first, then price.
There are Publix every 20 blocks or so. And there are Winn-Dixie stores, which are far better than they used to be. For those willing to travel a little ways, there are Walmart Superstores (which I think were actually what drove Albertsons down).
I suppose it’s a reasonable experiment given Safeway’s size (what are three stores in that context? Not much.). But I don’t expect it to go anywhere.
Maybe the better question is, do we have any reason to believe that Safeway can succeed in Florida? No offense to Safeway folk, but I don’t think they’re doing anything better than any other mass-appeal grocer. And their profit margins can’t be that good if they are supplying the stores from Houston.
This is a silly exercise and a waste of time. Is the Albertsons banner so toxic? So you choose a 90-year-old banner to represent something new and innovative? Why not just stick with “The New” Albertsons or come up with something entirely unique?
It’s a sensible means of re-setting the brand in Florida and the Safeway format seems more in line with the competitive position they are aiming to take. Meanwhile they retain the real estate, hopefully the staff, and get to test “entry” into a market in the least expensive way.
The only thing I can surmise is that this is a possible test. However, the stores are in disparate parts of the state, resulting in no real marketing presence and higher costs of service to them. On the one hand I can appreciate the desire of Albertsons to develop a banner against the market leader and near monopoly of Publix in a state with a growing population. On the other hand, I question whether a three-store initiative against the Publix juggernaut can produce enough positive traction for Albertsons to return to Florida similar to the scale it once enjoyed.
Not sure what Albertsons is doing other than experimenting to see if the Safeway banner and store selection will work in Florida. Safeway is well known in the Baltimore-Washington area and many Florida residents shopped Safeway in the Mid-Atlantic area before retiring to Florida, particularly the east coast of the state where the stores are located. I do question the economics of supplying the stores from Houston, Texas. That seems like a long way to be able to do quick inventory replenishment.
It is definitely an interesting play. Fail and then employ a try, try again approach to the market. That being said many consumers in the market are unlikely to realize it is the same company just using a different brand name. Albertsons may believe that they can induce trial and then adoption.
As many have pointed out, it is a way to test the market but it lacks scale and has a long supply chain. Neither of these is conducive to success.
Well we know the Albertsons name didn’t work. Those remaining stores are probably the cream of the crop for a chain of under-performing stores and were probably profitable. Changing the name to something other than Albertsons might be worth a try.
I really doubt they plan a return to Florida. Albertsons, along with Food Lion and Sweet Bay, were crushed by Walmart and Publix. Winn-Dixie was forced to file bankruptcy and then get bailed out by Bi-LO. A sterile chain like Albertsons has no chance. Best to just keep those three profitable stores and not read any more into it.
Florida has an extraordinary number of snow birds and vacation visitors as well as people relocated from places where they may have previously shopped at Safeway. It may be something as simple as seeing if the Safeway name, private brand loyalty, loyalty card benefits and comfort of familiar surroundings entices those folks to shop at Safeway when they are in Florida.
This move speaks to Albertsons’ momentum and its desire to compete in large markets across the country. While new to Florida, the Safeway banner is generally recognized as a national leader and could succeed in the right locations with the right execution.
Similar to its success in reviving weak Albertsons stores over the past eight years, Albertsons may use these stores to establish a beachhead in the Florida market and potentially expand over time.
The answer to Gene’s question (about toxicity) is “Yes!” At least here in the Bay Area (SF, not Tampa) they took a popular, if underperforming, local nameplate, changed it to Albertsons, and left it a diminished mess. The first thing the new owner did was to restore the original brand … so if history is any guide, however small Safeway’s chances are, they’re better than Albertsons.
Liatt and DJL have the combined correct answer. The stores are worth keeping regardless of banner. Perhaps more of an advantage with snowbirds using the Safeway banner. These are good locations or Albertsons would not have kept them open. If it fails, other grocers will line up and buy them. In my opinion the worst case scenario is that this is just a lateral move.
These three locations were pretty tired and I’m not even sure they they were kept open. They were not high volume; moderate volume at best and tired on a good day.
I think rebannering them to Safeway and remodeling will increase sales just because the stores were in huge need of a remodel. Doing things like adding in a Starbucks and upgrading the displays will get them more attention and I think they will see some nice sales increases with this move.
Still I don’t see the point to doing this. The supply chain is too far away. Are they planning some kind of mass expansion in Florida using the Safeway banner? Is that really the best use of their resources? The rest of their enterprise is a mess; Safeway locations in NorCal are still disgustingly overpriced and understaffed. Safeway locations in Phoenix and Denver keep underperforming the competition. They are also trying to integrate A&P and Haggen Stores they have converted or are in the process of converting. And they are in the process of systems conversions, private label transitioning (converting Safeway brands to Signature brands and discontinuing Supervalu brands at many of the locations). This operation is a mess!
No. Safeway could not make a go of it in Chicago under the Dominicks name, a home town chain for years.