Safeway Inc. Being Sold

By Noel Smith

On Thursday March 5, Safeway made known that it had agreed to be acquired for over $9 billion by an investment group led by Cerberus Capital Management. If the sale is finalized, Safeway will merge with Albertson’s, the 5th-largest grocer, which Cerberus bought from SuperValu last year. Safeway has more than 1,300 stores in the US. However, it is reported that Kroger, the country’s largest grocer (almost twice as large as Safeway by revenue), is considering making its own offer.

How will all this affect our local Rancho Del Mar Safeway store?

Keith Turner, Director, Public and Government Affairs 
Safeway Inc. Northern California Division, released this statement to the Aptos Times:

“With the recent press about Safeway’s potential sale to Cerberus, a private equity firm, we have received many inquiries about the future our project in Aptos.

Safeway and Property Development Centers is continuing with its Northern California projects on a business-as-usual basis. We remain very committed to Aptos and the region. Before proceeding with any construction, we always check budgets and evaluate return on investment. New investors in Safeway may become involved in this process, but we are confident that they will continue to consider Aptos an important place for Safeway to invest.

I will keep you posted as to our progress with this project and all things Safeway.”

Are The Days of The Conventional Supermarket Numbered?

Safeway Inc.’s announcement that private equity giant Cerberus Capital Management agreed to buy the 2nd-largest grocer in the US is the latest sign from the grocery industry that supermarkets may be changing. This sale could transform Safeway into a neighborhood grocer that resembles Trader Joe’s, according to some analysts and industry watchers.

Frank Dell, president and chief executive of consulting group Dellmart & Co. and a 30-year industry watcher said, “The supermarket was built on the principle of, if you’re 8 years old to 80, we carry everything in the store for you. I just don’t see bigger as being better anymore.”

Smaller neighborhood markets that promote locally sourced meat, organic produce and try to attract customers with friendly service, and one-of-a-kind items are attracting customers away from traditional supermarkets, experts say. Trader Joe’s continues to earn a loyal following with its private label offerings, its smaller stores and helpful staff. However, these smaller stores have a limited selection compared to the supermarkets.

Safeway also has private-label products, including organics, which comprised an all-time high of 28 percent of total grocery sales last year.

Even Walmart has been downsizing from big-box to neighborhood market stores — about a quarter the size of its Supercenters — which emphasize groceries. With the increased competition from discount retailers, local farmers markets, Whole Foods or Trader Joe’s, it’s estimated that traditional supermarkets have lost 15 percent of the grocery market.

“At one time, the supermarket was the place to shop four times a week,” Dell said. “Then along came Costco, and along came this little guy named Sam Walton. Then when I see them open a Trader Joe’s in this town, a line forms around the block.”

If the sale is finalized, some Safeway stores and distribution centers would probably be closed or sold, industry experts say. Karen Short, an analyst with Deutsche Bank, said Cerberus might sell off Safeway stores in Colorado, Texas and Arizona where competitors outperform Safeway.

Kroger, the nation’s largest grocery chain, has outperformed Safeway, Dell said, because it allows each store to tailor its offerings to local shoppers, and stock stores with local brands. Dell said that’s the direction Safeway needs to move in — more gluten-free items in San Francisco stores and more locally made barbecue sauce in Georgia.

Safeway has tried to tailor stores to customer preference, said spokeswoman Teena Massingill, and in 2012 began reorganizing stores to make them easier to shop, placing ingredients in categories and lowering shelves. The company remodeled 177 stores with this new design and expects to complete 200 more this year.