Kroger, Albertsons to divest with C&S Wholesale Grocers to advance merger

In a move to advance the merger of Cincinnati-based The Kroger Co. and Boise, Idaho-based Albertsons Cos., the two major retailers have entered an agreement with C&S Wholesale Grocers that includes the sale of 413 stores, eight distribution centers, two offices and five private-label brands across 17 states and the District of Columbia.

The agreement includes the sale of the QFC, Mariano's and Carrs brand names and the exclusive licensing rights to the Albertsons brand name in Arizona, California, Colorado and Wyoming, according to a news release.

C&S, a major wholesale grocery supplier and one of the largest privately held companies in the U.S., will maintain collective bargaining agreements, which means union jobs should stay secure, the release said.

Kroger and Albertsons are still working on closing the merger deal in early 2024, depending on regulatory clearance and other conditions.

“Following the announcement of our proposed merger with Albertsons Cos., we embarked on a robust and thoughtful process to identify a well-capitalized buyer who will operate as a fierce competitor and ensure divested stores and their associates will continue serving their communities in the ways they do today. C&S achieves all these objectives,” Kroger Chairman and CEO Rodney McMullen said in the release.

This C&S divestiture plan is a key step in completing the proposed merger previously announced Oct. 14, 2022, by extending a well-capitalized competitor into new geographies. The goal of the divestiture plan is to ensure no stores will close as a result of the merger and that all front-line associates will remain employed, all existing collective bargaining agreements will continue, and associates will continue to receive industry-leading health care and pension benefits alongside bargained-for wages, the release said.

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Founded in 1918 as a supplier to independent grocery stores, C&S supplies more than 7,500 independent supermarkets, retail chain stores and military bases. C&S currently operates Grand Union grocery stores and Piggly Wiggly franchise and corporate-owned stores in the Midwest and Carolinas. Through its wholesale and retail operations, C&S purchases more than 100,000 products. Also, C&S provides end-to-end wholesale, supply and marketing services to its retailer customers.

In anticipation of the agreement, C&S’s 1918 Winter Street Partners retail holding company has been established to make the closing process go smoothly.

According to the release, the divestiture plan fulfills the commitments Kroger and Albertsons Cos. set out in the original merger agreement in October 2022, regarding divesting stores, including:

• Extending a competitor to new geographies through the sale of stores to a well-capitalized buyer that is led by seasoned operators with a strong balance sheet and a sound business plan.
• Ensuring that no stores will close as a result of the merger.
• Maintaining all current collective bargaining agreements, which include health care and pension benefits, bargained-for wages and ensuring front-line associates remain employed.
• Committing to invest in associates and stores for the long term.

Related: Western Growers opposes proposed merger between Kroger and Albertsons

The terms of the plan support C&S's ability to operate divested stores effectively and efficiently by providing, according to the release:

• Strong teams, with deep industry expertise and the ability to operate at scale, and to drive growth and operational advancements in the divested business.
• A cohesive set of stores in each geography supported by two regional headquarters as well as banners, and private-label brands with strong consumer recognition that will provide C&S with an established base on which to grow its store network.
• A robust operational infrastructure, including distribution centers and offices to support both the immediate and long-term success of the divested business.

“We look forward to welcoming thousands of new associates to the C&S family ...," Eric Winn, C&S chief operating officer and designated CEO (effective Oct. 2), said in the release. "Today's announcement is another exciting opportunity for C&S to further expand into the retail market, which is an important component of our growth and future success.”

More transaction details include the following.

The divestiture transaction includes 413 stores, along with QFC, Mariano's and Carrs brand names. Stores currently under these banners that are retained by Kroger will be re-bannered into one of the retained Kroger or Albertsons Cos. banners following the close of the transaction. In the four states where C&S will have the license to the Albertsons banner, Kroger will re-banner the retained stores following the close of the merger with Albertsons Cos. Kroger will maintain the Albertsons banner in the remaining states. In addition, Kroger will divest the Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals and Waterfront Bistro private-label brands.

The number of stores contained in the divestiture plan by geography is as follows:

• Washington: 104 Albertsons Cos. and Kroger stores.
• California: 66 Albertsons Cos. and Kroger stores.
• Colorado: 52 Albertsons Cos. stores.
• Oregon: 49 Albertsons Cos. and Kroger stores.
• Texas/Louisiana: 28 Albertsons Cos. stores.
• Arizona: 24 Albertsons Cos. stores.
• Nevada: 15 Albertsons Cos. stores.
• Illinois: 14 Kroger stores.
• Arkansas: 14 Albertsons Cos. stores.
• Idaho: 13 Albertsons Cos. stores.
• New Mexico: 12 Albertsons Cos. stores.
• Montana/Utah/Wyoming: 12 Albertsons Cos. stores.
• Washington, D.C./Maryland/Virginia: 10 Harris Teeter stores.

The above stores (regardless of banner) will be divested by Kroger following the closing of the merger with Albertsons Cos.