Why Kroger Buying Albertsons Is Good News

This is huge. Kroger announced today that they intend to purchase Albertsons in a $25 billion deal that will rock the retail grocery industry.

"The deal, which is expected to close in 2024, would combine two of the largest supermarket chains in the country and create one of its largest private employers," reports CNN today. "The two companies have a combined 710,000 workers – most of them unionized in an industry with low union rates – nearly 5,000 stores and more than $200 billion in sales. The companies say they reach 85 million households." It will be the largest supermarket chain in the U.S.

This is great news for shoppers. Albertsons has long lagged behind in keeping up with trends in the grocery sector. 

This is no ordinary merger. It is gigantic. "Albertsons Companies is a leading food and drug retailer in the United States. As of June 18, 2022, Albertsons Companies operated 2,273 retail food and drug stores with 1,720 pharmacies, 402 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. Albertsons Companies operates stores across 34 states and the District of Columbia with 24 banners including Albertsons Safeway, Vons, Jewel-Osco, Shaw's, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci's Food Lovers Market." (Albertsons newsroom, Oct 14, 2022) 

Kroger is the fourth largest food retailer in the nation, according to Progressive Grocer (May 2022), behind only Walmart U.S., Amazon, and Costco with fiscal year end sales of $137.8 billion. That's nearly twice Albertsons's $71.8 billion.

"Kroger said the deal would benefit consumers and it will use half a billion dollars in cost savings from the merger to invest in lower prices. Albertsons is known for having higher prices than Kroger and analysts say Kroger may try to lower the chain’s prices." – CNN

A favorite example of mine is Randalls, one of the many Albertsons brands. Here in Houston, Randalls has been struggling for years, and they seem oblivious to what the competition is doing and how the competition is killing them. 

There is a grocery chain here in Texas called H.E.B. They are truly the best grocery stores I've ever been in, anywhere in the U.S. Their selection is amazing, their prices are reasonable, their quality is top-notch and their partnerships with local producers and food makers is outstanding. 

In June 2018, a new H.E.B. opened directly across the street from a large Randalls in Bellaire (a separate city surrounded by Houston). As soon as they began construction, I knew the end was near for that Randalls. Business at Randalls immediately plunged as H.E.B. siphoned off traffic from them. While customers across the street at H.E.B. were enjoying upbeat music, wide aisles, lower prices and a far superior selection of nearly everything, the stale old atmosphere at Randalls was populated (it seemed) only by a geriatric crowd who were (in my opinion) probably afraid of change.

H.E.B., by the way, had fiscal year end sales of $34 billion. Not bad for a company that's almost entirely within the state of Texas and not nationwide like Albertsons. H.E.B. was named America's second-best grocer, behind only Amazon, in January 2022. To anyone who's ever shopped at an H.E.B., that comes as no surprise.

Walk into most Randalls stores in Houston and you'll notice how, well, dead it feels. Which brings me to Randalls in Chicago, circa 2013, and how it relates to Randalls in Houston in 2022. 

Dominick's, which was started in 1925 as a corner market on the West Side, grew into Chicago's second largest grocery chain behind Jewel with 72 stores. Safeway bought Dominick's for $1.2 billion in 1998, incorporating it into the nation's second-largest chain. Dominick's notified the state Oct. 30 that it would close all of its Chicago-area stores by Dec. 28, affecting a total of 5,633 workers. Jewel-Osco has plans for four stores and Roundy's, the parent of Mariano's Fresh Market, announced it will acquire 11." Chicago Tribune, Dec 17, 2013

At its height, Dominick's was in Chicago and its suburbs, northwest Indiana, and parts of Wisconsin with some 12,000 employees. At first, it was a nice new alternative to the old-fashioned grocery stores. And, at that time, they had a better selection than most of the chains. 

But Chicago is a very competitive market for grocery stores, and by 2010 a lot of small local grocers were getting very creative and stealing some of Dominick's market share. The bigger problems, however, were the bad business decisions behind the scenes. And those bad decisions were made by the current owner, Safeway. And you know who owns Safeway? Yep. Albertsons.

Deja Vu: I moved from Chicago to Houston a few months before the downfall of Dominick's, but I followed the news. And so, when I walked into a Randalls in Houston for the first time it was a spooky experience. I got about 30 steps into the store when I thought, "wait, it feels like I've been here before but...that's impossible." After seeing the Safeway brands on the shelves, I realized that in essence I was in a Dominick's. Randalls and Dominick's looked exactly the same.

So here we are in 2022, and Albertsons is being bought up by Kroger. "It’s 2022 and Randall’s is still hanging on by a thread in Houston, as of this blog posting, there are only 16 remaining locations. A far cry from the 70+ concurrent locations, the chain offered at its heights in the 90s," noted Houston Historic Retail in May 2022. Chicago flashbacks and deja vu, indeed.

Kroger is, and always has been, a high-quality grocery store. I don't know if Randall's will be renamed, or just how Kroger will absorb them into its fold. But whether it gets renamed or not, it's just another of many cases of changing hands. The big difference this time, however, is that – unlike its extinct doppelganger Dominick's – it and other Albertsons properties face a brighter future. 

Related Articles:

The Kroger-Albertsons Merger, and what it could mean for Houston - Oct 19, 2022 - Houston Historic Retail 

U.S. grocer Kroger carts away Albertsons for $25 billion but faces antitrust test - Oct 14, 2022 - Yahoo! Finance

Randall’s Going Out of Business Sale in Sugar Land and Why This Time It’s a Little Bit Different - May 11, 2022 - Houston Historical Retail

Safeway’s Merger Loss Eclipses Labor Woes - Oct 23, 2003 - L.A. Times

Dominick's says goodbye to Chicago - Dec 12, 2013 - Chicago Tribune

Dominick's: A Timeline News History of a Chicago Supermarket - Feb 20, 2014

Dominick's Closes Chicagoland Stores  - Ghosts Of Retailers Past - "It was announced that most Dominick's stores would be closed in the Chicago area by December 28, 2013. The announcement has spurred its competitors into seeking out employees and store locations that they could expand into once Dominick's exits the market. On December 2, 2013, Milwaukee-based Roundy's, which operates under the Mariano's Fresh Market brand in the Chicago market and is chaired by former Dominick's CEO Bob Mariano, announced the purchase of eleven stores in the chain, though employees would have to re-apply to work for Roundy's. One location will remain open in Bannockburn, Illinois until January 25, and another in Westchester, Illinois, until January 28."

Dominick's to be sold or closed as Safeway exits Chicago - Oct 12, 2013 - CSMonitor - "Dominick's chain is Safeway's lowest-performing division. Grocery giant will sell or close all 72 Dominick's stores in the Chicago area."

Albertsons and Safeway Complete Merger Transaction - Jan 30, 2015 - PRNewswire - Newly combined private company will operate 2,230 grocery stores in 34 states and the District of Columbia