While the ultimate decision if the FTC approves the Kroger-Albertsons merger is likely 10-16 months away, both retailers have taken a more aggressive posture in recent weeks when it comes to promoting the benefits of the $24.6 billion transaction.
Perhaps this was a preordained strategy, but I believe that at least part of the uptick in action comes from the loud backlash both retailers have felt from several interested and important parties. At some point, the harsh criticism merits a level of counter-response.
After staying silent for nearly six months (except to fight legal action by several states to nullify the deal and stop Albertsons’ $4 billion special dividend), both chains are fighting back.
Late last month Rodney McMullen and Vivek Sankaran, CEOs of Kroger and Albertsons respectively, wrote an op-ed piece in the Cincinnati Enquirer defending the deal, noting that no frontline workers would be laid off and that all stores, even ones that are divested (and presumably unsold), would remain open. They also touted that their business strategy is to lower prices and expand product selection.
About two weeks later in an interview with Bloomberg, McMullen went on the offensive again noting, “Usually you wouldn’t commit in advance to litigate. In this case we both committed to litigate in advance,” emphasizing that regulators haven’t indicated opposition to the proposed transaction at this time. He added that discussions with the FTC were continuing and the deal’s progress is “where we thought we would be at this time.”
“We believe very strongly that we had the best professional advisers, and Albertsons had the best professional advisers, on being able to find a viable solution,” McMullen stated. A successful outcome would mean that “the combined company will create the right environment and lower prices, and we’ll be able to divest stores to somebody that’s good.”
In my opinion, the “play offense” strategy is a good one that’s been long overdue to defend critics of the deal.
The pushback against the deal has been present from the day the two chains announced their intent to join forces in mid-October 2022. Several states’ attorneys general (mainly in the West) tabbed the deal as anti-competitive (and therefore anti-consumer). A month later, several U.S. senators voiced their opposition to the deal, and the food industry’s largest labor union – the UFCW International – decried that such a marriage would cost jobs and lower wages.
In recent weeks, the UFCW has doubled down on that narrative by officially rejecting the merger at their annual convention earlier this month.
“For months, the UFCW has called for transparency, engaged independent experts and assessed the publicly available information on this proposed merger to determine the widespread impact it will have on our members and the communities they serve. At our 9th Regular Convention, hundreds of UFCW delegates representing our entire union from around the country came together to unanimously declare mergers pose a serious threat to the livelihoods of our members, and we must act to confront them,” UFCW International president Marc Perrone said in a statement. “Given the lack of transparency, and the impact a merger between two of the largest supermarket companies could have on essential workers and the communities and customers they serve, the UFCW stands united in its opposition to the proposed Kroger and Albertsons merger.”
A few days earlier, a report by Washington, DC-based think tank the Economic Policy Institute (EPI) said that if the merger were approved it would reduce the number of outside employment options available to workers, lowering grocery store workers’ annual wages by a total of $334 million – about a $450 loss in annual wages per worker.
“Workers’ ability to negotiate better pay and working conditions rests on their capacity to switch jobs. By decreasing the number of outside options available to workers, the merger will limit competition for hiring and retaining employees, and grocery store worker earnings will fall as a result. Crucially, the wage effects we identify are solely driven by this increase in labor market concentration. If the merger also leads to layoffs or hours cuts, this would add another dimension of damage to affected workers.
“Our analysis uses grocery store employment and earnings data and the specific locations of Kroger and Albertsons stores. We find that: the merger will lower wages for 746,000 grocery store workers in over 50 metropolitan areas of the U.S. Increased concentration will suppress wages for all grocery store workers in affected cities- not only those workers currently employed by Kroger or Albertsons.”
I’m certain that Messrs. McMullen and Sankaran find the EPI report to be misleading, if not inaccurate. And as several of our readers have pointed out, a significant portion of the EPI’s annual funding comes from labor unions.
And how does this all potentially affect Jim Perkins’ shift to Albertsons headquarters in Boise?
For me, that answer is fairly fundamental. As stated above, the external media defense of the big merger by both chains is relatively new, but the internal planning of the deal was likely done at least a month before the announcement of the potential deal in October.
As you may recall, both parties laid out their game plan on how they would improve each organization if it was combined. Included on that checklist was a promise to invest more than $1 billion in store improvements at Albertsons’ nearly 2,300 supermarkets; expansion of private label items; improvement in customer experience; continued significant investment in associate benefits; and more streamlined synergies. Also included on the initial itinerary was a plan to establish an Albertsons subsidiary – SpinCo – to Albertsons Cos. shareholders immediately prior to the merger closing which would operate as a standalone public company. The original plan estimated that SpinCo would comprise between 100-375 stores that could not be sold after the divestiture amount is established by the FTC.
As for SpinCo, I’m skeptical that it will ever become a reality, but Kroger and Albertsons need to prepare to protect all of the nearly 5,000 supermarkets in the combined mix. And I expect other internal moves to be made by both merchants prior to the FTC ruling in 2024.
By moving Perkins out of his role of running Albertsons Mid-Atlantic division (a territory he has overseen successfully for most of the past decade), the company is sacrificing one of its top executives. However, in replacing Perkins with Tom Lofland, there won’t be much of a learning curve. Lofland is extremely capable, knows the Albertsons system (he’s been with the retailer for about 30 years) and was the president of Safeway’s Eastern division in 2018-2020 (Albertsons acquired Safeway in 2015).
Objectively, Perkins is the right man for the SpinCo job, even if that newly conceived standalone business never comes to fruition. I dare say that nobody knows more about store operations than Jim Perkins. That one skill alone is a difference-maker when it comes to identifying a given store’s strengths and weaknesses. Coupled with his strong people skills and his proven ability to serve as an Albertsons ambassador (he’s moved more than 30 times in his career), Perkins will handle this new role with the professionalism and aplomb that have become his trademarks.
We wish Jim and Tom all the success in their new roles.
‘Round The Trade
A tip of the hat to arguably the most unsung and successful leader in the grocery business. That would be Dan Bane, who will retire July 2 as chief executive of Trader Joe’s after 22 years at the helm. Current COO Bryan Palbaum will become chairman and CEO upon Bane’s retirement. Additionally, current president of stores John Basalone will be promoted to vice chief executive officer and company president. “I take great pride that together we have made Trader Joe’s the best grocery store in America. Thanks to all.” Said Bane in typical low key fashion
Almost under the radar was the announcement that Latriece Watkins has been named chief merchandising officer for Walmart’s U.S. stores, one of the most powerful jobs in the full spectrum of retail. Most recently, Watkins served as executive VP-consumables for the “Behemoth’s” 4,600 U.S. stores. She has been with the Bentonville, AR-based merchant since 1999. “We have a rich history of strong leaders who embrace change, set bold visions for our teams and best represent the humanity that is Walmart,” said John Furner, CEO of Walmart’s U.S. stores in an internal email. “For two decades I’ve admired those qualities in Latriece Watkins, who I’m pleased to announce as our new chief merchandising officer-Walmart U.S. Anyone who has worked with Latriece knows she’s a merchant at heart and has a passion for developing future leaders. Her enthusiasm, talent and deep experience helped establish the omni merchandising strategy we have today, and her focus on customers and members will only strengthen our position. I’m excited to see our merchandising team excel in its mission to be the customer’s first choice under her leadership.” Watkins succeeds Charles Redfield, who stepped down as chief merchant last month after more than 30 years with Walmart.
At Ahold Delhaize (AD), Q1 sales and earnings continued their forward momentum Ahold Delhaize’s U.S. banners propelled the Dutch retailer to report strong earnings for the first quarter. In fact, it was the Dutch retailer’s U.S. brands (especially The Giant Company and Food Lion) that helped AD achieve positive comp sales and strong earnings. In the U.S. not comps increased 6.2 percent (excluding gas) for the period ended April 1 and underlying operating margin in the U.S. was 4.8 percent, up 0.4 percentage points building on the strong performance in the prior quarter and higher on-shelf availability resulting from improving supply chains the retailer said. In Q1, online sales in the segment were up 11.9 percent primarily by over 20 percent growth at Food Lion and TGC, which both opened four new click-and-collect locations during the quarter. “The U.S. brands continue to deliver consistent and strong performance,” AD president and CEO Frans Muller said in a statement. “For the first quarter, comparable sales grew by 8.1 percent (with gas) excluding weather and calendar shifts. We also delivered a strong underlying operating profit, driven by better shelf availability, as supply chains are much improved compared to a year ago.”…Remember Ron Bonacci and Brian Bosworth from their days at Weis Markets not so long ago (as well as other industry stops)? Well, both industry veteran executives have emerged at Rouse’s Markets as VP-advertising and marketing and VP-center store respectively. They will report directly to Donny Rouse, fourth-generation CEO of the family-held firm based in beautiful Thibodaux, LA, the heart of Cajun country, about 15 miles from Bayou Blue (not be confused with the great Roy Orbison song “Blue Bayou
Local Notes
Richard Tully, longtime owner of the Kearny (NJ) ShopRite, has sold his lone, high-volume supermarket (and liquor store) to Carol LoCurcio, who owns ShopRite units in nearby Belleville and Nutley, NJ. The Carney ShopRite first opened in 1938 and a decade later became one of the first Wakefern members and the first operator to put the ShopRite name on his store. “We are proud that our family has served the Carney community for more than seven decades and grateful for all the friendships we made along the way. We thank our loyal customers and dedicated associates. We know the store is in good hands with Nutley Park ShopRite, Inc. and the LoCurcio family at the helm. Although this chapter is ending for me as I retire, my connection to the community will remain,” said Richard Tulley.
Federal Realty Investment Trust LLC is reportedly suing Amazon, blaming them for defaulting on a lease for a long-delayed Amazon Fresh (AF) store opening. Amazon quickly countersued, charging that the landlord has not completed the necessary work to make the store ready to open. With more than 10 planned but unopened AF units in the Delaware Valley along, and more than 30 mid-Atlantic stores in similar limbo, you can expect to see more litigation of this type. I also found it amusing that high powered research firm Alliance Bernstein suggested that Amazon could accelerate its brick and mortar expansion by acquiring many of the divested stores in the Albertsons Kroger deal. First, Willie Wonka could conclude that. Second, before Amazon even thinks about expanding its physical store presence, maybe they should learn how to improve their current
brick and mortar base.
We have some future new stores to report including the new Stew Leonard’s unit that will open next year in Clifton, NJ. This will be the dynamic merchant’s second Garden State store (Stew’s first NJ store opened in Paramus in 2019) and eighth overall. The new store will be in the Styertowne Shopping Center and will incorporate an existing Stew Leonard’s Wine & Spirits shop located about half a mile away. The new Clifton site was formerly a Seasons kosher supermarket.
Lidl will be opening its second Manhattan store in 2026. The “from the ground up” 23,000 square foot discount unit will be part of a new mixed-use development located at 335 Eighth Avenue (at 26th Street) in the Chelsea neighborhood. The German-based limited-assortment grocer, whose U.S. headquarters are in Arlington, VA, opened its first Manhattan unit in Harlem in 2022. Other NYC Lidl stores include locations in Astoria, Queens and on Staten Island.
The Giant Company will open a new 50,000 square foot supermarket in Jenkintown, PA (Old York Road and Wyncote Road), which will be the ADUSA brand’s 22nd store in Montgomery County. The big regional chain is still getting final clearances on permits and municipal entitlements and will provide more details later. “With a decades-long history of serving Montgomery County, we are excited to bring Giant to Jenkintown,” said interim president John Ruane. “The Giant Company is looking forward to serving the families of Jenkintown by offering a simplified shopping experience, inspiring fresh ideas, and creating a healthier community, true to our purposes of connecting families for a better future.”
Amazon cut the ribbon on a new five-story 3.8 million (that’s not a typo) square foot fulfillment center earlier this month in Windsor, CT. Not surprisingly, the new distribution center will be “Godzilla’s” largest depot in New England and will employ approximately 2,000 associates.
BJ’s, which has been on a great run over the past three years, has added the chairman’s duties to current president and chief executive Bob Eddy’s list of responsibilities. The very capable and well-respected Chris Baldwin, who served as the Marlborough, MA-based club operator CEO from 2016 to 2021 and chairman since 2021, will remain on BJ’s board. Eddy first joined the discounter in 2007.
We have a couple of deaths to report, including Canadian folk singer and prolific songwriter Gordon Lightfoot. Beginning his musical career in the early 1960s, Lightfoot played the same coffeehouses and clubs as did Canadian contemporaries Leonard Cohen, Joni Mitchell, Neil Young, and Ian and Sylvia. His career took off after signing with Albert Grossman, who also managed Bob Dylan and Peter, Paul and Mary. It also helped that Lightfoot wrote “Early Morning Rain” and “For Lovin’ Me,” two hits which became more famous for other artists. By the early 70s, Lightfoot was a virtual hit machine, writing and recording such Top 10 hits as “Sundown,” “Carefree Highway,” and his biggest hit “The Wreck of the Edmund Fitzgerald.” Three years after an aneurysm nearly killed him in 2002, Lightfoot returned to the stage saying, “I want to be like Ralph Carter, Stompin’ Tom and Willie Nelson. Just do it as long as humanly possible.” And, Lightfoot continued to perform until May 2023. He was 84 when he passed.
And one of the most underrated baseball players of the past 50 years has died. Pitcher Vida Blue (a great name – but perhaps not as good as former college basketball star Napoleon Lightning), who spent his 15 seasons of his 17-year career playing for both Bay Area teams (the Oakland A’s and San Francisco Giants), passed away earlier this month at 73. During Blue’s first full season in 1971 at the age of 21, he put together one of the greatest seasons in recent history. His record that year was 24-8; he had an ERA of 1.82 while striking out 301 hitters; and threw 24 complete games (and eight shutouts) in the 312 innings that he pitched. Capping off that spectacular season, Blue was named both the winner of the Cy Young award and MVP of the American League. He was also part of A’s teams that won three consecutive World Series (1972-1974). In 1978, Blue was traded to the Giants where he continued to produce at a high level. Blue would likely be in MLB’s Hall of Fame if not for a cocaine possession charge in 1983 which led to an 81-game suspension. He returned from his forced absence a new man, vowing to be a better person who would go on to mentor many young players, even after he retired in 1987. All told, Vida Blue won 209 major league games while losing 165, certainly HOF-worthy numbers. Maybe the Era Committee (formerly the Veterans Committee) will finally vote him in.