CONSOLIDATION CONTINUES DESPITE FTC ROADBLOCKS

ELLIOT ZWIEBACH

The Federal Trade Commission flexed its muscles in 1999 as industry consolidation continued.

The most devastating impact was felt by Netherlands-based Ahold, which opted to terminate its proposed acquisition of Pathmark Stores, Carteret, N.J., after the FTC opposed the deal in mid-December, reportedly due to considerable competitive overlap.

Also feeling the FTC's power was Albertson's, Boise, Idaho, which was required to divest 145 stores in the Western U.S. to receive approval to acquire American Stores Co., Salt Lake City -- reportedly the largest number of divestitures ever ordered in the retailing industry -- in large part because of competitive overlap in California, Arizona and New Mexico.

The Albertson's divestitures proved beneficial for several California operators, including Stater Bros Markets, Colton, Calif., which picked up 43 store locations in southern California; Ralphs, the Compton, Calif.-based division of Kroger, which acquired, among others, 31 units in northern California; Raley's Supermarkets, Sacramento, Calif., which was able to move into two new areas by acquiring 19 stores in Las Vegas and eight in New Mexico, and Certified Grocers of California, Los Angeles, which purchased 31 locations for its members.

Even with the divestitures, Albertson's became the second largest chain in the U.S., with 2,437 stores in 38 states and volume of $33.4 billion. In November it eliminated the Lucky Stores logo it had acquired in the deal and rebannered all of its California and Nevada stores under the Albertson's name.

With virtually no competitive overlap, the FTC was easier on Kroger Co., requiring the Cincinnati-based company to divest only eight stores to complete its acquisition of Fred Meyer, Inc., Portland, Ore. That merger, disclosed in 1998 and consummated in May, enabled Kroger to solidify its position as the nation's largest retailer, with nearly 2,200 supermarkets and 380 jewelry stores in 31 states and sales of $43.1 billion.

In the year's other major transaction, Safeway boosted its volume to approximately $30 million with the acquisition last summer of Randall's Food Markets, Houston, operators of 116 stores in Houston, Dallas and Austin, Texas. Earlier in the year Safeway completed its acquisition of Carr Gottstein Foods Co., Anchorage, Alaska, which was disclosed in 1998.

One other major deal was awaiting FTC approval as the year ended: the purchase by Food Lion, Salisbury, N.C., of Hannaford Bros., Scarborough, Maine. That deal reflects a more aggressive expansion program on the part of Delhaize "Le Lion," Food Lion's Brussels, Belgium-based parent company, which hopes to become a stronger player globally by increasing its holdings in various countries, including the U.S.

With the Hannaford deal came the creation of a new holding company, Delhaize America, to operate Food Lion and Hannaford.

On other global fronts, Wal-Mart Corp., Bentonville, Ark., purchased London-based Asda, setting off what is expected to be a new round of consolidation abroad that included the acquisition by France's Carrefour of Promodes, also in France; Ahold's plans for additional European purchases; talks in Germany between Tengelmann and rival Edeka about a merger; a shift in focus toward more European acquisitions by Tesco in the United Kingdom and Metro in Germany, and the perception that Auchan, Leclerc and Casino in France were possible takeover targets or merger partners.

Among wholesalers, Minneapolis-based Supervalu acquired Richfood Holdings, Richmond, Va., strengthening its position as the nation's largest wholesale distributor with sales of $23.1 billion -- and, with $6.9 billion in corporate-owned retail sales, the nation's 11th largest operator.

In another significant wholesaler move, two major West Coast cooperatives -- Certified Grocers and United Grocers, Portland, Ore. -- merged to create a new entity, Unified Western Grocers, with combined sales of approximately $3 billion.

On other consolidation fronts:

Kroger expanded its holdings in Texas when it acquired 74 units of Winn-Dixie, including 69 in Texas and five in Oklahoma, making it the largest operator in the Fort Worth area and the second largest in Dallas. The company built on its mid-year acquistion of 28 units of The Groub Co., Seymour, Ind. (in southern Indiana), with an agreement at year's end to purchase the eight units of Pay Less Super Markets, Anderson, Ind. (in central Indiana).

Shaw's Supermarkets, East Bridgewater, Mass., added about $1 billion to its sales base when its parent company -- London-based J. Sainsbury plc -- acquired 45 stores from Star Markets Co., Cambridge, Mass., in a move designed to strengthen its position in the Boston market and expand into the competitive Cape Cod marketplace.

Big V Supermarkets, Florida, N.Y., operator of 31 ShopRite stores, boosted sales by about $150 million and strengthened its position in northern New Jersey with the acquisition of ShopRite of Pennington, a five-store operator based in Trenton, N.J.

K-VA-T Food Stores, Abingdon, Va., strengthened its position in the Knoxville, Tenn., marketplace with the acquisition of seven locations there from Winn-Dixie Stores, Jacksonville, Fla.

Wild Oats Markets, Boulder, Colo., acquired a number of companies in separate transactions throughout the year: 11 Henry's Marketplace stores in San Diego, Calif.; six stores and two development sites in Oregon and Washington from Nature's Fresh Northwest, a subsidiary of General Nutrition Co., Pittsburgh, Pa.; three stores from United Natural Foods in Connecticut and Florida, and three Reay's Ranch Markets, Tucson, Ariz., with deals pending at year's end for nine units of Sun Harvest Farms, San Antonio, Tex., and four units of Wild Harvest, Boston, from Shaw's.

Whole Foods Market, Austin, Tex., strengthened its position in the Boston area with the acquisition of Nature's Heartland, a four-store operation with annual sales of approximately $50 million.

Food Lion, Salisbury, N.C., acquired 30 Farmer Jack stores in Virginia from A&P, Montvale, N.J., to strengthen its position in the Richmond and Tidewater areas. A&P said the Virginia Farmer Jack stores were closed in January because they no longer fit into the company's long-range plans.

Harris Teeter, Matthews, N.C., acquired 10 stores in the Winston-Salem and Greensboro areas of North Carolina from Kroger Co., Cincinnati -- at the same time it sold Kroger 11 underperforming stores in the Lynchburg-Roanoke area of western Virginia -- to provide greater distribution efficiency and better centralization of advertising.

Homeland Stores, Oklahoma City, acquired 13 units during the year: nine Apple Markets from Horner Foods, Tulsa, Okla., and four from Brattain Foods, Muskogee, Okla., as part of its effort to consolidate its operations and complement its internal growth plan through acquisition.

Acme Markets of Virginia, North Tazewell, Va., nearly doubled its size to 26 stores with the acquisition in June of 12 units of Community Cash Stores, Spartanburg, S.C. In November it acquired two North Carolina stores from Kroger.

Publix Supermarkets, Lakeland, Fla., acquired nine Atlanta-area stores from A&P, which shut down its 34-store Atlanta division.

A&P purchased six units of Schwegmann Giant Super Markets, New Orleans, for its Sav-A-Center division.

Giant Eagle, Pittsburgh, Pa., acquired four Cleveland-area units from Stop-N-Shop, Chesterland, Ohio, with reports at year's end that it would add nine more Ohio locations through acquisition.

Seaway Food Town, Maumee, Ohio, acquired two independents in Ohio as part of its plan to expand into nearby and fill-in markets.

Brown & Cole Stores, Bellingham, Wash., acquired the five Ennen Food Stores, also of Bellingham.

Among wholesalers:

C&S Wholesale Grocers, Brattleboro, Vt., added $325 million in volume when it acquired the inventory and 4,000-member customer base of James Ferrera & Sons, Canton, Mass

Roundy's, Pewaukee, Wisc., acquired 27 units in three transactions: 16 stores in Wisconsin and one in Illinois from Mega Marts, Oak Creek, Wisc.; seven stores in Wisconsin from Ultra Mart, Menomenee, Wisc., and three stores in Indiana from Kroger that Kroger was required to divest after acquiring The Groub Company.

Nash Finch Co., Minneapolis, expanded its retail business with the purchase of 18 supermarkets in Minnesota and Wisconsin from Erickson's Diversified Corp., Hudson, Wis.

Spartan Stores, Grand Rapids, Mich., acquired 23 units of Glen's Markets, Gaylord, Mich., that boosted its new retail division to 44 locations.

Associated Food Stores, Salt Lake City, entered the corporate retail business with the acquisition of 19 stores in three separate acquisitions: seven units of Dan's Grocery Stores, Salt Lake; seven units of Macey's, Sandy, Utah, and five units of Lin's Foodstores, Saint George, Utah.

Affiliated Foods Cooperative, Norfolk, Neb., acquired the real estate, equipment and inventory of Affiliated Foods, Elwood, Kans., extending its reach into Missouri, southern Iowa, southern and eastern Kansas and Oklahoma.