Anyone has first-hand knowledge of the Lucky fiasco?

Uh...California.

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pseudo3d
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Anyone has first-hand knowledge of the Lucky fiasco?

Post by pseudo3d »

Being a fan of Albertsons, I do know the short story of what happened to Lucky: Lucky was the American Stores brand in California and other areas (there were even some in New Mexico) and because Albertsons didn't want overlap, and rebranded them all as Albertsons within six months. Obviously, this took expense because they needed to integrate American Stores' systems with Albertsons, shoppers hated the change, and the whole company essentially went under about 7 years later.

Obviously, the Bay Area really detested it, because by the time Albertsons was split apart, it was considered part of the "weaker" divisions sold to Cerberus, and of those five divisions, it was shut down within a year (though Southern California's division was taken by SuperValu). So, who out there actually remembers on hand and witnessing the changes of how Lucky became Albertsons? I've heard Albertsons raised prices, but that wasn't really the only thing, was it?
TheQuestioner
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Re: Anyone has first-hand knowledge of the Lucky fiasco?

Post by TheQuestioner »

I was here, and I remember it well. I had only lived in the Bay Area for a few years when the Albertsons takeover happened, but the initial rollout was met with mostly confused looks by the natives. Lucky was a well-regarded discount supermarket chain in the Bay Area (and I believe throughout CA and other western states.) Lucky was the pace to go if you wanted to pinch that extra penny, their sale prices were comparable or better than Safeway's (the other dominant chain here) and their everyday low prices were indeed lower than Safeway's everyday prices, or sometimes even their SALE prices.

When Albertsons took them over, they marketed the changeover as a "marriage," complete with TV ads showing a Lucky's paper shopping bag and an Albertson's paper shopping bag going down the checkout conveyor belt "aisle" together. Like all such mergers, it was not a merger of equals, and very little of what made Lucky popular survived the transition. The stores were lightly refurbished, lots of new signage but still retaining that discount supermarket "funk" that cheaper stores always seem to have. I think a few of the really run-down locations got new flooring, paint etc. The real changes, and the real problem, were the prices and selection of merchandise.

When Lucky was taken over, they had, like most modern retailers, a loyalty card program. Albertsons made a big fuss about how they had no loyalty cards, that sale prices were available to anyone and everyone. I think that lasted maybe 2-3 years at most, maybe even less in So. Cal. Even though you didn't need a card for sale prices, the sale prices themselves were not the deep discounts Lucky shoppers were used to. The everyday prices were raised, and many popular house brand items were switched to different suppliers or eliminated entirely. Lucky was famous for having cheap-but-good house brand stuff, right down to "Lucky Rum" for the rummy on a budget! The cheapo charm of Lucky was replaced with Safeway-level prices and not-quite-Safeway-level décor and amenities. In short, Albertsons was Just Another Supermarket, and had nothing going for it to make someone go out of their way to shop there compared to Safeway, Ralphs or any other CA supermarket chain.

It was no surprise to me how thoroughly they were rejected up in NorCal. Kind of surprised the name survives in SoCal, but then, they have so many different chains to choose from down there, I suppose the loss of Lucky wasn't felt as acutely. The current Lucky chain is really the Central Valley's Save Mart dressed up in Lucky's clothing. They are a bit of an improvement over Albertsons; better staffing of checkstands, fewer incidences of sale items or even regular ones being out of stock, stores seem a bit cleaner. Still, the deep discounting didn't really return. Lucky's sales must have been total loss leaders given how great some of them were, Save Mart almost never has anything on sale to the degree that you're going to throw on your slippers and t-shirt & sweats to run out to the store before the sale is over.

I still miss the real Lucky, and have pretty much refused to set foot in an Albertsons ever since.
pseudo3d
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Re: Anyone has first-hand knowledge of the Lucky fiasco?

Post by pseudo3d »

Thanks for the reply! (and also thanks for not mocking my using "Obviously" twice in a row :P )

The Lucky name was revived simultaneously for SuperValu as a discount grocery brand in SoCal, but it never really caught on and most of those stores ended up closing, I know, but as far as we know, Lucky is dead and gone.

Probably the biggest problem, I think, was too much too soon. It seems that Lucky was already becoming less of a "low price leader" and assuming more of an appearance of a traditional supermarket based on a few observations:

- Some YouTube comments about Lucky, at least their bakery, being more expensive than other grocers like Stater Bros.
- Almost certainly growing pressure from Wal-Mart by the late 1990s
- The conversion of the New Mexico Jewel-Osco division (which was one of the "Jewel-Osco" spin offs in the South, both the Florida and Texas divisions were sold off to Albertsons in the early 1990s) to Lucky stores
- The stated intention of American Stores to move toward an operating company and less of a holding company, including uniform store brands

Obviously, none of this really panned out due to the hasty conversion from Lucky to Albertsons, and I had to honestly wonder what the reaction was when it turned out that Albertsons 2.0 would buy Safeway, the other main supermarket in the area. (that said, I do believe most of the layoffs blamed on Albertsons would've happened anyway, as the company was starting to shed stores at an alarming pace, plus the whole "decision was made to sell the company in 10 minutes" bit)

Instead of gradually letting the company transition its natural course, then do any market name changes later down the line, Albertsons converted the name and format change in about six months. In addition to being expensive, that was a horrible idea in retrospect. From what I've seen in Safeway stores (well, Randalls), they've only renamed the Safeway brands to "Signature" in some cases (while introducing Safeway brand products to their own stores) and phasing out Primo Taglio in favor of Dietz & Watson. Safeway is at least on the same market level of Albertsons, which it still wasn't for Lucky, and Albertsons definitely isn't and won't rebrand Safeway as Albertsons (heck, I don't even see any screaming on Yelp about the whole changeover).
klkla
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Re: Anyone has first-hand knowledge of the Lucky fiasco?

Post by klkla »

pseudo3d wrote:So, who out there actually remembers on hand and witnessing the changes of how Lucky became Albertsons? I've heard Albertsons raised prices, but that wasn't really the only thing, was it?
When the two companies merged Albertsons only had about 95 stores in the state. Lucky had around 450 if I remember correctly, maybe even more.

Albertson's stores were predominately in white-populated middle income areas (there were exceptions) and were Wonder Bread, Budweiser and Hamburger Helper type stores. Very generic and simple stores.

Lucky had built their reputation as "The Low Price Leader" since the late 1950's and everybody knew what they stood for. They also had a hugely loyal following in California's growing Latino population. In fact I think they had the most loyal customer base of all the major chains in that day regardless of ethnicity except in higher income areas.

Albertson's basically tossed all that brand equity in the trash and offered nothing better to consumers in return. The general impression was that Albertsons raised prices and they quickly turned off Lucky's price sensitive consumers. Changing the name of Lucky to Albertsons in California has to rank as one of the stupidest business decisions ever in the grocery industry.

Personally I think they would have been smarter to market Albertson's as an upscale brand in wealthier communities and keep the Lucky name in the other 95% of California.
pseudo3d
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Re: Anyone has first-hand knowledge of the Lucky fiasco?

Post by pseudo3d »

klkla wrote:
pseudo3d wrote:So, who out there actually remembers on hand and witnessing the changes of how Lucky became Albertsons? I've heard Albertsons raised prices, but that wasn't really the only thing, was it?
When the two companies merged Albertsons only had about 95 stores in the state. Lucky had around 450 if I remember correctly, maybe even more.

Albertson's stores were predominately in white-populated middle income areas (there were exceptions) and were Wonder Bread, Budweiser and Hamburger Helper type stores. Very generic and simple stores.

Lucky had built their reputation as "The Low Price Leader" since the late 1950's and everybody knew what they stood for. They also had a hugely loyal following in California's growing Latino population. In fact I think they had the most loyal customer base of all the major chains in that day regardless of ethnicity except in higher income areas.

Albertson's basically tossed all that brand equity in the trash and offered nothing better to consumers in return. The general impression was that Albertsons raised prices and they quickly turned off Lucky's price sensitive consumers. Changing the name of Lucky to Albertsons in California has to rank as one of the stupidest business decisions ever in the grocery industry.

Personally I think they would have been smarter to market Albertson's as an upscale brand in wealthier communities and keep the Lucky name in the other 95% of California.
From the sounds of it, I'm not sure that Lucky would've survived in its existing, pre-Albertsons state. Obviously, the quick conversion was a huge mistake, and probably would've been better if Albertsons had slowly let the store change over a few years under the Lucky name before converting it, but if Albertsons hadn't mucked with American Stores (or if Lucky had been spun off), one of two things might have happened:

1) As American Stores continued to homogenize the brands, it would move Lucky to larger, more traditional supermarkets (many Lucky stores were quite smaller) and discontinue the Lucky brands in favor of national store brands for Jewel-Osco and Acme (that's really what would've happened). The Lucky name would continue riding on its success, but the price model would be largely gone.

2) As Wal-Mart continued to proliferate, Lucky's reputation as a "low price leader" would suffer as it would be unable to effectively match prices all while having a fleet of small and dated stores. Complicating this would be new competitors coming in when Lucky started to weaken. Worst case scenario would be Lucky becoming a "West Coast Winn-Dixie" and close many stores while ultimately raising prices, still riding on the name familiarity (especially in NorCal) just like W-D back in the East (see Option #1).

I find it interesting that when Albertsons bought Safeway, there was prevailing fear (at least from analysts) that Cerberus would strip Safeway's real estate and make the chain worthless, similar to what happened to Mervyn's. While that didn't happen, it did happen to the stores sold to Haggen (another dumb supermarket industry move).
klkla
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Re: Anyone has first-hand knowledge of the Lucky fiasco?

Post by klkla »

pseudo3d wrote:From the sounds of it, I'm not sure that Lucky would've survived in its existing, pre-Albertsons state.
I think they would have survived in their pre-Albertsons state. They certainly would have done better than Albertsons. They had made a strategic error a couple years before the merger when they started doing the "The other side of Lucky" campaign. They spent a lot of money remodeling virtually every store and then tried to emphasize their new more upscale delis, bakeries, floral e.t.c.. but customers did not respond well to this change and they went back to "The Low Price Leader" campaign and were regaining their sales momentum. But the return on investment from the remodels was not as strong as it should have been which depressed their stock price and allowed Albertsons to move in.

While WalMart would certainly have been an issue, especially in areas where real estate is cheap, they would have been able to hold their own in urban areas and probably would have been part of the consolidation that occurred since then. Don't forget they were a strong number #2 in Northern California and had the overall Number #2 position in Southern California, as well.
TheQuestioner
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Re: Anyone has first-hand knowledge of the Lucky fiasco?

Post by TheQuestioner »

It might have turned out that American Stores' "Low Price Leader" Lucky never could have survived the last 15 years of retail changes, but I think it could have worked given their real estate positions and brand loyalty. I was really expecting Save-Mart to return to that when they took over the Albertsons locations and "brought back" Lucky, but they seem to just be a somewhat shabbier-looking competitor to Safeway. I guess I assumed Save-Mart was a similar discount market, given their Central Valley origins and name.

It seems like no one in grocery is trying to compete in the space Lucky once did. There are "deep discount" warehouse type places like Food4Less/FoodMaxx/Food Source, but those stores quite frankly give off a "very low income" vibe, and I don't know too many people who aren't at the edge of poverty who shop there. The worst part is, the few times I've been to those stores, the prices on a lot of the things I buy aren't really much cheaper than a good sale at Safeway or Lucky today! If everything were consistently 15%-20% less every day, it would be worth it, but I guess only Wal-Mart can achieve that today, and I avoid them out of principle.

The whole Safeway/Albertsons/Haggen thing seems like such a screw job to the Haggen chain and its employees and customers. I am in favor of regulation against monopolies, but it seems like the FTC's divestment demands in this case are an example of the law of unintended consequences. It ended up hurting a lot of workers and customers.
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Re: Anyone has first-hand knowledge of the Lucky fiasco?

Post by rich »

Winn-Dixie ran horrible stores for many years. I remember the first time I ever went in one--it was a lightly remodeled Kroger greenhouse and it was filthy, with terrible produce. They did well in rural areas and places where there was little competition for a lower income customer, but the stores were dumps. The service was horrible because they kept labor to a minimum. They were horribly incompetent and limped along for years. Wal-Mart was able to compete head to head with them because of relatively low land costs and relatively little interest in urban planning or civic activism in their core markets. There's no way you could compare Winn-Dixie to Lucky
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Re: Anyone has first-hand knowledge of the Lucky fiasco?

Post by storewanderer »

I am confident the "old Lucky" would have survived and done just fine today throughout California and in Las Vegas. Not so sure about Albuquerque. The "old Lucky" was in great shape. They were successful with little old 20,000 square foot stores in neighborhoods and also did well with large 65,000 square foot stores in larger shopping centers in suburbs. They paid good attention to the ethnic diversity in California at a time before there were a ton of Ranch 99s or Northgates or El Supers around. It was the first to have a loyalty card in NorCal, the first to have private label in english and spanish in parts of California, the first mainstream grocer I saw offer hispanic bakery items, etc. Lucky was building very good (functional, pleasant, but still simple) large stores (some were combo stores, some were not; the combo stores patterned after Jewel Osco were also very similar to a Smiths which Lucky bought some of in SoCal in the mid 1990's) in the 1997-1999 period and was working to get good velocity in those stores through running strong promotions. Those combo stores were quite large for California. Many of those in SoCal and Las Vegas have remodeled very nicely for Albertsons today as they had good sized departments and were well-located. The Save Mart purchased ones are continuing to deteriorate and suffer from not seeing any real capital since the late 1990's.

Although a lot of new competition has come and that would have impacted the "old Lucky," they had a good momentum to build off of. They had great volume stores, a strong center store program on mix, private label, and price (most of the ethnic operators in California today are primarily strong on perimeter, not so much on center store), and most importantly, customers liked the "old Lucky." That in itself gets you a lot of mileage.

I am confident, had Albertsons kept the "old Lucky" model, and also expanded elements (like the center store and private label programs, and the promotion program) of that model throughout other parts of the west and south, the old Albertsons would never have broken up a decade ago in the first place.

The most similar thing at present to the "old Lucky" is some of these Kroger divisions. Smiths, Frys in particular. Hard push on private label center store, large mix of drugstore items, and heavy promotions on center store. A good job on product freshness in meat and produce helped in part by having high volume stores. Not the best quality you can find but certainly good enough. Acceptable (not the best) quality perimeters.

Also Lucky's strong markets in NorCal were Sacramento, San Francisco suburbs, Oakland, and San Jose. These are markets Wal Mart has not gotten to make a great inroads with. Some of the rural and central valley markets where Wal Mart (and other hard discounters like WinCo) have really made inroads are markets Lucky was either never in or pulled out of...

Also to be very clear, that "uniform private label" thing American Stores was doing in the late 1990's. That involved centralizing the private label purchasing for the divisions (drug, Acme, Jewel, Lucky) at their headquarters in Salt Lake City, Utah (a state where they had no stores other than a gourmet store in the basement of their headquarters tower). All drug private label at all stores was either Osco brand or Sav-On brand depending on region and store. The grocery divisions still kept their food private labels with the individual store name and they all had similar but different package designs. This was not a move to get all stores selling a common private label brand. Maybe the same procurement but the Acme was keeping its brand, Lucky was keeping its brand, etc. There was a common budget label called "Value Wise" with a clean red, white, and green packaging.

Also the Albuquerque market where there were maybe a dozen Lucky Stores would not have "brought down" a 400+ store chain had it not done well. It was a remote market, isolated, the stores were older and not in particularly great condition, and Albuquerque is a much different market than California. But I can see why Lucky was "placed" there. The main competitors, Smiths and Albertsons, were the very same main competitors that Lucky was facing in Las Vegas in the 1990's (and did very well against). The difference in Las Vegas was Lucky had a lot of newer, more modern stores. This was not the case in Albuquerque where they had large but not so modern stores.
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