November 29, 2006
Save Mart Buys Albertsons Stores
Save Mart Supermarkets will be much bigger, about twice its current size, with the acquisition of 132 Albertsons stores in northern California and northern Nevada.
Many of the stores involved in the deal are former Lucky supermarket locations and, while those units fared poorly after becoming Albertsons, at least one analyst, Burt Flickinger III, managing director of Strategic Resource Group, sees a different scenario playing out this time around.
“Save Mart is very much like Lucky. It’s competitively priced,” he told the San Jose Mercury News. “Even though the market is consolidating, this deal will increase competition and make stores better… It’s certainly better for competition. Albertsons had run a weak division for at least five years and maybe ten years.”
With the acquisition of the Albertsons stores, Save Mart will now become the number two grocery store operator in Northern California behind Safeway. Currently, the company operates 75 stores under the Save Mart banner and another 44 warehouse-style Food Maxx stores. Five other locations operate as S-MART.
Bob Piccinni, chairman and CEO of Save Mart, said the company is looking for a smooth transition. “It is my hope and expectation that Donna Robbins (president of Albertsons Northern California Division) will continue to be a part of the new organization going forward with minimal disruption to current operations. Save Mart will embrace and learn from the current operations of these new stores, implementing the best practices of both organizations and making our entire chain of stores a superior shopping experience for all our valued customers,” he said in a released statement.
Discussion Question: What are you expecting from Save Mart’s acquisition 132 Albertsons?
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Pluses and minues: Albertsons closed 37 underperforming locations already, so Save Mart won’t inherit those headaches. Hopefully Save Mart paid a low price for the Albertsons locations they bought, since purchase values for unionized stores aren’t high. The announcement didn’t specify the price, so it’s hard to tell if this was a bargain.
At least initially it seems Bob Piccinni is looking at the Jeff Noddle playbook for acquisitions and see what best practices can be used for both companies and make the total better. Having a pretty good track record in the NorCal market should help them make this growth successful.
At last, Save Mart can justify their annual NASCAR sponsorship of the Dodge Save Mart 350 at Infineon Raceway at Sears Point in Sonoma by actually having stores within one hundred miles of the racetrack!
In order to understand just how successful this deal could be, it would be great to get an understanding of purchase price.
Personally I feel that Save Mart is in a good position to ensure that these stores will be converted and run well, adding competition to the area. It will certainly apply a little more pressure to Safeway in that area.
This is a great move by Save Mart and they will be able to improve these locations from the start. Save Mart has been able to carve out a unique role in the marketplace and by taking over these stores, it will provide the consumer with a retail format different than the other operators in the area.
Save Mart will now be better positioned, strategically, to address the continued growth of WinCo and Wal-Mart Supercenters in the Central Valley. They will add strength in the Bay Area and Sacramento market, as well as add increased self-distribution capabilities that will allow them to improve COGS and profitably maintain their low price leadership.
It is the employees of Albertsons NorCal that will be the true winners in this deal, as the uncertainty of being sold twice in the last couple of years diminishes with the realization that they have been acquired by a true supermarket company – a company that values their employees and values it’s “family atmosphere” of conducting and running their business.
It’s about time someone challenged Safeway in the No. California market. But why would they want to keep Ms. Robbins if “Albertsons has been under-achieving” in the market for several years. SM strategy should be to redesign the stores and products based on unmet needs in the store clusters, using a fresh, customer focused approach. The consumer’s in the area are ready for a change from the Safeway dull-drums. Hell, it’s California – it should work tremendously.