Kroger will sell Mariano’s brand name, and some Mariano’s stores, as it prepares to merge with Albertsons (2024)

One of the major brand names in Chicago’s grocery landscape will change hands as giants Kroger and Albertsons shed stores in hopes of securing federal approval for their megamerger.

The companies announced Friday they would sell off more than 400 grocery stores, including 14 in Illinois, to C&S Wholesale Grocers for $1.9 billion. The companies also said they would sell off the Mariano’s brand name as part of the deal.

The divestiture plan comes as the companies, which are the two largest traditional grocery operators in the country, attempt to secure Federal Trade Commission approval of their $24.6 billion merger, which they first proposed last October. Mariano’s parent Kroger is planning to acquire Jewel-Osco parent Albertsons.

In a statement, Mariano’s spokesperson Amanda Puck confirmed some Mariano’s stores would be sold off as a result of the divestiture plan.

“Because we are still in the regulatory process, we are not able to share the specific locations included in the agreement,” Puck said. She said C&S, a wholesaler that also operates Piggly Wiggly and Grand Union grocery stores, had agreed to honor all existing collective bargaining agreements.

Fourteen Kroger-owned grocery stores in Illinois are slated to be sold off. Kroger owns about 44 Mariano’s grocery stores in Illinois in addition to about 10 Food 4 Less stores.

Any Mariano’s stores that are retained by Kroger will be “re-bannered” into an existing Kroger or Albertsons brand after the deal closes, the companies said in a Securities and Exchange Commission filing.

Kroger will sell Mariano’s brand name, and some Mariano’s stores, as it prepares to merge with Albertsons (1)

Jon Hauptman, founder and president of retail consultancy Price Dimensions, said it is possible Kroger would choose to operate those Mariano’s stores under the Jewel-Osco banner, which remains a brand with strong name recognition in the Chicago area.

“There’s a good chance that we’ll just see more Jewels in the area,” he said.

Hauptman added that over time shoppers could see the selection at their local Jewels change under Kroger ownership if and when the deal closes. Kroger is particularly likely to consolidate private label brands across the two banners, he said.

Kroger and Albertsons will also sell off the QFC and Carrs brand names, as well as some distribution centers and private-label brands.

Kroger said in an SEC filing that the deal, which is still subject to approval by the FTC, is on track to close in early 2024.

The company said Kroger may require C&S to buy up to 237 additional stores “in certain geographies” in order to secure FTC approval of the deal.

Hauptman said he would not be surprised to see additional divestitures in the Chicago area, where some Mariano’s and Jewel locations are located almost on top of one another. The plan calls for significantly more divestment on the West Coast; in Washington, more than 100 stores are set to be sold off. The companies have agreed to sell 66 stores in California and around 50 each in Colorado and Oregon.

“Fourteen seems sort of low,” Hauptman said.

Jewel has about 183 stores in Illinois and a handful in Indiana and Iowa.

Kroger and Albertsons first announced the proposed merger last October. In an earnings call Friday, Kroger CEO Rodney McMullen said the company had landed on C&S after a “robust and thoughtful diligence process” that included reviewing “dozens of buyers spanning from private to public to union to nonunion domestic and international players.”

Labor unions and various elected officials raised concerns about the merger in the months after it was announced, particularly in regards to the potential for consolidation to lead to higher food prices and the loss of union grocery jobs.

Kroger has said it plans to reinvest approximately half a billion dollars in cost-savings achieved through the merger into lowering prices for consumers.

The company has cited competition with low-cost, nonunion competitors such as Walmart as a rationale for the merger; lower prices could help the combined company woo customers from those lower-cost options.

Critics, however, have noted Kroger ultimately has no obligation to pass any cost savings achieved in the merger along to consumers.

In their announcement Friday, the companies said C&S would honor existing collective bargaining agreements, that no stores would close as a result of the merger and that all front-line grocery workers would keep their jobs.

In a statement, Marc Perrone, president of the United Food and Commercial Workers International Union, which represents workers at both Kroger and Albertsons, said UFCW staff “will be analyzing every aspect of this proposed deal and will assess the impact, positive or negative, that it may have on our UFCW members, the customers we serve, and the communities we call home.”

Claire Kelloway, food programs manager at the Open Markets Institute, a nonprofit focused on the prevention of monopolies, said stores could still end up closing, with resulting job losses, should C&S not end up being able to effectively operate more than 400 additional grocery stores in a variety of regional markets. Those stores would need to compete against the combined power of a Kroger-Albertsons behemoth.

“It’s just impossible to know if they’ll be able to handle that,” Kelloway said.

C&S operates about 160 retail locations, the company’s chief operating officer and incoming chief executive Eric Winn said in a news release Friday. Winn said those stores “demonstrate C&S’s ability to deliver solid retail performance.”

Mariano’s was founded by Dominick’s executive Bob Mariano in 2010. The demise of the former major local grocery player Dominick’s, which was shuttered by parent company Safeway in 2013, paved the way for Mariano’s growth.

Kroger bought the chain’s parent company, Milwaukee-based Roundy’s, for $800 million in 2015.

Kroger will sell Mariano’s brand name, and some Mariano’s stores, as it prepares to merge with Albertsons (2024)
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