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Albertsons has announced that it has acquired Southern California's fresh, gourmet and specialty food retailer, Bristol Farms. The acquisition is said to mark Albertsons' entry into one of the industry's fastest-growing sectors. Financial terms of the transaction were not disclosed. Larry Johnston, Chairman, CEO and President of Albertsons stated: "We are thrilled to welcome Bristol Farms to Albertsons' world class family of stores. Bristol Farms has clearly built a solid leadership position in the Southern California specialty, gourmet market segment with strong performance over the past several years. This acquisition is the latest example of our dedication to diversify into new formats that can accelerate growth, tap into new customer segments and maximise return on invested capital."

Bristol Farms operates 11 stores in Southern California and will continue to operate under the Bristol Farms banner, with separate management operating the business independently from Albertsons' traditional food and drug operations. Kevin Davis will continue as Bristol Farms' President and CEO. The transaction was completed through a merger whereby Bristol Farms has become a wholly owned, but independently-operated, subsidiary of Albertsons. Bristol Farms was formerly majority-owned by private equity funds managed by Oaktree Capital Management.

It is believed that Bristol Farms, which operates the bulk of its stores in Los Angeles county, has sales of around USD175 million dollars. Its stores are upscale units that include distinctive wine departments, upmarket fresh food counters, instore cafés, sushi counters and catering services. The stores are idiosyncratic outlets that feature standalone "shops" with full facades and themed accessories. The wine area in most stores, for instance, has four walls, wine racks and a roof trellis, resembling a dedicated wine boutique. Other common features of the Bristol Farms stores include gourmet and international grocery departments, extensive meat counters with a focus on organic and 'natural' products, seafood departments, sushi counters, extensive fresh produce areas, Bristol Café instore restaurants, floral departments, instore bakeries and catering departments.

Albertsons is proving itself to be among the more dynamic players in the US grocery sector at the moment. The current year has so far seen the launch of a far-reaching restructuring programme, the introduction of a RFID programme, the acquisition of Shaw's, the roll-out of dollar store zones throughout its store estate, the launch of the new Super Saver extreme value format, the roll-out of the "Renaissance" drugstore concept and, now, the acquisition of Bristol Farms. Not a bad year's work - and it's not even over yet.

There is no doubting that the Bristol Farms move is an extremely modest one in absolute terms (adding a barely discernable 0.47% to Albertsons' store count and turnover), but it is a heartening indicator that the larger company is not content to merely tread water as it seeks to defend its market share. The company obviously feels that, despite its massive size and heritage, it can still learn from smaller businesses - an observation that will have been underscored by the acquisition of Shaw's this year. Indeed, the deal may have opened CEO Larry Johnston's eyes to the true potential of what he has termed "reverse synergies" - Albertsons can bring its scale, systems and buying power to the party, but can also learn best practice from smaller operators that become part of its family.

With the launch this month of its new Super Saver extreme value chain (the conversion of seven Albertsons stores in Texas and Louisiana), it seems likely that further acquisitions are very much on the agenda. Albertsons has promised that Super Saver will expand rapidly through a combination of acquisitions and new store development. The fact that Albertsons is simultaneously targeting the value end of the market and the gourmet niche at the upper end of the market reflects that it is assembling the fluidity and the responsiveness that will furnish it with the competitive arsenal required for long-term survival in the competitive US market.
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