Safeway’s new owner not afraid to make changes

By Heather Somerville / San Jose Mercury News

The private equity firm that struck a $9.4 billion deal to buy Safeway has proved it’s not afraid to make big supermarket purchases — and turn around and make big changes.

In 2006, Cerberus Capital Management bought more than 600 Albertsons grocery stores, including more than 170 in Northern California. Today, following dozens of store closures and the sale of dozens more, not a single Albertsons is left in Northern California.

That bloodbath is the first thing that comes to mind for many grocery store labor leaders and industry veterans when they think of Cerberus and what the buyout might mean for the San Francisco Bay Area. Safeway for decades has been the region’s dominant supermarket, and the Pleasanton, Calif.-based chain is also one of the largest employers in the East Bay.

“They can do one of two things with Safeway: They can run it like a grocery chain, or they could dismantle it and sell it for profits,” said Mike Henneberry, spokesman for the United Food and Commercial Workers union Local 5, which represents Bay Area Safeway employees. “I’m hoping (the latter is) not the case, but that has not been Cerberus’ track record in Northern California.”

Cerberus’ deal, announced last week, will merge Safeway with Albertsons, which still has stores in Southern California and other states, to create a grocery conglomerate of 2,400 stores and 27 distribution facilities. The deal is expected to be finalized in the fourth quarter of this year, although other buyers could still make a bid for the company.

After about two decades as an independently run, public grocery company, under the direction of a single chief executive for most of that stretch, Safeway now finds itself under the control of a $25 billion private equity firm from New York. Albertsons executives have said emphatically there are no plans to close Safeway stores and business will proceed as usual.