Press Clips: The Effects of the Safeway-Albertsons Merger

When news broke last week of the merger between Safeway and Cerberus Capital Management, the investor group that controls Albertsons, the beverage industry could sense the ripple effects. Among those who were paying attention, the industry’s many tiers understood that the news would significantly alter the retailer landscape in the U.S. However, few reactions had a tone as fatal as that of Jia Lynn Yang, reporter for The Washington Post.

In a story titled “The end of the traditional supermarket,” Yang analyzes the approximately $9 billion deal and concludes that supermarkets will continue to decline in size and cater more to the consumer. As a result, we could see fewer slotting payments and concentrations of 100 different types of olive oil in one aisle.

“Much the way department stores evolved by no longer selling televisions, supermarkets will also have to be more selective about what they put on their shelves,” Frank Dell, consultant and president of Dellmart, said in the article.

A few other factors mentioned by Yang that could be worth consideration:

  • Safeway is one of the few grocery stores in the U.S. with a unionized workforce. Non-union grocers have previously pressured Safeway to reduce labor costs. There are no current signs as to how the merger will affect this point, or if the union will be disassembled.

  • The merger was strongly influenced by consumer habits. As two-income families increase, fewer women shop during the days. This has increased the demand for smaller, easier-to-navigate stores and prepared and quick-cooking foods.

Another issue with a massive scope: the FDA’s proposed Nutrition Facts label updates. A story written by Rhonda Colvin and Annie Gasparro of The Wall Street Journal notes that most industry experts believe the costs associated with implementing label changes wouldn’t severely hamper bigger companies.  Tweaking a label is a common occurrence for larger businesses, which can easily reach into vast reservoirs of funds. However, the same isn’t the case for the little guys.

“Smaller mom-and-pop shops will often do all their printing a year and a half out, so it is a much bigger deal for them,” Cynthia Harriman, director of food and nutrition strategies at the consumer-advocacy nonprofit Whole Grains Council, said in the article.

When entrepreneurs are doing their best to lift their startup off the ground, dedicating resources to marketing campaigns, production, formulation and research, among a heap of other costs, a drastic change of the Nutrition Facts label could serve as a true setback. Crista Freeman, co-owner of Phin & Phebes Ice Cream in Brooklyn, N.Y., said that her company could face drawbacks if it needs to double its half-cup serving size of 230 calories. The label change could limit sales and halt distribution. It could also lead to a contemplation of less sugar, the main ingredient that prevents the company’s use of shelf-life extenders.

However, on the flip side of things, if ingesting your company’s product has a health value comparable to gnawing on kale stalks while doing calf raises, you’ve got little need to complain.

“If you have the attributes, you might as well flaunt it,” Robert Gropper, owner of My Brother Bobby’s Salsa, said in the article.

Dan MacCombie, co-CEO and co-founder, Runa

Onto the entrepreneurial side of things: when Dan MacCombie isn’t busy graduating from Brown, mixing it up with the locals in Ecuador’s Napo Province and helping run one of the more fascinating “clean energy” brands in the beverage industry, he’s penning autobiographical pieces in The New York Times.

MacCombie shared stories about the development of Runa and his experiences from sourcing guayusa in Ecuador. In a question-and-answer sidebar, he mentioned that he flies for business about four to five times per month, mostly domestic, but some international. He also recalled a story about a beast of an automobile that his team called “el limón.” The story is MacCombie’s to tell, so I’ll let him take it from here.

“We bought a dryer to cure the guayusa, but our grant didn’t include any money to transport the dryer deep into the jungle,” MacCombie writes. “So we loaded the dryer, which was about the size of a refrigerator, into the flatbed of a 1992 pickup truck we called ‘el limón.’ The drive was supposed to take three hours. It didn’t. I had to stop driving every 15 minutes to check the brakes.

We were traveling down a steep grade, and I could feel the brakes stiffening and rubber burning because of the excess weight of the dryer. It probably didn’t help that the truck’s brake pads were worn. We wound up having to put about $2,000 into the truck to keep it working. We eventually sold it, and for all I know, el limón is still running somewhere in Ecuador.”