Few changes are expected after the purchase of Shaw’s and Star Markets grocery stores in the New England region.
The 204 retail grocery operations will see its parent company, J.S. USA Holdings, change hands from London-based supermarket group J. Sainsbury to Boise, Idaho-based Albertsons. Announced in late March and completed late last month, the deal is valued at about $2.5 billion and will see Albertsons, one of the world’s largest food and drug retailers, move into a region where it has little or no presence.
Terry Donilon, a Shaw’s spokesman, described the deal as great for employees and customers of both chains because it’s expected to strengthen the company’s New England foothold. The Shaw’s and Star chains are located throughout Rhode Island, Massachusetts, Connecticut, Vermont, New Hampshire and Maine, and without any overlapping locations. Donilon said the plans are for all stores to remain open. Collectively, the stores employ more than 30,000 people.
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He said Shaw’s would continue with its plans for a new location on the site of the Fiddlestick’s golf range located in North Kingstown. The proposal for the store was scheduled to go before the local Town Council there last week, after the Providence Business News went to press.
Donilon said there are 14 Shaw’s locations in Rhode Island, employing about 2,100 associates.
Additionally, Donilon said the West Bridgewater, Mass., store-support headquarters, where a few hundred workers are employed, will remain open and both grocery operations will continue to do business under their current names, along with continuing to offer their own private-label brands.
The top tier of management will remain familiar as well, with Shaw’s CEO and President Paul Gannon remaining in place and reporting directly to Larry Johnston, chairman, CEO and president of Albertsons.
A release from Albertsons said that ‘cost synergies’ from the transaction should be realized at between an estimated $100 million and $125 million in the 2006 fiscal year.
“We’re still in the early stages of the integration process,” Donilon said. “But everything we hear is that we’re going to continue to operate as a division of Albertsons.”
Elaine-Marie Notarantonio, a marketing professor at Bryant College for more than 20 years who’s concentrated her research on branding, said keeping the Shaw’s and Star Market names accomplishes two things. First, she said it will ensure that the retail grocery operations remain well recognized, and secondly it will allow the brand equity invested by the company over several years to be retained – a big positive for the locally recognized Shaw’s name, Notarantonio said. In her opinion, Albertsons, which has virtually no presence in the Northeast, would gain nothing from putting their signs on locations.
“The goal of a deal like this is to not confuse shoppers,” Notarantonio said. “The last thing you want to do is jeopardize the image they?ve worked years to build.”
Notarantonio pointed to Macy’s department store acquisitions of smaller chains, such as the merger with the Midwest-based Lazarus. Though Lazarus kept its identity for several months, it did begin operating under the Lazarus-Macy’s name last summer.
“They?re being run by the same company,” she said. “But the brand loyalty for both has been retained and maybe a little bit of prestige was added.”
Mentioning the Brooks and CVS/pharmacy acquisitions for pieces of the Eckerd drugstore chain, Notarantonio said such alliances are the way companies are doing business nowadays.
“Centrally owned national chains are the way everyone is looking,” Notarantonio said. “It can be good for consumers, but makes things much tougher for the small players who can’t generate the same cost efficiencies.”
With annual revenues of more than $35 billion, Albertsons employs more than 230,000 employees and operates more than 2,500 retail stores in 37 states across the country.
Under the “frequently asked questions” section for associates, located off
Shaw’s main Web site, Gannon informed the chain’s associates that the union
contracts they are currently operating under would continue to be honored by
Albertsons, which has both union and non-union stores.
