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article imageOp-Ed: How Albertsons' purchase of Safeway benefits shoppers

By Angela Atkinson     Mar 14, 2014 in Business
Last week, Albertsons parent company Cerberus Capital Management announced that it will buy Safeway in a definitive merger agreement valued at over $9.1 billion.
Safeway executives said that none of its stores will close, which means only Albertsons branches that are geographically close (to Safeway stores) may be affected. The Albertsons-Safeway combination will result in more than 2,400 stores, including 21 Safeway stores in Hawaii, and a 5.4 percent share of the U.S. grocery market.
Albertsons-Safeway will also present a formidable challenge to North America's largest supermarket chain, Cincinnati-based Kroger Co., which has 2,640 stores and 9.6 percent of all grocery sales in U.S. supermarkets.
Here are three ways the merger could benefit shoppers:
1. More Niche Stores
The emergence of discounters, warehouse clubs and natural foods grocers has altered the food retailing industry. How will Albertsons-Safeway adjust to attract shoppers away from Sam's Club, Target, and Trader Joe's?
The grocery industry has been shifting towards smaller, niche-focused stores. In a Wall Street Journal article, Albertsons CEO Bob Miller says Safeway was an attractive acquisition target because of its 20 store brands, which includes Safeway Select, Bright Green and O Organics.
The buyout of Safeway could result in the expansion of specialty stores that target niche consumers, such as vegan diets, organic food, premium labels, and low gluten lifestyles.
2. Lower Prices on Certain Products
The new company will leverage a stronger negotiating power with suppliers. Thus, shoppers could get better prices on hundreds of SKUs. When the deal was announced, Albertsons CEO Bob Miller said the combined company would improve its bargaining position in the supply chain.
Albertsons-Safeway will do what it can to remain competitive in the grocery industry. It will need to defend against threats coming from discount big box retailers such as Walmart, Costco, Target, and other competitors.
3. Operational Synergies
"This merger will improve our competitive position," said Safeway CEO Robert Edwards. "Our customers will benefit from significant cost saving synergies and a stronger management team."
Edwards will lead the combined company.
Aside from reducing administrative redundancies, the newly combined company could improve from adopting best practices in operations.
For example, its business intelligence for sales could optimize the placement of products in shelves.
Here's how business intelligence (BI) applies to the supermarket industry:
• Improve efficiency and productivity
• Tailor the blend of products and services by location
• Manage inventory and maintain low cost shipping and procurement channels
• Maximize efficiency in supply chain costs and orders by use of real-time information
• Prevent fraud and waste
• Improve service and overall customer experience with focused information
BI is a competitive advantage because of a grocer's ability to optimize inventory levels and product placement. A grocery enterprise needs to maintain adequate inventory but avoid holding excess goods.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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