Kroger and Albertsons will sell more than 400 stores and other assets for about $1.9 billion, seeking to clear a path for a merger with antitrust regulators reviewing a deal that would unify two of the nation’s largest grocery chains.
The 413 stores, along with QFC, Mariano’s and Carrs brand names, are being sold to C&S Wholesale Grocers. Kroger will also divest the Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals and Waterfront Bistro private label brands. In addition, C&S will get eight distribution centers and two offices.
All fuel centers and pharmacies associated with the divested stores will remain with the stores and continue to operate.
It’s unclear how many Mariano’s stores will be spun off. In the Chicago area, Kroger has a heavy presence with its ownership of the Mariano’s and Food 4 Less chains, while Albertsons controls the market leader, Jewel.
Terms of the transaction Kroger posted Friday say 14 of its Illinois locations will be subject to divestiture but it did not say which of its chains are involved. Mariano’s has 44 stores in Illinois while Kroger stores are mostly Downstate. Jewel has around 180 stores in the Chicago area, many close to a Mariano’s.
“Because we are still in the regulatory process, we are not able to share the specific locations included in the agreement,” said Amanda Puck, director of strategic brand development for Mariano’s.
“We are confident C&S’s experienced, purpose-driven leadership team and more than 100-year history of food industry experience will enhance the competitive marketplace. Importantly, C&S agreed to honor all collective bargaining agreements, securing the future of good-paying union jobs and protecting associates’ industry-leading health care and pension benefits as well as bargained-for wages,” she said.
The United Food and Commercial Workers International Union has opposed any deal that would cost jobs and hurt grocery competition. “These companies are successful because it is our members who make them a success, and no proposed merger or divestiture of stores should endanger or threaten the vital role they play,” the union said in a statement. The International Brotherhood of Teamsters, with members in the companies’ stores and manufacturing and distribution sites, has lobbied against the merger.
‘Worry about access’
Carole Gordon regularly shops at the Mariano’s at 2021 W. Chicago Ave. in West Town. She works at the Chase bank nearby and comes in for groceries during her lunch break.
“Oh wow, I had no idea it was changing, that’s big news,” said Gordon, an Evanston resident.
Her biggest concern is whether the Starbucks inside the store will go away. Gordon and her coworkers come by on their breaks to relax, chat and get a coffee and snack.
“That’s really the main reason we come here, so if they take that away, it would be disappointing and I probably won’t come as much,” Gordon said. “I just hope the change means cheaper prices, that’s my recommendation.”
James Foster and his family used to live around the corner from the store so it’s become a default choice for him. They now live in West Humboldt Park and the Mariano’s is between home and his child’s school.
“It won’t really make a difference for me, I got Aldi’s more often these days because it’s closer to home and cheaper,” Foster said.
“But I worry about access for others, I hope that doesn’t lead to this store sitting vacant. That happened here before when the Dominick’s that was once here closed and it sat vacant for two years. A lot of people in the neighborhood depend on this store, it’s the nearest neighborhood store for many people around here.”
Staying competitive
Kroger and Albertsons agreed to merge in October. Kroger, based in Cincinnati, bid $20 billion for Albertsons. Kroger would also assume $4.7 billion of Albertsons’ debt. The deal is targeted to close early next year.
The grocery chains say they must merge to compete with Walmart, Amazon and other major companies that have stepped into the grocery business. And there is significant consolidation throughout the grocery sector as companies fight with rising prices for everything from food to workers.
Before the deal with C&S closes, Kroger may, in connection with securing Federal Trade Commission and other governmental clearance, require C&S to buy up to an additional 237 stores in certain regions. If more stores are added to the agreement, C&S will pay Kroger an additional undetermined financial amount.
C&S, founded in 1918, is a supplier to independent grocery stores, supplying more than 7,500 independent supermarkets, retail chain stores and military bases. It runs Grand Union grocery stores, the Piggly Wiggly franchise and corporate-owned stores in the Midwest and Carolinas.
C&S has experience with divestitures related to mergers and has successfully transitioned union employees and their associated collective bargaining agreements in the past.
“Importantly in our agreement, C&S commits to honoring all collective bargaining agreements which include industry-leading benefits, retaining frontline associates and further investing for growth,” Kroger Chairman and CEO Rodney McMullen said in a statement Friday.
Contributing: David Roeder and Kaitlin Washburn
