American Stores

American Stores Company was a holding company which operated chains of supermarkets and drugstores in the United States from 1917 through 1999. The company was incorporated in 1917 when Pennsylvania-based Acme Markets merged with four other Philadelphia area grocery chains to form American Stores. In the following eight decades, American Stores would expand to 1,700 food and drug stores in 40 states with $20 billion in annual sales.

1960s-1970s

In 1961 American Stores company acquired California's Alpha Beta chain of supermarkets.

American Stores itself was acquired in 1979 by Skaggs Companies, Inc., which adopted the American Stores Company name, and relocated the company headquarters to Salt Lake City, Utah.

American Stores was by far the larger organization, with 758 supermarkets, 139 drugstores, 53 restaurants, and nine general-merchandise stores in nine states. Although the resulting entity bore the American Stores name, it was controlled by Skaggs management headed by Leonard S. Skaggs, Jr., more familiarly known as Sam. Stores in several markets having both an Alpha Beta and a Skaggs Drug Center presence were combined (or expanded) to combination food and drug stores and re-branded "Skaggs Alpha Beta". (In 1977, Skaggs Companies, Inc. had amicably dissolved a partnership with the Albertsons supermarket chain having started in 1969 and pioneered the first combination grocery/drug stores "Skaggs Albertsons").

1980s

American Stores posted $83 million in earnings on sales of nearly $8 billion in 1983. But its presence was still weak in the Midwest, New England, and Florida. To help overcome these remaining geographical shortcomings, Sam Skaggs made an attempt to merge with Jewel in 1984.

In 1978 Skaggs Companies, Inc., had worked out an agreement to merge with Jewel Companies, but was torpedoed at the last moment when some of Skaggs's directors, concerned that they would lose their autonomy under the deal, failed to approve it.

But Weston Christopherson, who had succeeded Donald Perkins as chairman of Jewel, was opposed to a merger and Skaggs was forced to engineer a hostile takeover. On June 1, 1984, American Stores tendered an offer worth $1.1 billion for 67 percent of Jewel's outstanding shares at $70 per share.

For two weeks, Jewel management refused all comment on the offer, maintaining its silence even at a stormy shareholder's meeting before which Jewel shareholder groups controlling 20 percent of the company's stock had come out in favor of negotiating with American Stores. Finally, on June 14, Sam Skaggs and Jewel president Richard Kline reached an agreement after an all-night bargaining session. American Stores raised its bid for Jewel's preferred stock, increasing the total bid to $1.15 billion in cash and securities. In return, Jewel dropped plans for a defensive acquisition of Household International and accepted American Stores' offer. To help raise cash for the deal, American Stores sold its Rea & Derick drug chain in December 1984 to People's Drug, a subsidiary of Imasco Limited.

The acquisition of Jewel Companies, Inc. which consisted of the (Melrose Park) Illinois based Jewel Food Stores supermarket chain, (Oak Brook) Illinois based Osco Drug, Inc., Cambridge, Massachusetts based Star Market, (Anaheim) California based Sav-on Drugs and Buttrey. This acquisition also returned L. L. Skaggs's Osco Drug chain to the Skaggs family ownership. And Sav-on Drug, another Jewel subsidiary, had been founded by C. J. Call, who had once been a business partner of another of Sam Skaggs's uncles, O. P. Skaggs.

The acquisition of Jewel Companies, Inc. added 190 supermarkets, 360 drugstores, 140 combo stores, 300 convenience stores, and 130 discount stores to the American Stores holdings. But in 1985, American Stores found itself in legal trouble through its new subsidiary. A salmonella food-poisoning outbreak affecting some 20,000 people in the Midwest was traced to Jewel's Melrose Park, Illinois, dairy that had supplied tainted milk to Jewel stores. In 1987, Jewel was found not liable for punitive damages in Cook County Circuit Court, but agreed to pay compensatory damages estimated at $35 to $40 million.

Soon after acquiring Jewel Companies, American Stores put Acme, Buttrey and Star Market up for sale in order to raise capital and pay down debt. During the 1980s, American Stores did not receive acceptable offers for Acme, Buttrey or Star Market. Although the company continued to operate these divisions, investment in remodeling and new construction for these stores was minimal in the 1980s.

By 1987 American Stores was the largest drug retailer in the United States, but only the third-largest grocery retailer.

In 1988, American Stores made an unsolicited tender offer for Lucky Stores, an Alpha Beta competitor noted for high efficiency and low prices. At the time, Lucky was California's leading grocery retailer, due in part to the fact that it was the only chain with a significant presence in both northern and southern California. Lucky refused American Stores' first offer. Furthermore, American Stores 210-store Alpha Beta chain in California was struggling, plagued by high prices and a reputation for poor service. Within a month, American Stores proposed to up its bid if Lucky would agree to a friendly takeover. Again Lucky rejected the offer as inadequate and was said to be contemplating defensive strategies. Later, American Stores upped its bid to $2.5 billion, or $65 per share. Lucky accepted and American Stores was about to become the largest supermarket chain in the nation, over Kroger and Safeway Food Stores. The Federal Trade Commission forced the divestiture of 37 Alpha Beta stores, which were sold in December 1988, the same month 38 Lucky stores in Arizona were also sold.

Between 1986 and 1988, Skaggs Drug Centers and Sav-on Drugs stores were rebranded under one national banner, Osco Drug. However, in 1990 the Osco California and Nevada [| store names were reverted] to their previous Sav-on Drugs namesake. A period of consolidation and debt reduction continued throughout the remainder of the 1980s with sell-offs and departures from certain United States markets to pay down debt incurred by the Jewel and Lucky acquisitions.

In 1989, a division 'American Drug Stores' was formed and consisted of American Stores drugstore holdings of Osco Drug, Sav-on Drugs, the Osco side of the Jewel Osco food-drug combination stores and RxAmerica. RxAmerica began in 1989 as a mail service prescription fulfillment center with a facility in Salt Lake City, Utah.

1990s

In 1991, in order to consolidate the store names of some of its subsidiaries, American Stores renamed 76 Skaggs Alpha Beta stores in Texas, Oklahoma, New Mexico to Jewel-Osco.

In 1992 American Stores shifted its strategy from that of a holding company to a centralized operating company. As a result of the decision, common functions among American Stores' operating divisions (procurement, distribution logistics, payroll, human resources, etc.) would be removed from the operating divisions, consolidated and run centrally. From 1992 up through 1998, American Stores consolidated operations and moved responsibilities of their division offices to their headquarters in Salt Lake City, Utah. American Stores employees based in Salt Lake City, Utah increased from fewer than 100 in 1992 to 1,200 by 1998.

Also in 1992, Albertsons purchased the newly rebranded and remodeled Texas and Oklahoma Jewel-Osco combination stores along with six Jewel-Osco stores in Florida. This purchase increased Albertsons' store count in the Dallas-Fort Worth market by adding 41 Jewel-Osco stores to its 19 stores already in operation. The 11 Jewel-Osco New Mexico stores were retained by American Stores and operated as a division separate from the Jewel-Osco stores in the midwest.

In early 1994, American Stores launched a discount warehouse food store concept in California. New store formats were built in Anaheim, Indio, National City, Oceanside and existing Lucky stores were converted to this warehouse format in Sacramento, Pittsburg, Vacaville, and Woodland. Initially, these stores were named "Price Advantage", based on the "Lucky Advantage" prototype store in Escondido, California. Price Club sued American Stores over name infringement shortly before the grand opening of the stores. The stores were swiftly renamed "Food Advantage" the night before grand openings, with the word "Price" marked out with a thick ink marker on every label, tag and sign in the store. In the coming months these stores were branded as "Food/Price Advantage" and finally as Super Saver Foods. Super Saver Foods was a familiar brand which had been used in the 1970s and early 1980s by Acme for their discount grocery store format in Pennsylvania and was a trademark already owned by American Stores. In November 1994, the Star Markets grocery division, which at that stage consisted of 33 food stores in Massachusetts and Rhode Island was sold for $285 million in cash and the assumption of liabilities to Investcorp Bank, an international investment bank.

In 1995 L.S. Skaggs Jr. relinquished the Chairmanship of American Stores and in 1997 the company purchased $550 million of his shares, leaving him with insufficient ownership to retain a seat on the company's board.

Acquisition by Albertsons

In June 1998 American Stores completed construction and opened the American Stores Center, its 24 story corporate office building in Salt Lake City, Utah. Six weeks later, it was announced that Albertsons would acquire American Stores for $11.7 billion. The Federal Trade Commission charged that Albertston's proposed acquisition of American Stores would substantially lessen supermarket competition in California, Nevada and New Mexico. The proposed acquisition, the FTC charged, could result in higher prices or reduced quality and selection for consumers. As a condition of the sale, Albertson's and American Stores agreed to sell 144 supermarkets (104 Albertston's supermarkets, 40 American Stores' supermarkets) in 57 local markets in order to resolve. The divestiture agreement, was the largest retail divestiture ever required by the Commission. Due to the mandated sale of stores, the acquisition took nearly a year to complete. In June 1999, the acquisition was complete and American Stores ceased to exist.

For a short time, Albertsons was the largest food/drug chain operating nearly 2,500 stores in 40 states. Albertsons preserved the Acme, Jewel-Osco, Osco Drug and Sav-on Drugs namesakes. Shortly after the sale, Albertsons rebranded the Lucky stores under the Albertsons name because both chains had stores and overlap in northern and southern California (The Lucky brand would be revived the in 2006 by SuperValu).

In November 1998 American Stores RxAmerica division and Longs Drug Stores' Integrated Health Concepts (IHC) division agreed to merge their Pharmacy Benefits Management (PBM) ventures. Under terms of the joint venture, RxAmerica and its former corporate partner, Geneva Pharmaceuticals, parted ways, and RxAmerica combined with Longs' IHC division in a 50/50 partnership. The alliance created a national PBM of nearly 1,400 Longs and American Stores pharmacy outlets and a nationwide network of 40,000 pharmacies serving some 3 million patients under contract. Longs and Albertsons remained equal partners up though 2001, when Albertsons sold their 50% interest to Longs.

In 1999, the drug store operations division and general merchandise procurement functions were relocated from Salt Lake City, Utah to Scottsdale, Arizona. The functions which supported the food divisions were consolidated and moved from Salt Lake City, Utah to Albertsons headquarters in Boise, Idaho. For a short time after the acquisition of American Stores, Albertsons leased several floors of the American Stores Center building to the International Olympic Committee - Utah had been awarded the 2002 Winter Olympics. The building is now owned by Wells Fargo.

2006 Albertsons Break-up

In 2006, the sale of Albertsons essentially split the company into three parts.

CVS Corporation purchased the 700 free-standing drug stores (Osco Drug and Sav-on Drugs). By 2007 these stores were rebranded as CVS/pharmacy.

Cerberus Capital Management purchased the Albertsons stores in Northern California, Colorado, Texas, Oklahoma, Florida, Arizona, and New Mexico forming a new corporation called Albertsons LLC. Many of these stores have since been sold to other grocery chains or closed altogether.

SuperValu purchased the Jewel, Acme, Shaw's divisions and the remaining Albertsons stores not acquired by Cerberus. SuperValu retains the Osco and Sav-on drug trademarks allowing the pharmacies in their grocery stores to remain branded as Sav-on Pharmacy or Osco Pharmacy.

Both SuperValu and Albertsons LLC use the Albertsons store banner name.

1960s-1970s

1980s

1990s

Acquisition by Albertsons

2006 Albertsons Break-up

See also