admin @ Tue, 2005-10-25 05:46
A Kroger-Albertsons deal would mean more consolidation in Phoenix's competitive grocery market, although it is likely to have a bigger impact in parts of the country where Kroger is in a weaker position and trying to gain market share.
Just a few traditional grocers are left in the Valley: Fry's has the top spot with 28 percent market share, followed by Bashas', 16 percent; Safeway, 15 percent; Albertsons, 12 percent and Wal-Mart, 9 percent, according to Metro Market Studies research firm in Tucson. Wal-Mart's Valley growth threatens each grocer's hold on the market. Specialty grocers are also growing.
Kroger stands to gain stores in the deal, but analysts say Kroger would have to sell operations in some markets, including Arizona, to avoid overlap.
Kroger operates about 85 Fry's stores in metropolitan Phoenix, according to a company spokeswoman. Albertsons has about 50 grocery stores and grocery-drug stores and 40 stand-alone Osco Drug stores in the Valley, according to the company's Web site.
Boise, Idaho-based Albertsons has struggled in the Phoenix market amid competition from Wal-Mart and specialty grocers. Although the company is dominant elsewhere, it has not opened a new store in the Valley since February 2004.
Albertsons came to Phoenix in 1989 and was the last traditional grocer to join the market. Despite its late arrival, many of its stores are on prime pieces of property, said Judi Butterworth, a commercial real estate broker for De Rito Partners in Phoenix.
"They got into areas that would today be very difficult to duplicate," she said. That would work to Kroger's advantage if it needed to sell or lease Albertsons stores as part of the deal, Butterworth said.
Shares of Albertsons rose nearly 5 percent Monday and closed at $25.25. Kroger shares inched up 1.36 percent to $20.07.
Analysts had mixed opinions about Kroger's bid on Monday.
New York City-based Prudential Equity Group LLC said in a report that Kroger would be buying poorer quality assets just to gain access to a couple of markets.
"We hope Kroger is only poking around Albertsons for informational purposes," the report said.
BB&T Capital Markets said it would support Kroger's bid.
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