Supermarket analysts gathered at the 18th annual Supermarket News Analysts Roundtable in New York earlier this week and agreed that a new wave of consolidation will hit the industry in the near future, and that Kroger may lead the way as a buyer.
In the last two weeks two major deals have been announced: Albertsons LLC agreed to purchase United Supermarkets, and Yucaipa Cos. is planning to acquire Tesco's Fresh & Easy Neighborhood Market chain (Tesco paying Yucaipa to take on its Fresh & Easy grocery stores).
Analyst Gary Giblen (GMC Capital) said the underlying theme of future consolidation would be defensive, due in large part to the expansion of discounters creating "an impetus for companies to get bigger, to get more volume power and hopefully to get some operating synergies and economies of scale."
Scott Mushkin (Wolfe Research) said he expects Kroger, the largest supermarket chain in the United States, to get more aggressive since "the assets available aren't massively expensive, and in many cases Kroger is the most logical buyer."
Meredith Adler (Barclays Capital) pointed out that "really cheap money" promotes consolidation, but doubts there are many companies Kroger would want. She argued that Kroger's pending purchase of Harris Teeter simply shows that if you're a class act, run great stores and have positive comps, then you're an attractive takeover candidate.
The analysts also agreed that Cerberus Capital, which headed the group that acquired Albertsons, Acme and others from Supervalu earlier this year, might continue its involvement in the consolidation process, even though it has its hands full with the banners it bought.