Supervalu Gets FTC OK to Buy Albertsons
By George Anderson
The Federal Trade Commission (FTC) has approved the $9.7 billion sale of Albertsons to a group of investors including Supervalu without requiring any assets be sold off.
Supervalu’s end of deal (it will purchase 1,124 stores under the Acme Markets, Albertsons, Bristol Farms, Jewel-Osco, and Shaw’s Supermarkets banners) will be completed once it is approved by shareholders of the two companies.
“I am excited and look forward to detailing the strong benefits from this proposed combination for the investment community,” said Jeffrey Noddle, chairman and chief executive officer of Supervalu in a released statement. “We believe that this merger creates tremendous value for both Supervalu and Albertsons shareholders, as the combination results in a retail powerhouse with strong market positions, tremendous brand equities, significant size and scale, and a solid financial platform.”
With the addition of the Albertsons’ banners, Supervalu will have 2,656 stores putting it second in size only to Kroger in the supermarket channel.
Moderator’s Comment: What will Supervalu need to do once it takes possession of Albertsons’ stores? Are there specific challenges or opportunities you
see for individual banners (Albertsons, Acme Markets, Bristol Farms, Jewel-Osco, and Shaw’s Supermarkets) that Supervalu is acquiring? –
George Anderson – Moderator
Acme needs the most work, so let me start there. Acme needs to be rebranded, plain and simple. These stores are currently operating between Aldi and Save-A-Lot on the low end and ShopRite, Weis and others on the higher end, and that can’t continue forever. The company needs to determine Acme’s place in the market and reset the stores correspondingly. My suggestion would be to change the conventional stores over to Save-A-Lots, and rebrand the superstores to Bristol Farms.
The Albertsons stores that are joining Supervalu need to be examined store-by-store to see which are running well, which should be shut and which should be rebranded as Bristol Farms or Save-A-Lots.
Jewel and Bristol Farms need the least amount of work, although Bristol should act as a marketing incubator for the whole chain. The learnings from those stores should be incorporated at Jewel, Shaw’s and, as mentioned, the appropriate Albertsons and the Acme superstores.
I am curious as to specifically why the panelists believe ACME needs the most work. ACME and Jewel were the cash cows keeping Albertsons afloat during the Southern California labor crisis. ACME and Lancaster Brand have high recognition in the Philadelphia metro region. ACME has survived Skaggs and Albertsons – so why exactly do its stores need to be rebranded?
Jewel has maintained a long standing base with consumers in the Chicago area. Jewel is known for freshness and quality with groceries and produce. Jewel possesses very good customer service skills, as well. It also possesses a near 49% market share in the Chicago area. I believe Supervalu should only tweak a few things with Jewel, such as organic food options and the addition of prepared foods. This will help Jewel compete with the rather impressive Dominick’s Lifestyle stores. Also, the IT systems and Voice Communication systems in the Jewel stores far exceed the competiton, and it would be a sin to tweak these as well.
For now, I hope I keep hearing “bake shop 501, bake shop 501” on the store’s PA….or chef’s kitchen, pier 14, or choppin block, haha. All of you Jewel’s fans will know what I am speaking of……
I don’t really have enough of the facts to answer this question directly, but here is what confuses me. Why couldn’t Albertsons have saved itself? What is it that makes one organization able to take over another operation and make a go of it when the other could not? Are the people smarter? Are the new people willing to make difficult decisions the others werent? Are there legal contracts or union commitments that constrained the original owners? It just doesn’t make sense to me (besides the contractual issues) that the corporate structure should make a difference. If the board of directors is unhappy with the management team, why don’t they just tell them to leave? All the restructuring seems to do is make a lot of attorneys and investment banks richer while the fundamental task of getting goods to consumers waits until all the dust settles. (Sorry, I feel little ornery today.)
It is my hope that the Supervalu Team is capable of seeing through the smoke screens much of Albertsons’ current management will blow their way in attempts to save their own positions.
If Supervalu can shed the management teams that drove Albertsons into the ground, they are in a good place to have a strong company. If they can not, it will be just a matter of time before they will come full circle with the merger of Albertsons and American Stores.
I look forward to a very interesting year that just may redefine the way many in the industry do business. Could consolidation in the wholesale sector be next?
For those who are advising business students on topics for case histories, they might want to consider the corner of North Avenue and 9th Avenue in Melrose Park, Ill.
The long-time home of Jewel-Osco headquarters is about a mile west of the corner.
On the southwest corner of North and 9th is Cub Foods. On the southeast corner is a Jewel-Osco. Immediately south of the Jewel-Osco is Target, which includes a recent, substantial expansion of its grocery section, including refrigerated goods.
The changes about to unfold from the merger — and the new competitive dynamic introduced by Target — will be on daily display for any student who wants to monitor retail warfare at very close range.
This is a great deal for all involved with the pending sale. This will finally allow the remaining pieces of the company to go their separate ways and get back to the business of operating grocery stores, which is what they are supposed to be doing. This sale has been in the works since September 2nd of last year and it is good to see one of the last major hurdles overcome to finalizing the deal. Hopefully, now the 200,000 employees of Albertsons can have some piece of mind in regards to their future.
Answer to J Costas’ question: sometimes the government (federal or state) requires pieces of an acquisition to be sold off to encourage competition. Apparently, the federal government doesn’t believe this is necessary for this acquisition. But Supervalu may sell various locations for its own reasons.
The number one priority for Supervalu: determine who in the acquired organizations are worth keeping and who should be replaced. Albertsons was not known for competent cohesive management. The acquisition is so large that determining who the best people are will not be easy. The market positioning and other implementation issues are less daunting when you have a team you believe in.
Having done business with both Supervalu and Albertsons, I would think that it will be a tremendous challenge to Supervalu to run the entire entity. Both Supervalu and Albertsons are well known to be heavy maintenance, from the vendor’s standpoint.
It is a lot of work to run a national grocery chain with a lot of perishables daily. Supervalu has to spend a lot on building infra-structure, supply chains and pay their bills on time. It will be tremendously squeezed by Wal-Mart, who is well know for efficiency and bargain basement prices–however, my experience with Wal-Mart has been a very good one — very, very few returns and pays its bills within 5 days.
Good luck to Supervalu.
It would seem a bit late for offering Supervalu suggestions on how to craft new designs for its acquisitions of Albertons and their family of stores. My belief is that Jeff Noddle and his team didn’t invest billions in Albertsons without having a very carefully designed a master implementation plan beforehand.
Like other panelists, I might add my two-cents worth. But after careers at both the #1 and now the #2 supermarket chain, I have come to the conclusion that it would not be timely to give advice after a well-planned purchase has been completed. This will be a challenging assimilation and improvement process.
So let’s wait to see how the in-place plan unfolds as the Supervalu team melds the 1,124 acquired stores across the country into their retailing portfolio.
I agree with Ron that Acme needs the most work. Acme will certainly be a challenge. The others like Jewel, Shaw’s and Bristol Farms really did not seem broke to me, so they don’t need much fixing. Typically, when Albertsons bought a chain of stores, they were like a bull in the china shop. Now that the bull is gone, it can be business as usual once again. For the most part, Supervalu should put these chains back into the hands of those who did such a fine job with them before Albertsons took over.
I would hope they do what Albertsons should have done… take some of the great pieces of Shaw’s and Bristol Farms and incorporate them into a shopping experience that will differentiate them in the marketplace rather than trying to homogenize them into a bland offering. Supervalu has the people in place and some of their own concepts like Sunflower that can be used to create an enjoyable experience for their customers.
A quick comment. My experience with Bristol Farms says to let them be; they know what they’re doing and, also, I believe Albertsons actually took some of what Bristol Farms did and tried it with some of their stores successfully.
Albertsons’ marketing team is very hesitant to pull the trigger and that’s where Supervalu needs to start some changes.