Private equity fund Cerberus has bought American supermarket company Safeway for 6.8 billion euro, which results in a new large American supermarket giant, together with Cerberus's other subsidiary Albertsons. The new group may create some challenges for Ahold.
New supermarket behemoth
According to the latest ranking from Supermarket News Safeway is America’s fifth food retailer with an estimated 27 billion euro turnover and 1406 stores. Albertsons is ranked 10th, with an estimated 16.7 billion euro turnover and 1103 stores.
Benelux chains Ahold USA and Delhaize USA are ranked 8th and 14th, with estimated turnovers of 19.5 billion euro (in 765 stores) and 14 billion euro (in 1512 stores): both chains are at a proper distance compared to the new supermarket behemoth Safeway/Albertsons. When these two combine their turnover, it is estimated to be fifth on the list, with 43.5 billion euro.
No store closures, but cost-saving measures
The question is what a financial investor with a huge stake in the supermarket branch will do, as these non-strategic investors usually reorganize and clean up companies and sell them in 5 years’ time.
Cerberus states this new merger will create a company with 250,000 employees in 2,400 stores, 27 distribution centres and 20 production locations, but there will be no store closures. “Substantial cost savings” could happen, but they will lead to investments in price promotions and store remodels and refurbishments.
Limited impact on Ahold
According to analysts at the Rabobank, the impact on Ahold’s position in the American market should remain limited: there is still plenty of room for Ahold to expand into, despite the fact that Safeway is also active in the Northeastern United States.
Disappointing results have resulted in Ahold USA focusing on getting its organization in check and to build its online features, instead of trying to take over other chains and stores. It passed on Harris Teeter’s take-over last year, despite a firm interest in the chain.
Kroger, with an estimated 71.9 billion euro turnover and 3527 stores, is the second largest food retailer in the United States and it is on the prowl again for new take-overs. Apparently, it is interested in stores in Safeway’s range of stores, particularly those stores the new owners probably do not really want to keep.