Formerly sleepy (and shaky) Albertsons has been busy the past few months, acquiring United Supermarkets (better known in DFW for its suburban Market Street concept) last September, and entering into a merger with Safeway (better known here as Tom Thumb) in March. Despite closing a number of stores recently, including several in DFW, Albertsons says it has no plans to close additional stores.
However, industry experts say, it’s only a matter of time. A Los Angeles Daily News story quoted one analyst as saying of the merger, “When an investment company buys another company, it’s not doing it to operate that company. It’s doing it to break off some assets and sell those assets to make money.” The merger would make for 117 stores in DFW, according to Supermarket News, with a handful of those in close proximity to each other, such as the Albertsons and Tom Thumb situated kitty corner at Mockingbird-Abrams.
The Supermarket News story notes that Albertsons could sell out once the merger closes, and quotes an anonymous insider who believes “San Antonio-based HEB could be interested in expanding further in the market, and that Cerberus [the firm that owns Albertsons] could be interested in exiting the market once the deal closes.” This would not be unprecedented; Safeway did just that in Chicago last winter, closing or selling all of the Dominick’s chain, which at one time was of one the two biggest grocery store companies in the area.
If that happens, experts believe it would blow the door open for HEB, which has opened stores on the outskirts of Dallas and, for years, been rumored to enter the market, even though the company has insisted that its gourmet store, Central Market, will be the format it continues to use here. David Shelton of United Commercial Realty told us in 2011 that HEB in Dallas is “inevitable. It’s just a matter of timing for those guys.”
If the opportunity presents itself to buy former Albertsons and Tom Thumb stores, that could be the trigger for HEB to finally come to Dallas. Another possibility is that Albertsons could convert some store locations to Market Street, a smaller, specialty kind of grocer, and the type of store that Albertsons as a chain didn’t have before it bought United.
The other option is that Albertsons would dig in and continue to compete; with the merger, it would have close to 20 percent of the DFW grocery market, moving it to second place behind Walmart, at 27 percent, and in front of Kroger, at 14 percent, according to Supermarket News. Its story quotes Jeff Kittleson of CBRE as saying the merger “helps them compete better with Walmart and Kroger from an offering standpoint and from a convenience standpoint.” However, Kittleson also notes there are at least 30 grocery stores — from Walmart and WinCo to The Fresh Market — under construction in DFW that will open in 2014 and 2015.
Between the competition from Walmart and Kroger, and from the specialty stores under construction and those already here (not the least of which is Trader Joe’s with its cult following), Albertsons may figure it’s just not worth the trouble.
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