Kroger, Albertsons sell more than 400 stores to C&S Wholesale Grocers

The Kroger Co. and Albertsons Cos. Inc. entered a definitive agreement with C&S Wholesale Grocers LLC for the sale of select 413 stores in 17 states, three banners, eight distribution centers, two offices and five private label brands for approximately $1.9 billion. The divestiture is in connection with Kroger and Albertsons’ proposed merger previously announced on October 14, 2022. The merger remains on track to close in early 2024.

Prior to the closing, Kroger may, in connection with securing FTC and other governmental clearance, require C&S to purchase up to an additional 237 stores in certain geographies. If additional stores are added to the transaction, C&S will pay to Kroger additional cash consideration based upon an agreed upon value.

The divestiture plan marks a key next step toward the completion of the merger by extending a well-capitalized competitor into new geographies. The divestiture plan ensures no stores will close as a result of the merger and that all frontline associates will remain employed, the grocers said. C&S, a wholesale grocer and one of the largest privately held U.S. companies offers 104 years of food industry experience and supplies more than 7,500 independent supermarkets, retail chain stores and military bases. C&S currently operates more than 160 Grand Union grocery stores and Piggly Wiggly franchise and corporate-owned stores in the Midwest and Carolinas.

The divestiture transaction includes 413 stores, along with QFC, Mariano's and Carrs brand names. Mariano’s currently operates 44 grocery stores across 33 cities in Illinois, including Chicagoland. QFC operates 59 grocery stores in Oregon and Washington. Carrs currently operates 11 grocery stores in Alaska. 

Stores currently under these banners that are retained by Kroger will be re-bannered into one of the retained Kroger or Albertsons Cos. banners following the close of the transaction. In the Arizona, California, Colorado and Wyoming where C&S will have the license to the Albertsons banner, Kroger will re-banner the retained stores following the close of the merger with Albertsons Cos. Kroger will maintain the Albertsons banner in the remaining states. 

The number of stores contained in the divestiture plan by geography is as follows:

• Washington — 104 Albertsons Cos. and Kroger stores.
• California — 66 Albertsons Cos. and Kroger stores.
• Colorado — 52 Albertsons Cos. stores.
• Oregon — 49 Albertsons Cos. and Kroger stores.
• Texas and Louisiana — 28 Albertsons Cos. stores.
• Arizona — 24 Albertsons Cos. stores.
• Nevada — 15 Albertsons Cos. stores.
• Illinois — 14 Kroger stores.
• Alaska —  14 Albertsons Cos. stores.
• Idaho— 13 Albertsons Cos. stores.
• New Mexico—  12 Albertsons Cos. stores.
• Montana, Utah and Wyoming— 12 Albertsons Cos. stores.
• Washington, D.C.; Maryland and Virginia— 10 Harris Teeter stores.

All fuel centers and pharmacies associated with the divested stores will remain with the stores and continue to operate.

In addition, Kroger will divest the Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals and Waterfront Bistro private label brands. 

The divestiture plan fulfills the commitments Kroger and Albertsons Cos. set out in their original merger agreement with regard to divesting stores, including:

• Extending a competitor to new geographies through the sale of stores to a well-capitalized buyer that is led by seasoned operators with a strong balance sheet and a sound business plan.
• Ensuring that no stores will close as a result of the merger.
• Maintaining all current collective bargaining agreements, which include industry-leading healthcare and pension benefits. bargained-for wages, and ensuring frontline associates remain employed.
• Committing to invest in associates and stores for the long term.

"We look forward to welcoming thousands of new associates to the C&S family and providing them the opportunity to build long and successful careers," said Eric Winn, chief operating officer and designated CEO (effective October 2) of C&S Wholesale Grocers. "As a leader in the grocery industry, we have a strong heritage of value and customer service that is enabled by a deep commitment to our consumers, employees and communities. Today's announcement is another exciting opportunity for C&S to further expand into the retail market, which is an important component of our growth and future success. We look forward to providing a superior shopping experience that delivers both quality and value to our customers."

As a result of the divestiture plan with C&S, Kroger also sold its SpinCo business to C&S. Consequently, the spin-off previously contemplated by Kroger and Albertsons Cos. is no longer a requirement under the merger agreement and will no longer be pursued by Kroger and Albertsons, the retailers said.

Kroger also reported total company sales were $33.9 billion in the second quarter, compared to $34.6 billion for the same period last year. Excluding fuel, sales increased 1.1% compared to the same period last year.

The grocery industry currently is in the midst of an evolution with a series of major mergers and acquisition. Last month, Retail Leader reported Aldi entered into a definitive agreement to acquire Winn-Dixie and Harveys Supermarket as part of a larger divestiture of Southeastern Grocers  to various entities. The deal is expected to close in the first half of 2024. 

Walmart is also putting pressure on traditional grocers. Walmart netted nearly 36% of all U.S. e-commerce grocery sales in the second quarter, up more than 5 percentage points from the prior year and its highest share to date, as Retail Leader previously reported.