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IronTiger

Would Albertsons work in Houston again?

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So, splitting off from this topic which was before the Albertsons/Safeway merger--the facts are laid out...

 

- If what Swamplot said was true, the Houston division of Safeway doesn't exist anymore and was merged with Dallas (former Tom Thumb).

- Randalls and Albertsons are now under a common ownership.

- A new Albertsons did open in Denham Springs, LA a few years ago.

- In its 15 or so years under Safeway, the Randalls name has gotten tainted, but is irredeemable?

 

What I want to know is, do you think that a grocery store under the Albertsons name (a former Randalls) would work in Houston, even as a single Randalls test trial? Do you think that the new company can turn around the Randalls name? Or do you think they should cut their losses and dump the Houston market entirely whether by selling Randalls to private investors or divesting the stores?

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Albertsons failed here - hence why they moved out.  I think they could work if they revamped the image of Albertsons.  Perhaps be innovative some how that other area grocers are not.

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When you have had HEB who would go back to Albertsons? No one! The only grocery store that is not in the area that I think would do good is Publix.

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Albertsons failed here - hence why they moved out.  I think they could work if they revamped the image of Albertsons.  Perhaps be innovative some how that other area grocers are not.

It's been over 10 years since Albertsons closed their doors for the last time in Houston. Since then, Cerberus has made some improvements to Albertsons. I think that if Albertsons came in with competitive prices (they already dropped the card system, something that gives them a leg up on Kroger), decent products (produce--the make or break point), and not ignoring demographics, I think they could do it.

 

It wouldn't be super-hard to do--maybe just close an underperforming Randalls for a weekend, do some employee training, run around the store changing prices, alter out the sign, grand opening event, and presto! Lower prices! Better store! If it could turn the store around, then great! If not, well, it was on its way out anyway.

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When you have had HEB who would go back to Albertsons? No one! The only grocery store that is not in the area that I think would do good is Publix.

H-E-B is a very good grocery store, and there isn't a market where Albertsons and H-E-B compete anymore (not since 2011--actually, wait, I lie, Cleburne has both H-E-B and Albertsons).

What Albertsons failed to do in Houston and other areas where it has since pulled out are two main reasons:

1) Not good enough prices (competitive for what they offered)

2) Failing to understand store demographics

The locations also seemed a bit odd (Tidwell and Antoine--that one wasn't actually opened apparently, and Kroger opened it, if briefly).

Besides, if your statement was true, why is Kroger still have the bigger market share? And also, why have new stores been able to enter the market? (Aldi, Trader Joe's, The Fresh Market)

Again, it would be a simple one-store test. If it's not successful, too bad but not a great loss, if it is successful, then Albertsons will be able to return--and get it right!

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People like HEB because they feel a sort of Texas loyalty to it.  My brother lives in SA... he likes some of what HEB does, but he wishes there was more competition.

 

I prefer Krogers over HEB: better international foods and they have some better sales on things I actually want to buy.  But HEB near my house is better than the local Krogers so weekday shopping = visiting HEB, weekend shopping = Krogers (where I can get discounts on fuel, yet another plus).  HEB also has a smaller organic foods section nearby, so that's disappointing.

 

Albertsons would need to refocus there identity/brand a bit if they re-entered the market.  Maybe focus more on just being a grocer and not trying to sell too many non-food related items.  Perhaps have a big focus on natural/organics?  To be honest there just isn't enough of that in the Houston area, particularly in certain neighborhoods, and I feel like that would help them a bit.  Though if they went out of business before (here) due to price problems and lack of traffic then that may be a really fine line to walk.

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Albertsons would need to refocus there identity/brand a bit if they re-entered the market. Maybe focus more on just being a grocer and not trying to sell too many non-food related items. Perhaps have a big focus on natural/organics? To be honest there just isn't enough of that in the Houston area, particularly in certain neighborhoods, and I feel like that would help them a bit.

A "big focus on natural/organics" might do okay--that's one major thing that the AppleTree changed when it changed to Village Foods, adding gluten-free, natural products, organic produce, and a few other things (by the way, it's all supplied by Grocers Supply Co.) and that attracted people to it. But it also sells a lot of cheap stuff too (the market isn't more than middle class) but it doesn't do half the volume of H-E-B down the road.

Now, a third option would be improving the Randall's, then do some consumer research like "I like the new concepts introduced but prefer the Randalls name" then the Randalls name stays and improvements are made.

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I heard Kroger was looking at buying Safeway?  If so - no more Randall's.

 

That ship has sailed.  It was rumored that Kroger was sniffing around at buying Safeway, but Cerberus/Albertson's has a deal to buy it.  If Kroger wanted it, they lost out. 

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Ah, ok.  Interesting.  While I believe Kroger capable of buying it, didn't know Albertsons could...guess that's where Cerberus comes in?

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Ah, ok.  Interesting.  While I believe Kroger capable of buying it, didn't know Albertsons could...guess that's where Cerberus comes in?

Sort of. Albertsons Inc., the Albertsons that loved and lost Houston, was split up in 2006 (a lot of store closures in this era, btw). SuperValu, a wholesale grocery owner, took "New Albertsons Inc.", the "stronger" Albertsons divisions, while Cerberus, under a shell company "AB Acquisitions LLC" took in "Albertsons LLC", the "weaker" Albertsons divisions. This included the Dallas-Fort Worth stores. Five years into the acquisition, a funny thing happened--Albertsons LLC was starting to do well (after closing a bunch of stores and starting to market themselves as "Albertsons Market", though this never went on any stores) while SuperValu started to choke on the Albertsons divisions. Last year, AB Acquisitions bought back New Albertsons Inc., putting the Albertsons stores back under one corporate umbrella. A few months ago, AB Acquisitions announced it would buy Safeway, but there was a period where other companies (like Kroger) could bid on Safeway, but they never did.

So even though Albertsons is now marketing themselves as a combined entity now, they remain two independent companies. Safeway is the third company, and not yet combined. In the coming months, there will be some more changes and consolidations coming to AB Acquisitions as it cements its position as one of the biggest grocery operators in the nation.

Edited by IronTiger
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^  @ IronT - Makes sense.  Margins in the grocery business are very, very thin.  Being able to gather some economies of scale when at the commodity end of the business helps make for a better business model.  That's what the asset managers supposedly specialize in (as long as they're in the business of adding value to a company, as opposed to stripping and distributing it).

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Cerberus has done better with Albertsons, than, say, Lampert has done with Sears and Kmart (though arguably, Kmart was doomed to begin with thanks to some mistakes in the 1970s and 1980s, namely, dumping money into new stores instead of maintaining older ones). The trick is to see if a giant merger like this will actually work, because a lot of the time it doesn't (AOL Time Warner, Penn Central being some notable failures).

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^Great posts guys.  Thanks for the information.  A few years ago I had time to read up on things like this, but a few years removed from my last HBJ subscription and I'm afraid I'm just not as up on things as I ought to be.

 

One area where an Albertsons could come in right away and do pretty well: Clear Lake/League City areas.  We have only HEB and Krogers, 2 Aldi's and 1 Fresh Market (which is technically in the wrong location across from Baybrook Mall - just opened by the way).

 

Actually, come to think of it, I believe Galveston the city would be a decent location for a new grocer like Albertsons?  Only 3 grocery stores on the island.  A decent Krogers, small Randalls, and an Arlan's!  Arlan's would and could be squeezed out of business if someone better came along.  And the Randalls site is somewhat limited in size.  If it were my choice I would try to anchor a new center on the land in front of the county courthouse buildings on Broadway with a big new Albertsons.  You could have another 10,000 sq ft of retail and maybe a pad site or 2 out there as well.  The problem would be offloading that Randalls?  A new center off Broadway at 61st street would be more accessible to people in Texas City, Tiki/Bayou Vista and elsewhere.  Plus it would have the benefit of being accessible to downtown/utmb/anico employes driving back north at the end of the workday.

Edited by arche_757

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I have recently been in a few old kmarts, one a "Zodys" that closed and kmart took over another in Burbank CA...tons of business, lines long...the stores look like they never left 1980.

 

 

Cerberus has done better with Albertsons, than, say, Lampert has done with Sears and Kmart (though arguably, Kmart was doomed to begin with thanks to some mistakes in the 1970s and 1980s, namely, dumping money into new stores instead of maintaining older ones). The trick is to see if a giant merger like this will actually work, because a lot of the time it doesn't (AOL Time Warner, Penn Central being some notable failures).

 

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There's some rumors (not on this thread I don't think) that Albertsons would throw in the towel if H-E-B ever came to Dallas. While I'm not sure how true that rumor is, it is true that they are afraid of them, and besides, the ONLY CITY IN AMERICA where Albertsons and H-E-B co-exist anymore is in Cleburne, Texas (until 2011, New Braunfels, Kerrville, and College Station could claim that, but no longer). I think that the "Albertsons has high prices" thing isn't quite as true as it was, but reputations like that are hard to shake. Personally, I haven't stepped foot in an Albertsons since the CS one closed.

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Posted (edited)

Albertsons entered the Houston, Texas market in 1995. The chain expanded into the Houston market by opening about 10 locations in 1995. They were able to get a feel for the market and opened a few stores in the coming years. The real expansion occurred in 2000 with around 15 stores opening and even more being opened in 2001. The chain had previously closed six stores in Houston under the guise of restructuring the chain. At the time of their announcement 10 stores were closed immediately with the remaining 33 vowing to stay open until buyers could be found. Since Albertson’s exit from the Houston market was so unexpected many new stores and concepts were being developed right up until the point of exit. I'm also in too doubts finding this information but hoping best for the Albertson employee who runs their livelihood by working at Albertsons.  

 

Edited by walkyle
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No, because Randall's is Albertsons now, and that's not working.

 

The late-'80s to early-'90s mid-range grocery store market segment really doesn't exist anymore. Price-conscious shoppers go to Walmart or Aldi, while people willing to pay a premium for better selection and nicer stores will go to H-E-B, upgraded Kroger stores, Whole Foods, Trader Joe's, etc.

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2 hours ago, ADCS said:

No, because Randall's is Albertsons now, and that's not working.

 

The late-'80s to early-'90s mid-range grocery store market segment really doesn't exist anymore. Price-conscious shoppers go to Walmart or Aldi, while people willing to pay a premium for better selection and nicer stores will go to H-E-B, upgraded Kroger stores, Whole Foods, Trader Joe's, etc.

 

Exactly.  Different elements of what are now the same company have tried and failed.

 

Safeway.  Failed

Albertson's. Failed (very quickly)

Randall's.  Failing

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On 6/25/2020 at 5:10 PM, Houston19514 said:

 

Exactly.  Different elements of what are now the same company have tried and failed.

 

Safeway.  Failed

Albertson's. Failed (very quickly)

Randall's.  Failing

Different companies (at the time) and different reasons.

 

Safeway (original Houston) division failed because due to Safeway assuming lots of debt due to getting bought by KKR to "save" them from corporate raiders, and that meant a lot of divisions had to go, including the entire Southern California division (where Safeway had done quite well) to Vons. The "new" AppleTree chain in Houston failed because it had lots of debt and old stores, whereas Randalls and even Fiesta were zooming ahead with larger and nicer stores and getting attacked by newcomers Food Lion and HEB Pantry at the low-end.

 

Albertsons (original) division failed because Randalls and Kroger already had lots of stores, and it would've taken a big investment just to get a fraction of the market share. (That and Albertsons had a lot of bad location planning). The company had also assumed a lot of debt through buying American Stores in 1999 and decided that trying to get Houston wasn't worth the effort.

 

Randalls had been run into the ground by Safeway's leadership from the 1990s and a failure to effectively compete (including on price, selection, larger stores, etc.) and even after Albertsons' purchase of Randalls, the division was in bad shape (and again, struggling with debt), so it's dying on the vine.

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Posted (edited)
21 hours ago, IronTiger said:

Different companies (at the time) and different reasons.

 

Safeway (original Houston) division failed because due to Safeway assuming lots of debt due to getting bought by KKR to "save" them from corporate raiders, and that meant a lot of divisions had to go, including the entire Southern California division (where Safeway had done quite well) to Vons. The "new" AppleTree chain in Houston failed because it had lots of debt and old stores, whereas Randalls and even Fiesta were zooming ahead with larger and nicer stores and getting attacked by newcomers Food Lion and HEB Pantry at the low-end.

 

Albertsons (original) division failed because Randalls and Kroger already had lots of stores, and it would've taken a big investment just to get a fraction of the market share. (That and Albertsons had a lot of bad location planning). The company had also assumed a lot of debt through buying American Stores in 1999 and decided that trying to get Houston wasn't worth the effort.

 

Randalls had been run into the ground by Safeway's leadership from the 1990s and a failure to effectively compete (including on price, selection, larger stores, etc.) and even after Albertsons' purchase of Randalls, the division was in bad shape (and again, struggling with debt), so it's dying on the vine.

 

All  more or less true (except that it was not all different companies; Safeway failed twice).  Nevertheless, combining  operations that have failed  to compete in the Houston market  three times does not seem like a particularly good strategy (and the fact that they failed for a variety of reasons does not add to the level of confidence).  And of course, the current company is clearly failing in the Houston market; it's kinda hard to pretend otherwise.  Sure, Randall's may have been damaged goods by the time Albertson's bought Safeway, but that was 6+ years ago and all signs continue to point to failure.

Edited by Houston19514
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