At least 104 Kroger and Albertsons grocery stores in Washington would be sold to New Hampshire-based C&S Wholesale Grocers as part of a planned merger between the two grocery giants, the companies announced Friday.
That’s nearly a third of the nearly 350 Kroger and Albertsons locations in Washington, which operate under the Safeway, Albertsons, QFC and Fred Meyer brands.
Friday’s announcement brought good news for both shoppers and store staff: The $1.9 billion sale to C&S means no Kroger or Albertsons stores will close “as a result of the merger,” it said in the company’s statement.
But what the two companies didn’t say was almost as critical: where the 413 stores, including the 104 in Washington, are located.
Retail experts don’t expect the locations to be shared until Kroger and Albertsons are more certain of approval from the Federal Trade Commission, which they hope to do sometime next year.
But if the deal goes through, most of the divested stores are expected to be in the greater Seattle area, home to nearly half of the state’s Kroger and Albertsons stores, including many that are close to each other.
Regulators typically require merging companies to sell or divest locations that are close to each other to maintain competition in those markets.
“Seattle-Bellevue-Tacoma will have a lot of those 104 stores,” predicted Jarrad Harford, chair of the department of finance and business administration at the University of Washington’s Foster School.
Mixed reactions
On Friday afternoon, news of the divestment to C&S sparked mixed reactions throughout the Seattle area.
For some Kroger and Albertsons employees, assurances Friday that C&S would honor existing union contracts, including health care, pension benefits and wages, eased some fears of another major consolidation in the Seattle-area grocery business.
“I’m not really worried about it,” said a QFC employee in Seattle’s Wallingford neighborhood when asked whether the site would remain with the merged companies or be sold to C&S.
“They haven’t really told us anything except that we’re going to keep everyone.” The worker asked not to be identified because he was not authorized to speak to the press.
Other reassuring details: Once the merger is complete, Kroger says it will invest $500 million “to lower prices for customers in stores across the United States.”
And for Fred Meyer fans, the C&S sale will not include any of the major retailer’s locations, according to QFC spokeswoman Tiffany Sanders. (QFC and Fred Meyer are both owned by Kroger.)
Still, despite these promises, some workers and shoppers fear there could be a repeat of the last major grocery collapse.
They point to the 2015 merger of Safeway and Albertsons, in which the companies agreed to sell 146 locations to Bellingham-based Haggen. But in less than a year, Haggen had filed for bankruptcy protection and ultimately sold 29 of its “core stores” to Albertsons and closed several others in Washington.
“How do we know it won’t be a Haggen-like debacle?” asked Jeff Silverman of Seattle about the proposed sale to C&S, a grocery wholesaler that also operates the Grand Union and Piggly Wiggly grocery chains in the Midwest and Southeast, respectively.
Even if C&S acquires a Safeway or Kroger store in the Seattle area, “there is no guarantee that Piggly Wiggly will not close it, and there is no guarantee that Piggly Wiggly will run it as well as it used to run Safeway.” “Do it,” Silverman said.
Officials with the United Food & Commercial Workers, which represents more than 100,000 Kroger and Albertsons workers, also warned of a Haggen-like outcome.
“Today’s announcement of a nearly identical divestiture plan is a troubling sign that history could repeat itself,” said a statement Friday from seven UFCW local presidents, including Faye Guenther of UFCW Local 3000, which covers Washington, Northeast Oregon and Covering northern Idaho.
Deeper pockets
However, some economists say the current deal is far less vulnerable than the Haggen sale.
For starters, C&S is a much larger player: While Haggen only had 18 locations before attempting to acquire 146 new stores, C&S is the largest grocery wholesaler in the country, boasting nearly nine times as many retail locations as well as annual sales that Forbes estimated at 33 US -Dollar estimates billion in 2022.
“What went wrong [with Haggen] was that they didn’t have enough capital. They lacked operational experience. They really didn’t have a balance sheet,” said Kevin Boeh, a mergers and acquisitions expert at the Foster School. In contrast, C&S has “the capital to do it”.
But experts also have concerns. The $1.9 billion sale price for the 413 stores and other facilities was lower than many analysts expected, said Arun Sundaram, a market analyst at CFRA Research who tracks the grocery business. That could mean that the divested locations “stores are slightly underperforming,” Sundaram said.
Some critics have warned that Albertsons and Safeway are likely to divest only unprofitable stores, which would pose an additional challenge for a buyer.
The “good news,” Sundaram said, is that “C&S has both the capital and the experience to successfully run a grocery business,” Sundaram said.
Nevertheless, questions remain unanswered.
If federal regulators are not convinced that the sale of 416 stores addresses anticompetitive concerns, C&S could buy an additional 237 Kroger and Albertsons stores “in certain regions,” according to Friday’s announcement.
The announcement gives no indication of where these might be.
Attorney Doug Ross, an antitrust expert at the University of Washington School of Law, speculated that any additional sales would follow the same pattern as the 416 announced Friday, with many taking place in Washington, where about 10% of all Albertsons locations and 4 % of all Albertsons locations. all Kroger locations.
“It seems logical that further divestitures would occur in the same proportion,” Ross said.
And the deal has yet to stand up to scrutiny by federal and state regulators.
For example, Washington Attorney General Bob Ferguson unsuccessfully tried to stop Albertsons from paying its investors a $4 billion dividend before the merger. He also warned in January that the “merger is far from settled.” On Friday, Ferguson said his “priority is protecting competition, consumers and workers in Washington.” We will review it [the deal] through that lens.”
Meanwhile, some buyers also felt uneasy about not knowing whether their location would change hands or what changes might come under new ownership.
“I think it would make me even less inclined to come here as often,” Wallingford QFC regular Meghann Van Pelt said of the idea that the location might end up at C&S.
But Silverman believes Kroger and Albertsons could benefit by not disclosing which locations they plan to sell until the deal is close to approval.
“If I knew it was going to be my business, you can imagine I would write a letter to the attorney general,” Silverman says.
But because the locations remain secret, “people will say, ‘Well, you know, it could be my store, but it might not be my store, so I’m not going to write a letter yet…” “