ANAHEIM, Calif. -- Albertson's merger with American Stores Co. will not be its last, the chain's chairman and chief executive officer told an audience of sales representatives here.
According to Gary E. Michael, "Our strong cash flow and balance sheet will enable us to participate in industry consolidation if the right opportunity becomes available in new or existing markets."
In a speech to the Combined Food Sales Clubs of Southern California, Michael said Albertson's, based in Boise, Idaho, pursued the merger with American Stores, based in Salt Lake City, because of "substantial strategic benefits."
"The premise of the merger is to take two entities and create more value than the sum of the parts -- one plus one equals three."
Speaking shortly before the expected close of the deal, Michael said Albertson's was ready to begin implementing its integration plan "the day the merger closes."
As previously disclosed, he said the new company would have a three-person office of the chairman to oversee operations and strategic decisions.
The new Albertson's will remain an operating company, he said, with a structure similar to its pre-merger configurationure of eight regional offices overseeing 30 divisions.
Michael said three of these regions would be headed by Albertson's executives -- the Pacific Northwest region in Boise, Idaho; the southern region in Dallas-Fort Worth, and the Intermountain region in Denver -- and five by American Stores personnel -- the southern California region in Buena Park, Calif.; the northern California region in San Leandro, Calif.; the Midwest region in Chicago; the eastern region in Malvern, Pa., and the drugstore region in Scottsdale, Ariz.
The merger will make Albertson's the second-largest chain in the country (behind Kroger Co., Cincinnati), with approximately 2,500 stores in 38 states. Albertson's already operates in the West, Midwest and South; the merger will expand its reach into Chicago and Philadelphia, and it will add 773 freestanding drugstores, Michael said.
Despite its size, Albertson's goal is to operate neighborhood markets, Michael said. "We want to be the best supermarket in each neighborhood in which we operate, and although there are as many different neighborhoods as we have stores, we want to operate each one as if it were our only store."
Michael cited several examples of the company's efforts to customize its stores to local markets:
The Village Market by Albertson's in Austin, Tex., which was the first Albertson's to feature a new store-within-a-store concept, with what Michael called "the feel of a series of small stores" along the perimeter, including Party Pavilion and Candy City, "to make customers feel they are walking through a small shopping center."
Albertson's Woodlands store in Houston, which Michael said had the feel of a mall with several unusual shops, including expanded destination centers like Beverage Boulevard and Snack Central, "which makes it more fun to shop."
The Broadway Market/Albertson's in downtown Boise, which caters to college-age and senior customers -- a 27,000-square-foot store that tries to cater to the "what's-for-dinner" and fill-in shopper by featuring a meal center, coffee bar, expanded service fish department and the chain's first test of self-scan checkouts.
"We're designing stores category by category so we can be solutions and destination centers, to take away the reason for any secondary shopping trips to other stores," Michael explained.
He said Albertson's was testing a new destination category in a store in Norman, Okla. -- a Boomer Sooner department featuring merchandise related to the University of Oklahoma, including school supplies and sweatshirts.
Albertson's is also testing fuel centers at 26 locations, and plans to open 600 more in the next five years, Michael said. The fuel centers outside the stores have three to six gas pumps -- some with pay-only kiosks and others with small stores for convenience items, all at the same as they are inside the supermarket. "We offer discounts on gas if customers buy certain items inside the main store," Michael said, "and we're excited with the results so far because it creates a great opportunity for extra sales."
And Albertson's is excited about the prospects of its pharmacy business, at 705 in-store pharmacies and the 773 freestanding drugstores it will add in the merger, Michael said.
"Pharmacy is a business that's exploding," Michael said, "with demographics and medical factors fueling sales. As the U.S. population continues to age, this rapid growth in the pharmacy business will continue."
