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Gargantuan grocery-store shakeup

Cerberus owns Albertsons owns Vons/Safeway

La Costa store
  • La Costa store

The merger between Albertsons supermarkets and the parent company of Vons — Safeway — will cause the closing of numerous stores in San Diego County, it was recently announced.

To avoid lack-of-competition pressure from the Federal Trade Commission, it was announced that 25 local stores would have to be closed as part of the merger deal. The supermarket locations will be sold and reopened as Haggen — an 80-year-old Washington-based chain.

The $9 billion purchase of the 1335 Safeway stores, operating under six brand names (including Vons and Pavilions in Southern California), was announced last July. Industry experts predicted at the time that not much would change within the individual stores. That is showing to be uncertain with the sell-off of 168 store locations in the 20-state chain.

Industry watchers are not sure the merger will have a positive effect on the consumer, especially with the competition offered by the expanding grocery operations of lower-priced Costco, Target, and Walmart, and the increasing popularity of specialty stores such as Sprouts, Trader Joe’s, and Whole Foods.

To the average grocery shopper, Albertsons is generally thought to be the highest-priced major supermarket chain. It does not have a customer loyalty club-card discount program. The company has been volatile since 2006, when stores began to close and the company was sold and reorganized by various owners.

The equity investment firm Cerberus Capital Management now owns Albertsons. Cerberus likes to buy and sell big businesses and is into everything from bus manufacturing, financial services, and banks; restaurants, hotels, and resorts; and a film production company. At one time they owned both Alamo and National rental car corporations and Mervyns department stores.

Interviewed on January 3 at the La Costa Albertsons on the corner of El Camino Real and La Costa Avenue, customer Maureen said she is not happy about her store being on the closure list. She identified herself as Albertsons' “best shopper.” But she said the employees inside seem to be happy about switching to Haggen.

However, two courtesy clerks said their union reps had not told them anything about which store they will be working for. Haggen officials have stated they hope Albertsons and Vons employees join their organization and keep each local store’s team in place.

Julie said she shops at Albertsons regularly, but only because they carry three or four items that she buys. “If the new store doesn’t sell them, there would be no reason for me to shop here,” she said. Customer Jason said, “As long as the new store sells food, I’ll be happy.”

If Albertsons eliminates Safeway/Vons branding, it will be the end of an era. In 1926, Safeway became the largest grocery chain with locations in almost every state west of the Mississippi. Vons started in downtown Los Angeles in 1906 and by 1928 had 87 stores throughout Southern California.

However, Albertsons needs to be careful of how much change is forced on the Southern California grocery consumer. Grocery shoppers are loyal to their preferred stores. Just ask the former owners of Smith’s Food King, a Utah-based chain that had plans in 1995 to infiltrate SoCal with up to 60 food and drug stores. Most closed shortly after their failed attempt.

The announced list of soon-to-be Haggen stores include 8 Vons stores in Chula Vista, El Cajon, La Mesa, and San Marcos, along with 17 Albertsons locations in Carlsbad, Coronado, Del Mar, El Cajon, Poway, Rancho Bernardo, San Diego, San Ysidro, and Santee.

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Haggen is owned by a different private equity group, and has been a small operation up until now. While the supermarket chains were generally publicly traded for decades or were part of publicly traded corporations, now this private ownership pattern is spreading. In the past couple years, Albertson's has shuttered a number of stores in So Cal, and Von's has closed a few. In the coming few years, if this combination of Albertson's and Safeway (includng its variants) is successful, Cerebrus will then want to take it public again via a public stock offering. And the other group that owns Haggen now will likely do the same. But if you don't look closely, either or both of those IPO's could be a poor investment.

There is a proliferation of supermarkets and other food stores in the marketplace, and many are offering better products and better service at lower prices than the legacy supers. We have one here in Vista that just recently opened another store in Oceanside, called Frazier Farms. It is rather similar to Sprouts, except the prices are usually better. It's no cakewalk to rejuvenate those older supermarket operations, and this may not fly.

Yes, Albertsons is generally higher priced than Ralphs or Vons. I've been told that Haggen is higher in prices than all three! That may have to change, or Haggen may find itself losing a fierce battle when it enters the competitive California grocery arena. The big boys play rough. FYI, former vice president Dan Quayle is a major player at Cerberus Capital.

Gee, I hadn't thought about Quayle or his newspaper-owning family, the Pulliams, in a long time. So, is Danny a strategist,or just a figurehead? He never came across as either a big boy or anyone who played "rough." The outcome of the '92 presidential race might have been different if Dan-o had voluntarily stepped aside as running mate.

Danny boy is chairman of their Global Investment Division. Good thing he took latin in college, cuz he's serving clients in Latin America.

From what I have read Haggen is well liked in Washington. Their prices vary and for the most part are in the range of most stores. The Vons closest to me will be a Haggen. This store was one of the smallest Vons and is old and tired. A good remodel and a new owner will be a good thing. There is some good info on the Haggen website.

Does anyone know the fate of the employees? Will they all be retained, and will the new owners recognize their union and honor their contract?

Reportedly all employees including store managers will be asked to stay on, and union contracts will not change. This was required as part of the deal.

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