Dive Brief:
- Kroger and Albertsons announced Friday that they have entered into a $1.9 billion definitive agreement with C&S Wholesale Grocers to sell 413 stores and eight distribution centers across 17 states and Washington, D.C., in connection with the supermarkets’ proposed $24.6 billion merger.
- The deal includes the sale of the QFC, Carrs and Mariano’s banners to C&S as well as the sale of two offices and five private label brands. C&S will also have the right to license the Albertsons brand name in four states: Arizona, California, Colorado and Wyoming.
- The divestiture bid, which seeks to satisfy regulators currently reviewing the proposed Kroger and Albertsons merger, focuses mainly on western states, with 104 proposed store sales in Washington State, 66 in California and 49 in Oregon.
Dive Insight:
With its proposed divestiture plan to C&S, Kroger and Albertsons are looking to sell off hundreds of stores along with distribution centers, banner names and other assets to a distribution company that’s looking to expand its retail footprint in a big way.
The number of proposed store divestitures outlined in the deal is higher than the initial projections Kroger and Albertsons outlined, which included between 100 and 375 locations. And that number could go even higher. In addition to the 413 stores laid out in the announcement, the agreement also leaves room for C&S to purchase up to an additional 237 stores in order to satisfy regulators, per the announcement.
“If additional stores are added to the transaction, C&S will pay to Kroger additional cash consideration based upon an agreed upon formula,” the announcement noted.
C&S noted that it “brings extensive experience with the merger process” given its prior history as an FTC approved divestiture buyer in other grocery transactions.
C&S, which has been in business for over a century, currently operates corporate stores and services independent franchisees under the Piggly Wiggly banner and also operates 11 Grand Union stores in New York and Vermont. In total, the company currently has more than 160 retail locations, according to Friday’s announcement.
On the supplier front, C&S supplies more than 7,500 independent supermarkets, chain stores, military bases and institutions with over 100,000 different products, per its website. The company lost Ahold Delhaize as a distribution client when the grocer started switching to a self-managed distribution network in 2019, and Key Food, which signed on with competitor United Natural Foods, Inc. in 2020.
C&S said that an affiliate, 1918 Winter Street Partners, will operate the acquired Kroger and Albertsons stores.
C&S Chief Operating Officer and incoming CEO Eric Winn said that expanding further into the retail market is a key component of the company’s long-term growth plan.
“This [deal] will also further enhance C&S's ability to serve our customers as we will be in a unique position as a leading wholesale supplier and retailer to help grow their business and continue our legacy of braggingly happy customers,” Winn, who becomes the company’s CEO Oct. 2, said in a statement.
The deal would also transfer three store banner names to C&S, including the storied Mariano’s brand in the Chicago area. Kroger and Albertsons noted that any stores they retain from those brands will be re-bannered. It also said that any Albertsons stores retained in the four states where C&S has licensing rights to that name will also be re-bannered.
In addition, Kroger said it will divest the Debi Lilly Design,Primo Taglio, Open Nature, ReadyMeals and Waterfront Bistro private label brands as part of the agreement.
C&S said it will continue to recognize the union workforce of the acquired stores and maintain all collective bargaining agreements, noting it is “committed to retaining frontline employees and further investing for growth.” C&S claims it has “a strong track record of transitioning union employees and their associated collective bargaining agreements successfully.”
Kroger and Albertsons executives reiterated that they expect their proposed merger, which is currently undergoing regulatory review, to close in early 2024. In a statement, Kroger CEO Rodney McMullen noted that C&S is a strong company with the ability to successfully operate the stores it would gain in the proposed sale.
“Following the announcement of our proposed merger with Albertsons Cos., we embarked on a robust and thoughtful process to identify a well-capitalized buyer who will operate as a fierce competitor and ensure divested stores and their associates will continue serving their communities in the ways they do today. C&S achieves all these objectives," McMullen said. “C&S is led by an experienced management team with an extensive background in food retail and distribution and has the financial strength to continue investing in associates and the business for the long run.”
