ALBERTSON'S DEAL FUELS REGIONAL OPERATORS

ELLIOT ZWIEBACH

The merger of Albertson's and American Stores Co. is creating a new landscape in California and the Southwest, as several regional chains and independents reap the benefits of acquiring stores divested in the mega-deal.

The 145 stores that Boise, Idaho-based Albertson's was ordered to sell are being divided up among five California companies, which are now contemplating the possibilities for the windfall each has received.

Among the anticipated benefits:

In Southern California, 43 units acquired by Stater Bros. Markets and 31 by Certified Grocers of California on behalf of a variety of its independent members are expected to strengthen those operations, while the four units acquired by Vons Cos. are likely to have only a minimal impact.

The 27 stores being added by Raley's Supermarkets will enable the chain to move beyond its northern California-northern Nevada base into Las Vegas in southern Nevada and New Mexico.

Ralphs Grocery Co. will move into Raley's Sacramento backyard with 17 stores, while adding 20 other locations in virgin territory in northern and central California, plus two additional Southern California stores that will have minimal impact on its operations there. (Kroger also acquired one divested store in New Mexico for conversion to a Smith's Food & Drug Center.)

The 43 stores being acquired by Stater Bros., Colton, Calif., will enable that Southern California chain to increase its size from 112 to 155 locations and its volume from $1.8 billion to about $2.3 billion.

Jack Brown, chairman, president and chief executive officer, said Stater will begin taking ownership of the stores -- which include 33 former Albertson's and 10 units of American Stores' Lucky Stores -- around Aug. 7, with the changeover scheduled to be completed by Labor Day.

The acquisition package includes 10 stores in northern San Diego, a new marketing area for Stater, although Brown said consumers there are probably familiar with the company from Los Angeles television advertising that spills over into the market.

"But we will enter San Diego as if we are a brand new chain, with all the new-entry type of ads, including our slogan, 'Since we're neighbors, let's be friends,"' Brown told SN.

The overall conversion of the 43 acquired stores is being designed to have as small an impact on customers as possible, Brown said. "We don't want to do anything to offend those stores' existing customers," he explained.

"Our plan is to make customers our No. 1 priority and employees No. 2, and if we do things right for both, then we think everything will work out fine.

"We want to make this changeover a textbook study for the food industry. Many companies that have taken over large groups of stores have run into service problems, but after talking with three of those companies, we have binders full of the best information possible, including the mistakes they made."

Some things will change immediately, he noted. "We will lower prices to our everyday-low-price levels, and we will change all front-end systems to our own NCR system immediately, based on advice from some of our friends in the industry who have gone through this conversion process," he said.

Brown said Stater will change the exterior and interior signing on the stores over the next couple of months, but otherwise will pretty much leave the stores as they are now.

Accordingly, he said, Stater will re-merchandise the sales floor of each store while retaining all existing categories and departments -- regardless of whether Stater normally operates those departments -- including video rental and lobby services, "plus all salad and bakery recipes."

Brown said Stater will continue that approach "until we can get in and evaluate movement." However, he said, the acquired stores will become more standardized after Jan. 1, when Stater will begin remodeling them.

For Sacramento-based Raley's, the acquisition means moving beyond its familiar northern California-northern Nevada base into two new markets: Las Vegas, where it will add 19 stores, and New Mexico, where it will operate six stores in Albuquerque and two in Las Cruces.

The addition of the 27 locations will increase the chain's size from 124 stores to 151, with volume jumping from $2.5 billion to about $3 billion.

According to Larry Nurse, chief operating officer, the Las Vegas and New Mexico stores were offered to Raley's as a package "to facilitate their sale," and Raley's had to take both groups to acquire either.

"We see expanding opportunities in the Southwest, and we felt we could benefit from firsthand operating experience there," Nurse said, "and we felt New Mexico was a jewel that we should take advantage of."

Raley's plans to take ownership of the acquired stores beginning in late August and to complete the conversion, at a rate of two to four stores a week, by the last week of October, he told SN.

He said Raley's will start the conversion process with the two stores in Las Cruces, which should be operating under the Raley's banner by Labor Day, and end the process with the conversion of the Las Vegas stores.

Raley's will distribute product to the Las Vegas stores from its dry-grocery/frozen-food warehouse in Lathrop, Calif., and its perishables facility in Sacramento, Nurse said. "The distance from the distribution centers to Las Vegas is about 500 miles -- about the same distance as from Sacramento to northern Nevada," he pointed out.

In New Mexico, he said, the company will use a third-party distributor, which he did not name.

He said the company has mapped out a three-year program to introduce itself to consumers in the New Mexico market.

According to Nurse, a team of executives from the core company will run the New Mexico stores, headed by Rick Kaiser, currently director of operations for Food Source, Raley's seven-store natural-food chain.

Las Vegas will be run as a district out of Sacramento with oversight by Robert Abel, senior vice president of the superstore division; and Vince Testa, a district manager in Sacramento, will become manager of the new Las Vegas district, Nurse said.

He said Raley's may ultimately seek additional fill-in acquisitions in its broadened operating area. "This acquisition creates a lot of opportunities between all these different points, and over time, we will look for additional opportunities to fill in gaps," he explained.

Certified Grocers of California, the Los Angeles-based member-owned cooperative, is purchasing 31 stores that will be transferred to retail members to operate. The stores accounted for sales of about $475 million for Albertson's last year, although Certified is not expected to retain all of that volume, a company spokesman told SN, since it does not warehouse all product categories.

He said an announcement is scheduled this week to disclose the disposition of the stores.

Ralphs Grocery Co., Compton, Calif., a division of Kroger Co., Cincinnati, is acquiring 41 stores, of which 31 are in northern California -- including 17 in Sacramento -- and six are in central California, all new marketing areas for the Southern California-based chain.

However, Kroger officials declined to provide any details of Ralphs' growth plans.

Vons Cos., Arcadia, Calif., a division of Safeway, Pleasanton, Calif., is adding four stores in Southern California while selling an existing location in Costa Mesa near one of the divested stores to Certified, for a net pickup of three units.