Wednesday, March 22, 2017

Albertsons "Sprouts" Talks of a New Acquisition

Former Albertsons #4436 will become home to a new Sprouts Farmer's Market later in 2017. Photo courtesy of AFB contributor Kristin C.
     In the last few months there has been speculation floating around of Albertsons being in talks to make yet another acquisition. The last big acquisition talk was of Albertsons buying New York-based Price Chopper, talk which supposedly fell apart earlier this year. Now, the latest speculation is that Albertsons is going after Sprouts Farmer's Market as their next potential acquisition. Sprouts Farmer's Market is an organic specialty supermarket chain of about 240 stores with locations in 15 states, most of which are in the West and Midwest. Their format is more in line with Lucky's Market as they position themselves as a more price conscious organic grocer. In the last few years, Sprouts has begun opening stores in the Eastern United States, including locations in Tennessee, North Carolina, Alabama, and Georgia. After a few years of speculation, it was confirmed late last year that Sprouts would begin an expansion into Florida in 2017, with their first batch of stores opening around the Tampa Bay area in early 2017. Should this acquisition go through, Albertsons' Florida presence would include the three current Safeways (a concept they don't seem to be pushing further in Florida outside of those three stores) and whatever Sprouts stores may "sprout" up in the future. Sprouts' organic, fresh food focus is a bit different from anything Albertsons currently operates at this time, although a potential acquisition of this type of market is not surprising. The organic/fresh small footprint grocery format is the latest trend and seems to be doing well, and the big players don't have much of a presence in this market. Last year, Kroger was rumored to be bidding on The Fresh Market when they went up for sale, although that never materialized. Kroger instead invested in Sprouts' rival Lucky's Market later in 2016 after The Fresh Market deal fell through. Should this acquisition go through, Albertsons' Florida presence would grow for the first time in 15 years, although that growth would be with a slightly less traditional format. Clicking on any of this links in this post will take you to articles with more information on the topics I mentioned.

 That's all I have for now. Until the next time.

 The Albertsons Florida Blogger
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6 comments:

  1. Ian WoodsMarch 22, 2017 at 8:13 PM

    I just read an article on SN about this yesterday. It sounds like retail analysts feel that this potential aquisition would make sense, but it could be costly. My initial impression from the headline was: "Oh no. Be careful Albertsons (Cerberus)! Don't get too aquisition crazy!" They made a big boo boo with that buyout of American Stores in 1998. Although this sounds like it's not nearly the same scale as that one. So much for Safeway. I feel like those 3 stores may just be a $10,000,000 experiment by Albertsons. But, like you've mentioned before, Albertsons seems to be a company full of surprises.

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    1. Albertsons Florida BlogMarch 27, 2017 at 10:12 PM

      The American Stores purchase turned into the disaster it did because of the scale of the sale and all of ASCO's debt that Albertsons inherited. Even in their new form, Albertsons is pretty heavily debt ridden, but I think they've found a way to better manage the debt these days. I don't think a buyout of Sprouts would be as traumatic as what happened with ASCO, and this deal does have some merits to it. It still hasn't been a full year for those three Safeway stores, so who knows what may have yet to come out of them...

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  2. AnonymousMarch 23, 2017 at 1:08 PM

    I personally do not see any future for Safeway in the state of Florida but sprouts may be a hit a lot of competition in that field with albertsons backing it may work

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    1. Albertsons Florida BlogMarch 27, 2017 at 10:19 PM

      If Safeway can expand their store count in Florida (while keeping any new stores to the standards of the current three), I think they may have a chance. However, if they don't do anything and stay with only the three stores, I don't think it will work out long term. Considering how well Lucky's is doing in Florida, an Albertsons-backed Sprouts would probably do just as well.

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  3. AnonymousMarch 27, 2017 at 10:19 AM

    Acquiring Sprouts Farmers Market could help Albertson's gain presence and store count in the specialty organic grocery retail segment. It would not be enough to expand its presence across the southeastern United States.

    If Albertson's should pursue an acquisition, it should consider a supermarket chain like Southeastern Grocers with store count.

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    1. Albertsons Florida BlogMarch 27, 2017 at 10:28 PM

      Metro Atlanta is really the only part of the Southeast where Sprouts has a high concentration of stores. The most popular areas for these specialty organic stores are in large metropolitan areas, where Sprouts could create a few store clusters in the Southeast, but as you say, it's not the right concept for a total expansion through the entire region should Albertsons go through with this deal. I wouldn't say an Albertsons purchase of SEG is unlikely, but I don't know if they have the money at this time to completely overhaul many of SEG's aging and neglected stores.

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