Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=214096
Story Retrieval Date: 12/12/2013 4:09:23 AM CST
A shopper leaves the Jewel Osco at 1341 N. Paulina after a successful grocery trip.
Jewel-Osco stores face uncertainty after acquisition
There are likely big changes in store for the Jewel-Osco grocery chain and its customers in the wake of its purchase by a private equity firm last week. That could mean Chicago shoppers who rely on Jewel-Osco may have to travel farther or push their shopping carts down other grocery chains’ aisles.
Cerberus Capital Management L.P. bought the grocery store chain from Jewel’s parent company Supervalu Inc. last week in a $3.3 billion deal. There is speculation that Cerberus will close underperforming stores and sell off the real estate for other purposes as it did when it acquired Albertsons Inc. in 2006.
Albertsons put itself up for sale in 2005 because it was losing market share to other chains. Supervalu and Cerberus took control of the company. Supervalu struggled in the aftermath while Cerberus earned five times its investment after closing stores and making other real estate maneuvers, according to the Wall Street Journal.
Cerberus likely has similar plans in mind for Jewel-Osco, industry experts say.
“They could probably close down some Jewels,” said Rick Shea, founder of Shea Marketing Inc., a supermarket industry consulting firm in Minnesota. “But it won’t be as dramatic.”
According to Shea, the purchase of Jewel-Osco is different from Albertsons because it is about acquiring market share. If Cerberus decides to close some Jewel-Oscos, the company will not make as much money as it did with Albertsons, he predicts.
Shopping at the Jewel-Osco at 1341 N. Paulina St. Tuesday morning, Daryl McDonald said he would be unhappy if his local store closed. “I would be disappointed,” the Wicker Park resident said. “There was a time when Jewel stood for quality. If you went to Jewel you could pretty much find what you were looking for – the ease of shopping.”
Not only do Jewel-Osco’s low prices and wide selection appeal to Chicago residents, its various locations throughout the city make it easier for people to shop without straying far from home.
The prospect of her local store closing is upsetting to Chicago resident Manshi Shah.
“We would be really sad because we feel we can get everything we need in one place,” she said while was shopping at the same store as McDonald. “The food’s affordable, and we have good options of organic stuff as well.”
But low-price competition from Wal-Mart Stores Inc. and Target Corp. is pressuring mainstream grocers such as Jewel-Osco and Dominick’s, Chicago’s other major hometown chain. With people more cost conscious than ever, consumers are shopping around for the cheapest prices.
“You have what’s called channel blurring,” said Shea. “Consumers are buying more food at more types of stores, not just Wal-Mart and Target, so everyone is trying to differentiate themselves.”
Some grocers are using fresh foods, in-store bakeries and premium types of meat to lure customers through their doors. But Wal-Mart’s sheer size and efficiency has allowed it to provide the best possible pricing, according to Shea. Wal-Mart is currently airing commercials in the Chicago area comparing the price of a basket of groceries at a Jewel-Osco with the same items at a Walmart. Walmart wins every time. Sometimes its prices are lower by more than 20 percent.
“Wal-Mart has its focuses on providing the best value to its consumers, lower possible cost per brands and expanding its amount of fresh food items,” Shea said.