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Albertsons Moves Upscale With Bristol Farms Purchase

September 22, 2004|James F. Peltz | Times Staff Writer

Shopping in the gourmet aisle, supermarket giant Albertsons Inc. on Tuesday bought Bristol Farms, which operates 11 upscale food stores in Southern California.

The price paid to Bristol Farms' owner, the Los Angeles investment firm Oaktree Capital Management, wasn't disclosed. But sources close to the companies said the deal was valued in excess of $100 million.

Bristol Farms, based in Carson, is a 22-year-old chain with stores in Los Angeles, Orange and Ventura counties. It has annual sales of between $150 million and $175 million, and 1,250 employees.

Albertsons said Bristol Farms would continue to be run by its current management, led by Chief Executive Kevin Davis.

For Albertsons, a Boise, Idaho-based chain with annual sales of $35 billion, the transaction provides entry into the gourmet-food market, where profit margins are substantially higher than the slim 1% to 2% common in the supermarket business.

For The Record
Los Angeles Times Tuesday November 02, 2004 Home Edition Main News Part A Page 2 National Desk 1 inches; 53 words Type of Material: Correction
Bristol Farms -- A Sept. 22 article in the Business section about Albertsons Inc. buying upscale grocer Bristol Farms spelled the last name of Bristol Farms co-founder Irving Gronsky as Gronksy. It also said Bristol Farms was founded by Gronsky and Mike Burbank. Dale Johnson and Grant Gravatte also helped start the company.

With its deep pockets, Albertsons is expected to expand the Bristol Farms franchise.

"This acquisition is the latest example of our dedication to diversify into new formats that can accelerate growth, tap into new customer segments and maximize return on invested capital," Albertsons Chief Executive Larry Johnston said in a statement.

Albertsons has 2,500 retail stores in 37 states, making it the nation's second-largest conventional supermarket chain behind Kroger Co. Besides its namesake grocery stores, Albertsons owns several drugstore chains, including Sav-on Drugs.

Albertsons has been waging an increasingly tough battle not only with other conventional grocery chains, but also with mass-merchandisers such as Wal-Mart Stores Inc. that are becoming a huge force in groceries using cut-rate prices.

Albertsons also is still smarting from the 4 1/2 -month grocery strike and lockout in Central and Southern California that ended in February. Albertsons and Kroger's Ralphs chain locked out their union workers after members of the United Food and Commercial Workers union struck Safeway Inc.'s Vons and Pavilions chains.

In the six months ended July 29, Albertsons' net income plunged 58% from a year earlier, to $140 million from $334 million, in part because of price cutting, promotions and other costs related to Albertsons' effort to regain customers after the labor dispute.

During the dispute, many shoppers avoided the three major supermarket chains and bought their groceries at smaller, specialty firms such as Bristol Farms, Trader Joe's, the Gelson's unit of Arden Group Inc. and Whole Foods Market Inc.

Bristol Farms gives Albertsons "the ability to operate smaller-format stores that differentiate themselves not based on price, but based on quality and service," said Lloyd Greif, president of Greif & Co., a Los Angeles investment bank that represented Oaktree Capital.

Bristol Farms offers meat, fish and poultry and produce, as well as a large prepared-food and catering service that cooks up such items as traditional cookies and full holiday meals -- with upscale prices to match.

Whether Albertsons applies its low-price formula to Bristol Farms remains to be seen. But Davis said Bristol Farms itself experimented unsuccessfully with lower prices three years ago. The move boosted sales, but "we weren't delivering the [profit] margins we needed," the trade publication Supermarket News reported Davis saying in a speech last year.

Bristol Farms was started in 1982 by Irving Gronksy and Mike Burbank after they sold their successful meatpacking business. They opened the first store in Rolling Hills Estates, naming it after a street in West Los Angeles, and adding the "Farms" to emphasize their fresh products.

They sold the company in 1995 to an investment firm named Kidd, Kamm & Co., with financing from Oaktree, Greif said. Three years later, Oaktree -- which now has $27 billion in assets under management -- took over majority ownership of Bristol Farms, he said.

Albertsons' stock slipped a penny to $23.95 a share Tuesday on the New York Stock Exchange. The acquisition was announced after the markets closed.

Times staff writer Annette Haddad contributed to this report.

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