Supermarket Rivals Try to Figure Out Vons’ Plans for Safeway Outlets
Southern California supermarket operators pulled out their store maps Friday to see just what it means for Vons to acquire Safeway’s 172 stores in Southern California, a $408-million deal announced Thursday.
They pored over the hundreds of supermarket outlets that dot the Southern California landscape from San Luis Obispo to the Mexican border.
“We’re doing our surveys now,” said one chain chief executive who asked not to be identified. “I’m sure all chains either have or are (doing it) now.” A good deal of their time over the next few months will be watching and studying every move by the El Monte-based chain as it moves to absorb the new stores.
“Everyone is wondering how the dust will settle,” said professor Bernard Codner, director of the Institute of Retail Management at California State University, Los Angeles.
The deal, which must be reviewed by federal regulatory agencies and approved by Vons shareholders, would nearly double the number of Vons stores and boost the chain’s sales to $4.6 billion a year. Vons also indicated that it would be closing some stores--both Vons and Safeway outlets.
That disclosure has fueled speculation on what stores might be closed and subsequently sold. It has also raised fears among stores employees who could lose their jobs. Vons employs a total of 20,000 workers in Southern California and Safeway 11,300.
There also is speculation as to how the deal will be treated by regulatory authorities. “There is an open question whether the Justice Department and the Federal Trade Commission will allow such market concentration,” an informed source said.
“I don’t think this is a slam-dunk deal at all,” said another.
Although Vons’ officials have said no decisions have been made about what stores might be closed, sources pointed out that the company must soon file such disclosures with the FTC.
In evaluating such mergers as this one, the FTC uses a complex index to measure market share impact of such a deal. One source said Vons is most likely to face challenges in San Diego, Ventura and Santa Barbara counties and in Las Vegas.
When Safeway sold 59 stores in Texas and New Mexico recently, the FTC voted in August to block the sale, saying it would reduce competition. The buyer of the Safeway stores later agreed to sell 12 of the stores in order to get FTC approval.
Although Vons’ executives claim that they have no firm count yet, they said they know of at least four sites where Vons stores are located directly across the street from Safeway outlets. In addition, they said there are at least another three “direct overlaps.”
“We will make a very careful, well-studied evaluation of a store’s potential before we do anything,” Roger E. Stangeland, Vons’ chairman, said in an interview Friday. He emphasized that the study will focus on the “potential” sales of a store, not necessarily its past performance.
“There is not a lot of territorial overlap,” he said. “Their strength is where we had not developed: in the west side of Los Angeles and in Orange County where we are under-stored.” In addition, the Safeway deal gives Vons outlets in less populous areas, such as Inyo, Imperial, San Bernardino, Riverside and San Luis Obispo counties.
Stangeland explained that just because two stores are located close to each other doesn’t mean that one will be closed if there is enough business to sustain both stores. Proximity isn’t the only issue, he said.
Supermarket executives say that Vons’ acquisition last year of the 10-store Pantry chain might provide some insight into Vons’ strategy. Where the chain found overlap it closed one store in favor of the better, newer facility. That was the case in Yorba Linda, where the Pantry store took the Vons name and the old Vons store was shuttered and remains vacant. Vons also closed the Pantry store in Arcadia when it opened a Vons Pavilion nearby.
Industry observers believe that where there is store overlap between Vons and Safeway outlets, Vons will make sure when it vacates a site that it will not be occupied by another food chain, thus protecting it sales base.
Stangeland said Von officials met with employee unions Thursday night to explain the transaction and promised to work with them when it comes time to decide what is to be done with the employees. “We will negotiate with the unions over the merged seniority list.”
He added, however: “We can’t make any job guarantees, that would be less than truthful.” Stangeland also said: “There will be some layoffs for sure.”
SOUTHLAND SUPERMARKET CHAINS
SOUTHLAND SOUTHLAND CHAIN HEADQUARTERS STORES EMPLOYEES Vons El Monte 193 20,000 Ralphs Compton 128 17,000 Lucky Dublin, Calif. 179 17,300 Alpha Beta Salt Lake City 192 13,500 Safeway Oakland 172 11,300 Hughes Los Angeles 42 4,300 Boys Markets Los Angeles 54 5,000 Albertson’s Boise, Idaho 72 9,000
