Friday, March 07, 2014

Safeway sold to Albertsons for $9.4 billion

I found this story through both CS Monitor and

PLEASANTON -- Safeway announced on Thursday it had been bought by private equity firm Cerberus Capital Management in a $9.4 billion deal that will merge the Bay Area's dominant grocery chain with Albertsons, creating a massive chain that promises to further transform how Americans shop for groceries.
By merging Pleasanton-based Safeway with its Boise, Idaho-based Albertsons, Cerberus hopes to cut costs and expand product selection, and compete in a market Safeway and Albertsons have been steadily losing to big-box retailers, convenience stores and niche grocers.
For shoppers, the sale could mean lower prices, as executives pledge to pass cost savings on to the consumer, although some analysts are not so confident. For Safeway employees -- who will be negotiating a new contract with the company later this year -- jobs could be on the line, as antitrust regulations and duplication between the companies may lead to individual store sales and closures.
"As our customers need change, we have to adapt (to) a world where they have more options than ever." Albertsons' Chief Executive Officer Bob Miller, who will become executive chairman of the new supermarket conglomerate, said in a conference call with media.
Last year, Walmart, Target and Costco occupied three of the top-five spots among best-selling U.S. food retailers, joined by Safeway and Kroger, and even 7-Eleven ranked ninth, according to industry publication Supermarket News. Online grocery shopping and delivery has grown, too, and Amazon Fresh launched last year in the Bay Area, delivering food and beverage products from the Web's largest retailer.
Executives said the Safeway sale will help both chains cut costs by combining operations such as distribution. "These are real savings that we'll be able to pass along to our customers," Miller said.
Here in Campbell, the local Safeway store is about five blocks from my home.  The closest Lucky store is about a mile and a half away from my home.  I shopped at Safeway because it was much more convenient for me in the commute, and for getting in and out of the store parking lot.  I have no problems with the customer service at Safeway.   Pricing on inventory for the two grocery stores is about similar, although Safeway pushes the "Buy-More-Groceries-Than-You-Need-And-Save" meme.  How many customers buy five 12-pack cases of soda, just to get the low price savings?  I will also admit that I was never really thrilled with Safeway's continued use of the club card--even after Lucky's discontinued their club card use years ago.  While Lucky's may be a bit further away, I had no problems with the selection and quality of their groceries, prices, and customer service.  But those are minor quibbles, and both grocery stores still competed with each other for shoppers.

Now all that has changed.  Real competition has been replaced with pseudo-fake competition, as Safeway and Lucky's are the same grocery stores with different business names on the stores.  I am sure Albertsons conglomerate will be cutting costs in combining the generic "Safeway Kitchens" groceries with Lucky's "Lady Lee" groceries to be stocked in both store shelves.  And I'm sure there will be distribution savings in shipping your basics of milk, meats, veggies and fruits to both stores from same distribution centers.  But I doubt I'll see any savings, as prices will remain the same and more profits will go into Cerberus' bank account.  I will also guess that Cerberus will be forcing more wage concessions from Safeway employees, pushing wages further down or engaging in more anti-union busting.  If there is a Safeway store, and a Lucky store located across the street from each other, guess which store will be closed?  I fear that customers and Safeway employees will be getting the short shaft in this deal, with the profits and benefits going into Cerberus

Maybe I should start my grocery shopping at Smart and Final, or Nob Hill?

Update: Going through the Mercury News comments, I noticed that Cerberus Capital Management had purchased Mervyn's, then pretty much shut down that department store chain.  It was a pretty good department store, selling no-frills inventory at decent prices.  I would shop for clothes at Mervyn's.  Mervyn's went into bankruptcy and was sold to Cerberus, which then shut down the entire chain.  Ironically, the Mervyn's store that I went to in Campbell remained empty for years, until it was renovated into two-store shopping center of a Home Consignment store and a...wait for it....A Safeway grocery store!

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