COMPANY PROFILE

Market Position and Strategy Overview Albertsons and Safeway completed a merger on January 30, 2015, forming a combined company that is the 2nd largest supermarket chain in the U.S. The Albertsons network now spans over 2,300 stores across 35 states and the District of Columbia under 20 well-known banners including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Amigos and Carrs, as well as meal kit company Plated based in New York City. Together, the retailers net upwards of $59.9 billion in sales yearly and employ 273,000 people. Albertsons is backed by private equity firm Cerberus Capital Management, and is one of the two most active acquirers in the U.S. grocery industry along with The Kroger Co.

Post-merger, Albertsons and Safeway created a single, merged management team to better compete against segment leader Kroger and discount rivals such as Walmart. It’s divided into 14 retail divisions, with headquarters based in Phoenix, Boise, ID, and Pleasanton, CA. While division- level leadership is largely responsible for its own sales and profitability, the corporate team serves to deepen relationships with national vendors, set long term strategy and provide data insights to individual chains. The decentralized structure allows the company to combine the local presence of its banners (many of which have long-running operations) with its national scale in order to drive brand recognition, customer loyalty and purchasing, marketing and advertising, and distribution efficiencies.

In June 2016, the joint company completed the acquisition of Bellingham, WA-based Haggen, which was facing bankruptcy at the time. The grocer transitioned several stores in Portland and Seattle to its Albertsons banners, while others continue to operate under the Haggen name.

The company had plans to go public in 2015 but pulled them due to stock market turbulence. It withdrew plans again in April as its initial public offering registration statement had not been declared effective by the U.S. Securities and Exchange Commission. Albertsons also was pursuing a merger with drugstore chain Rite Aid, which would’ve taken the grocer public, expanded its healthcare division as well as broadened its private label brands into Rite Aid stores, but the merger was terminated in August 2018 just before it was expected to be finalized.

As of Jan. 23, 2019 MUST KNOW TERMS • Buy Local: An operational strategy that seeks to differentiate the chains from national operators by sourcing products locally. • Just for U: Originally Safeway’s digital loyalty program, Just For U lets the company offer members personalized coupons and deals on items they buy regularly. • MyMixx: Albertsons’ legacy mobile app that offered exclusive coupons and savings. Most banners have transitioned to the Just for U platform, though Jewel still operates MyMixx. • Mix & Match: The most prevalent bulk-purchase incentive across all chains. • Signature: The retailer’s main private label. (See “Private Label”). • O Organics: A premium private label offered by the retailer. • Big Book of Savings: The retailer’s monthly ad.

Thought Starters • The retailer is partial to bulk-purchase and manufacturer-led incentives as a way to increase basket size. • For national exposure, tap into the long-term promotions that run across all chains. • Many retailer-driven promotions tie in to its banners’ “Fuel Rewards” loyalty programs (See “Loyalty Marketing”). • Even national programming is personalized for each of the retailer’s 14 divisions to it is localized and relevant. The company seeks to keep chains “true to brand.” • Nearly every major program gets consumers to interact with the chains, so manufacturers should similarly consider incorporating a sweepstakes or game.

Circulars & Publications Albertsons publishes weekly circulars and a “Big Book of Savings” booklet monthly. The wholesale division handles circular production for both corporate stores and the franchise network. Although regional circulars vary extensively, featured items are sometimes carried corporate-wide. Circulars run on a Wednesday through Tuesday schedule at Albertsons, Jewel-Osco, Tom Thumb, Randalls, Safeway and Vons; and Friday through Thursday at Shaw’s, Acme and Star Market. Typical sales events include BOGOs and two-for-one deals. Retailer coupons are sparsely scattered throughout. The tabs usually group products by category, with fresh and prepared foods, personal care, liquor, dairy and frozen goods always receiving space. Often, bulk-purchase incentives from manufacturers will receive features, the sizes of which vary from a quarter-page to a half-page. Seasonal merchandise is highlighted toward the end of the tabs. Corporate-wide features include “Live Healthy, Be You,” which runs across one to two pages and deviates significantly from each chains’ template. Various personal care and OTC brands are represented, with the retailer offering bulk-purchase incentives. Jewel-Osco, which often does things a little differently than its sister chains, additionally deploys a monthly “Natural & Organic” brochure and a bi-monthly “Spotlight on Savings” brochure, the latter of which was just introduced in January 2019 and includes deals not shown in the weekly circular. Jewel’s circular typically comprises eight to 10 pages. Recurring features include Mix & Match and Fav 4. (See “Promotional Strategy.”) Shaw’s circular generally comprises six pages. Recurring features include Weekly Specials, Look What $5 Can Buy and Mix & Match. Acme runs an eight-page tab; 10 for $10 and Mix or Match features recur.

As of Jan. 23, 2019 2 Circulars & Publications continued Albertsons’ tab, six-pages long, focuses on bulk-purchase incentives more than its sister chains. Circulars will occasionally inclue “coupon mania” pages that carry up to 28 coupons. Most of the former Safeway chain circulars now have their own template, and a few chain- specific features each week — though upscale chain Pavilions’ circular deviates slightly, including all corporate initiatives but placing more emphasis on gourmet and specialty items. All advertised sale prices are for loyalty cardholders only. The tabs generally include coupons that can be clipped or accessed digitally via Just for U. Most chains run the monthly “Big Book of Savings” booklet or a similar variation (e.g. Safeway runs a “Big Book of Coupons” booklet), advertising month-long offers and sales. The booklets run from 24-32 pages and often carry account-specific coupons.

Private Label Albertsons Cos. has made own brands a pillar of its growth strategy. In fiscal 2017 (ended Feb. 24, 2018), own-brand items generated over $11 billion in sales. In 2018 the grocer added nearly 1,400 new products across its store banners, double the total of the previous year’s new-item launches. The additions spanned the grocer’s private label portfolio, which includes Open Nature, Signature, Waterfront Bistro, Value Corner, Primo Taglio, Debi Lilly Design as well as its four core, billion-dollar brands: Signature Select, Signature Cafe, Lucerne and, most recently, O Organics. Albertsons projects Open Nature will be its next brand to hit $1 billion, expected by 2022. Albertsons has grown its natural and organic category significantly for the past several years to address the growing heath concerns of consumers, offering two complementary premium lines in this category: • O Organics: an exclusively organic brand with more than 1,000 USDA-certified organic food and beverage products. Already one of the nation’s largest private-label USDA- certified organic brands, O Organics was on course to expand to 1,400-plus items across 192 categories in 2018. • Open Nature: more than 450 items that are 100% natural, including beef, chicken, sausages and packaged foods. The brand expanded into non-food items in 2018, and added another 250 or so products. The grocers’ newest addition and first ultra-premium brand is Signature Reserve, comprising super-premium ice cream flavors, globally sourced pasta and pasta sauces, single-origin whole bean coffee, loose leaf tea, confectionery and pie filling. Signature Reserve joins the grocer’s full lineup of Signature Brands (including Signature Cafe, Signature Farms, Signature Care and Signature Select), which generate nearly $6 billion in sales, span 400-plus categories and expanded by more than 600 new items in 2018. Signature Brands as well as O Organics and Open Nature receive a significant amount of marketing support from the retailer. Comprehensive launch campaigns built awareness, and the retailer continues to plug the lines with in-store signage, displays, circular features, social media activity and other tactics. They are occasionally the focus of seasonal retailer campaigns, and are almost always eligible for recurring promotions such as the Monopoly game and the “Stock Up Sale.”

As of Jan. 23, 2019 3 Private Label continued Other private labels include: • Value Corner: the retailer’s value-tier private label • Lucerne: dairy brand offering more than 400 items across some 20 categories such as milk, cheese, sour cream, ice cream and eggs; about 70% of the portfolio is rBST free • Primo Taglio: more than 80 deli meats and cheeses • Waterfront Bistro: more than 140 seafood selections, entrees and complementary items • Debi Lily: bouquets, candles, vases and gifts In 2017, Albertsons announced a partnership with the Food Marketing Institute and Grocery Manufacturers Association’s joint initiative SmartLabel. The digital platform allows shoppers to search for products from Signature Brands, O Organics, Open Nature and Lucerne to view enhanced nutritional information as well as any sustainability attributes. Albertsons is a founding member of the North American Sustainable Palm Oil Network (NASPON), part of the Roundtable on Sustainable Palm Oil (RSPO), which aims to increase adoption of certified sustainable palm oil throughout the supply chain. The grocer has committed to source 100% certified sustainable palm oil for its private label products by 2021. The retailer also has transitioned more than 80% of its private label canned products to non-BPA lined packaging, and all of its Waterfront Bistro products adhere to its “Responsible Seafood Policy” aimed at improving transpacrency within its seafood supply chains.

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