Albertsons is one of the largest food and drug retailers in the United States. Operating under various regional banners, including Albertsons, Safeway, Vons, and Jewel-Osco, the company has a rich history marked by innovation, strategic acquisitions, and adaptation to changing market conditions.
The Early Years: Building a Foundation in Boise
The story of Albertsons begins in 1939, when Joe Albertson, a former Safeway district manager, partnered with L.S. Skaggs and Tom Cuthbert to open the first Albertson's Food Center in Boise, Idaho. Albertson's vision was to create a one-stop shopping experience, and his 10,000-square-foot store was a significant departure from the smaller grocery stores of the time.
Albertson's Food Center offered several innovations, including an ice cream counter, an in-store bakery, and a magazine rack. The store's success allowed Albertson to reinvest profits and expand, opening new stores in neighboring towns like Nampa, Caldwell, and Emmett before World War II.
During the war years, Albertson focused on refining operations and promoting War Bonds. In 1945, Albertsons Corporation was formed, boasting six state-of-the-art supermarkets and sales approaching $3 million. The company also established a complete poultry operation.
Expansion and Innovation in the Post-War Era
The 1950s marked a period of expansion for Albertsons, as the company moved into Washington, Utah, Oregon, and Montana. In 1957, Albertsons built its first frozen foods distribution house to serve stores in southern Idaho and eastern Oregon. The company also experimented with department stores during this time.
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In 1959, Albertsons introduced its private label, Janet Lee, and went public, using the capital to accelerate its expansion plans. By 1961, Albertsons had entered Wyoming, and in 1962, the company opened its 100th store.
Entering California and Strategic Partnerships
In 1964, Albertsons made a significant move into the California market by acquiring Greater All American Markets, a Los Angeles-based chain. That same year, Joe Albertson passed the role of chief executive to J.L. Berlin, while remaining chairman of the executive board.
Under Berlin's leadership, Albertsons strengthened its position in California by merging with Semrau and Sons, an Oakland-based grocery store chain, in 1965. This acquisition added eight markets in northern California, which Albertsons continued to operate under the name Pay Less. By the end of the decade, Albertsons operated more than 200 stores and annual sales exceeded $400 million.
The Combination Store Concept and Continued Growth
In 1969, Albertsons embarked on a joint venture with Skaggs Companies, Incorporated, a company with roots in the establishment of Safeway. The partnership led to the creation of Skaggs Albertsons stores, which combined grocery and drug store offerings under one roof. This innovative concept proved highly successful, with the first Skaggs-Albertson's combination stores opening in Texas in 1970.
The combination stores were significantly larger than traditional supermarkets, covering as much as 55,000 square feet. In addition to groceries, they stocked non-food items such as cosmetics, perfumes, pharmacy products, camera supplies, and electrical equipment, capitalizing on the higher profit margins of these goods.
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Challenges and Transitions in the 1970s
The 1970s brought both opportunities and challenges for Albertsons. In 1972, the company acquired Mountain States Wholesale of Idaho, a subsidiary of DiGiorgio Corporation. This acquisition led to a civil antitrust suit filed by the Justice Department, which alleged that the purchase created an illegal monopoly. A settlement in 1977 required Albertsons to divest Mountain States and restricted the company from acquiring retail or wholesale grocery businesses in southern Idaho or eastern Oregon for five years.
In 1976, Joe Albertson became chairman of the executive committee, and Warren McCain, who had joined Albertsons in 1951, became chairman of the board and CEO. In the same year, Albertsons began building superstores, which featured an even higher ratio of non-food items and more fresh foods and perishables.
Dissolution of the Skaggs Partnership and Expansion of Distribution Facilities
In 1977, Albertsons and Skaggs dissolved their partnership amicably, splitting their assets equally. For Albertsons, the breakup resulted in the formation of Southco, the company's Southern division, which assumed operation of 30 of the combination stores formerly run by the partnership.
To support its growing operations, Albertsons expanded its distribution facilities. A full-line distribution facility was constructed in Brea, California, in 1973, followed by a large, fully integrated warehouse in Salt Lake City, Utah, in 1976.
The Warehouse Store Concept and Continued Adaptation
In 1979, Albertsons introduced its first warehouse stores in response to rising inflation. These no-frills stores, operating under the name Grocery Warehouse, carried non-food items but emphasized groceries, with substantial savings on meat and liquor.
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Throughout the 1970s, Albertsons continued to adapt to changing market conditions by remodeling and enlarging older stores and closing those that had become obsolete. This ongoing renovation program helped the company maintain its profitability and avoid the pitfalls faced by other supermarket companies.
Focusing on Established Markets and Reorganization in the 1980s
During the 1980s, Albertsons focused on increasing its presence in established markets. In 1984, the company reentered the Dallas-Fort Worth area with an "everyday low-cost" image, sparking fierce competition but ultimately proving successful.
In 1982, retail management was reorganized into four operating units/regions: California, Northwest, Intermountain, and South. This subdivision allowed each regional director and management team to more effectively focus marketing and retail sales strategies and guide employee and real estate development.
In 1988, the company’s first mechanized distribution center, covering an area of over half a million square feet, opened in Portland, Oregon. By the end of the decade, this and six other distribution centers serviced Albertsons 523 stores in 17 states.
Acquisitions and Expansion in the 1990s
Albertsons began to expand heavily in the 1990s. In 1992, Albertsons bought the stores American Stores had in Texas, Oklahoma, Arkansas, and Florida. Many of these stores had originally opened as Skaggs Albertsons before becoming "Skaggs Alpha Beta" under American Stores ownership and later being rebranded as Jewel-Osco. In Waco, the Jewel-Osco store was acquired, even though Albertsons already had a store in nearby Temple. A new Albertsons store, the first for the area, had opened in College Station a year prior to the acquisition. The Florida Jewel-Osco stores were massive, 75,000-square-foot stores with large general merchandise selections.
The Skaggs acquisition was a success, and the new stores were integrated into Albertsons's Southern division. The ease of that acquisition and Albertsons's high-flying stock price led Albertsons to attempt expansion on a grand scale.
In 1997, Albertsons launched Albertsons Express, a new branch of their brand that included a fuel center and a convenience store. The first Albertsons Express opened that year in Eagle, Idaho, and the concept expanded to locations across America located on Albertsons’ existing or new store properties.
The American Stores Acquisition and its Aftermath
In 1998, Albertsons made its biggest acquisition yet: American Stores Company, which included the chains ACME, Lucky, Jewel and Jewel-Osco, Osco Drug, and Sav-on Drugs. The acquisition briefly made Albertsons the largest American food and drug operator, with over 2,500 stores in 37 states, until Kroger's acquisition of Fred Meyer closed the following month.
To make the acquisition, Albertsons was forced by anti-trust concerns to divest 146 stores in California, Nevada, and New Mexico to various competitors.
Integrating American Stores into Albertsons proved to be extremely expensive, and plans to create a true coast-to-coast Albertsons chain were derailed when Lucky's conversion to Albertsons in November 1999 did not resonate with its customer base. Many of ASC's stores were also small and outdated compared to Albertsons' existing store base.
Restructuring and Divestitures in the Early 2000s
On July 18, 2001, Larry Johnston, the new chairman and CEO of Albertson's, announced the closure of 165 "underperforming" stores across 25 states, along with job cuts and a reduction in operating divisions.
Albertsons sold its freestanding Osco Drug stores in the northeastern states to Jean Coutu Group, a Canadian drug store company, which rebranded them as Brooks Pharmacy.
In 2002, Albertsons shuttered its Mid-South division by selling its Seessel's supermarket chain in Memphis to Schnucks and stores in Mississippi to Brookshire's. The troubled Houston division was also closed, with Albertsons shuttering its 43 area stores, most of which reopened as Kroger or Randalls.
Acquisition by Cerberus and CVS
By 2006, Albertsons was struggling to compete in an increasingly competitive grocery market. The company was acquired by a consortium of companies led by Cerberus Capital Management and CVS Pharmacy. CVS acquired 702 stand-alone Osco and Sav-on Drug stores and converted them to CVS Pharmacy stores, while the remaining Albertsons stores became Albertsons, LLC, held by AB Acquisition LLC, the Cerberus-led group.
Albertsons LLC included 661 stores and the distribution centers and offices from five of Albertsons divisions: Dallas/Fort Worth, Rocky Mountain, Southwest, Florida, and Northern California.
Shortly after the acquisition, Albertsons LLC announced its intent to close 100 Albertsons stores by August 2006, spread across all five divisions. In November 2006, the Northern California division was sold to Save Mart, which converted the stores to its Save Mart banner or rebranded them as Lucky in the San Francisco Bay area.
Further Downscaling and Divestitures
Over the next six years, the remaining divisions of Albertsons LLC continued to downscale. The Florida division suffered a major blow in June 2008 when Albertsons LLC agreed to sell 49 Florida Albertsons locations to Publix stores. In April 2012, the company closed most of its stores in Florida, and the Plant City distribution center was sold to Gordon Food Service.
The Rocky Mountain division also slowly shed stores, and by April 2007, only 32 stores remained in Colorado. In December 2007, SuperValu acquired the eight remaining Wyoming locations from Albertson's LLC not already owned by the company. Only the Southwest division was spared the major cuts suffered by the other divisions.
In 2008, Albertsons began exiting the fuel business, selling 72 of over one hundred Albertsons Express gas stations to Valero Energy, which converted most of them to Corner Store locations.
Acquisition of SuperValu and Reorganization
On January 10, 2013, it was announced that SuperValu was selling New Albertsons (which included Albertsons, ACME, Shaw's/Star Market, and Jewel-Osco) to Cerberus Capital Management. The deal was closed in March 2013, reuniting Albertsons under the same ownership as before the 2006 split.
On February 23, 2013, AB Acquisition announced it would split operations of the newly combined company into eight divisions: Northwestern, Intermountain, Southern California, Southern, Jewel-Osco, ACME, Shaw's, and Southwestern.
On September 9, 2013, the company acquired Lubbock-based supermarket United Supermarkets LLC.
Merger with Safeway and Attempted IPO
On February 4, 2014, the FTC approved the merger of Albertsons and Safeway. Following the merger, Albertsons reorganized its divisions, combining existing Albertsons and Safeway divisions into new regions.
Albertsons attempted to IPO on October 14, 2015, but postponed the listing due to market conditions.
At the time of the Albertsons-Safeway merger, Haggen purchased 146 West Coast Vons, Pavilions, Albertsons, and Safeway locations that had to be sold due to anti-trust concerns.
Recent Developments and Continued Evolution
In recent years, Albertsons has continued to evolve and adapt to the changing retail landscape. In 2016, the company made smaller acquisitions, including Paul's Market and G&G Supermarkets. Additionally, the United Supermarkets subsidiary acquired seven locations from Lawrence Brothers.
In 2018, Albertsons began to reenter the fuel market, opening a brand new Albertsons Express in Boise, ID.
In February 2018, Albertsons announced plans to acquire Rite Aid, but the deal was later called off.
In 2019, Albertsons opened Albertsons Market Street in Meridian, Idaho, a flagship store based on the Market Street brand of United Supermarkets.
Albertsons in El Paso
Albertsons' presence in El Paso dates back to the early 1970s, with the debut of Skaggs Albertsons. In 1979, the stores were rebranded as Skaggs-Alpha Beta upon the merger of Skaggs Drugs and American Stores. Albertsons entered El Paso for the first time when it acquired the Jewel-Osco stores from American Stores in 1992.
In 1987, Furr’s acquired Safeway’s El Paso division. Furr’s was primarily operating under the Save’n Gain and Food Emporium banners by this time. Smith’s Food and Drug arrived (as Smith’s Food King) around 1979 with the purchase of Winn-Dixie’s Foodway stores.