While Joe Albertson started in his company in 1939, the roots of Albertson’s LLC are more recent. Albertson’s LLC was formed in 2006, when the assets of Albertsons, Inc. were sold to three separate companies. SUPERVALU, out of Minnesota, bought the majority of the stores, and the free-standing drug stores in the south were sold to CVS. Albertson’s LLC acquired stores in Northern California, Colorado, Utah, Nebraska, South Dakota, Arizona, New Mexico, Texas, Louisiana, Arkansas, Oklahoma and Florida.
The story of Albertson’s grocery stores goes back over 75 years, however. Even though Albertson’s LLC is only a few years old, our company is built on a legacy that reaches back to the roots of what we know today as a “modern grocery store.”
In 1929, Joe Albertson was a college student who had spent two years studying business when the Great Depression sent the country into a tailspin. Joe decided that he would leave school and enter the grocery business, holding onto the philosophy that in good times or in bad, people had to eat, so he figured a grocery store was a good business.
Joe spent ten years working his way up at Safeway, but he knew that ultimately, he would open his own store. In July 1939, he did
just that. With $5,000 of his own money and a $7,500 loan from his wife’s aunt, Albertsons Store 101, at 16th and State Streets in Boise, Idaho, opened with new services that customers hadn’t seen in a grocery store before. He introduced things to shoppers like a scratch bakery, an automatic doughnut machine and one of the first magazine racks in the country. He also sold big, double dip ice cream cones, fresh popcorn and roasted nuts, which all became a hit with shoppers.
Joe’s idea about what made for a good grocery store quickly spread, and the following year he was able to open two more stores in neighboring Nampa and Caldwell, Idaho. It was only the beginning of a chain that, sixty years later, would have 1,000 Albertsons stores, as well as 1,500 other locations throughout the United States. In 2005, when the sale of Albertson’s Inc. was announced, a group of investors came together to form Albertson’s LLC, and in June 2006, the company officially acquired the stores in Arkansas, Arizona, Northern California, Colorado, Florida, Louisiana, New Mexico, Texas, Wyoming, and Oklahoma. Commonly referred to as “the dregs of the industry,” analysts acknowledged they were the stores that were holding Albertson’s Inc. back from closing the transaction. Inside the company, the stores were called “non-core,” meaning flatly that they were in areas that Albertson’s Inc. wasn’t investing in.
The non-core stores were in rough shape. Associate morale was low, and customer satisfaction scores were some of the worst in the industry. But Bob Miller, a retail executive who started his career at Albertsons in the 1960s, knew something in 2006 that most analysts did not know: he had opened a lot of those stores that were now considered “noncore,” and a lot of them had been proven performers. Most analysts speculated that the greatest value those non-core stores had was real estate.
Albertson’s Inc. had made it a practice to own a lot of the real estate that their stores were built on—and if they built a store across the street from an existing one, odds were they kept the old shopping center and rented it out. Bob knew that the stores needed a lot of work, but in order to be successful, they also needed to be merchandised for their local markets. He also knew that there was a division staff and store directors who would know what would be the best for their stores—and those people needed to be able to run them again. Bob brought together a leadership team comprised of former and current Albertsons executives to run the non-core stores.
Albertsons veterans Bob Butler, Rick Navarro, Paul Rowan, Mark Bates, Andy Scoggin and Mike McCarthy joined the company at Bob’s request to help establish the corporate structure—bringing with them over 200 years of experience in grocery and their respective areas of expertise—and two members of the Cerberus team, Justin Dye and Justin Ewing, also signed on to help rebuild the company.
On day one, Bob set the tone for the company by establishing a decentralized operating structure. Each division needed to be run like it was the only division—and each store needed to be run like the only store. Bob gave decision-making authority back to the divisions, and even the store teams to start making the decisions on what was right for the stores they operated—that, in and of itself made a big difference.
While the first year of business was coming to a close, the company noticed an interesting trend. A lot of these “non-core” stores that everyone had said weren’t worth any more than the land they were sitting on were turning things around. Overall, our stores and offices had a new spirit—and it was the spirit of winning.
By 2012, the Company was making money, had no debt, and was still looking for deals that would strengthen their overall presence and be a good fit. And everyone knew there was one transaction that truly was a great fit, and it was getting all of the Albertsons stores back under one company again. A lot of ideas were thrown at the dart board, but the Company didn’t land on the one that was viable until someone suggested something pretty simple: reversing the 2006 transaction.
Of the 1,100 stores that SuperValu had acquired, 877 were left. Albertson’s LLC knew that there would be very few regulatory concerns because we had no geographic overlap, so the transaction could be closed quickly. On January 10, 2013, the agreement with SuperValu to buy 877 stores was announced, and on March 22, 2013, it was done. Albertson’s LLC had all of the stores back. And they knew exactly what to do with them. Give the reins back to the divisions to run them, clean up the stores, focus on customer service, get the merchandise and pricing back in line, and build profitable stores again.
While a lot of people would’ve thought Albertson’s LLC was done growing, 2013 brought one more acquisition that strengthened our position in Texas. In the fall, we announced we had entered into an agreement to buy United Supermarkets, which included 51 operating stores, two distribution centers and Praters, a manufacturing facility based in Lubbock, Texas. And then in spring 2014, the Company announced a transaction that no one would have imagined happening when it started all this—the acquisition of the third largest food and drug retailer in the nation—Safeway. Announced on March 6, 2014, working together, Albertsons and Safeway will be able to deliver more of what shoppers want in a world where they have more choices than ever. That means lower prices, fresher produce, a wider selection of products, updated stores and an overall improved shopping experience, on top of the outstanding customer service shoppers have come to expect in our stores.
In the years that Albertson’s LLC has operated stores, we have operated under Mr. Albertson’s same philosophy: to give customers the products they want, at a fair price, with lots of care along the way. Our goal has never been to be the biggest, just the best. It’s that simple.