In the past couple of weeks, several mid-level chains have announced their intention to jump higher within their level through acquisition. The moves by A&P, Whole Foods and California's Save Mart supermarket should make each player stronger in its own particular niches.

In the late 1990s and as the 21st century dawned, the larger national chains got bigger through consolidation, and it appeared as if the supermarket industry was heading toward a situation where the top four or five chains would control a dominant share in the marketplace.

"The acquisitions by the majors didn't always work out the way they were intended to," said retail consultant Ed Odron of Ed Odron Produce Marketing Services in Stockton, CA.

Mr. Odron was a long-time retail produce executive with Lucky Stores in northern California before that chain was purchased by Albertson's. He said that there is a long list of supermarket acquisitions by Safeway, Kroger and Albertson's - and that some worked and some didn't. Observing the trend, he said that it has proven very difficult for a national chain to come in and do a great job running a regional operation. While there have been some successes, he said, "in some case, it has proven to be very painful."

Mr. Odron said that smaller operations getting larger within their own niche makes more sense. Since the middle of February, the two leading supermarket retailers in the natural foods/organic sector -- Whole Foods and Wild Oats -- have announced a merger; strong regional player Save Mart has finalized a deal that will see it double in size in its own geographic region by purchasing the northern California division of Albertson's; and A&P, which has become predominantly an East Coast chain, has announced plans to strengthen its foothold in its own markets by making a bid for Pathmark.

Speaking to The Produce News before the A&P-Pathmark announcement was made, Mr. Odron said that the Whole Foods-Wild Oats deal and the Save Mart-Albertson's deals make great sense and should strengthen both operations considerably.

Whole Foods, which operates close to 200 stores in the United States, Canada and the United Kingdom, is purchasing Wild Oats, which operates 110 grocery stores, mostly in western states and British Columbia, Canada. Mr. Odron said that this may well be both an offensive and defensive move for Whole Foods.

The offensive play sees Whole Foods go from a 200-store chain to a 300- store chain and become the clear natural foods/organic leader in virtually every major market in the United States.

On the defensive end of things, he added, the Whole Foods purchase prevents another major player from buying Wild Oats, pumping money into the chain and becoming an instant competitor. For the time being, Whole Foods is only sharing the die-hard natural foods/organic consumer with very small local stores.

Save Mart Supermarkets in Modesto, CA, may well have become the nation's largest privately owned regional supermarket chain in the nation with the completion of the Albertson's deal. The final sale includes 130 Albertson's stores in northern California and northern Nevada, two distribution centers in northern California and the division office in Dublin, CA.

Save Mart Communications Manager Alicia Rockwell told The Produce News Monday, Feb. 26, that "we have actually bought more stores than we had. We were operating 124 stores, and have now added 130 more."

Mr. Odron, who lives in the heart of Save Mart's marketing area, said that the chain runs a "nice operation with clean stores and good merchandising," adding, "They have very nice produce departments."

Prior to the acquisition, Save Mart Supermarkets operated 124 stores, of which 80 were full-service supermarkets. The vast majority of those stores are located in California's San Joaquin Valley and wear the company name. Five supermarkets in the Lodi-Stockton area go by the name S-MART. In addition, Save Mart operates 44 discount retailers under the Food Maxx banner in various parts of California.

Mr. Odron said that the acquisition now gives Save Mart a strong presence in the San Francisco Bay area, where most of the Albertson's stores are located.

Ms. Rockwell said that by agreement, all the Albertson's stores must be converted within nine months, which would mean late November. When Minnesota-based Supervalu bought the vast majority of Albertson's stores, the northern California division was not part of the sale. Instead that was spun off separately. Supervalu, however, had been operating those stores under a management contract which will expire in nine months, hence the nine-month deadline. Ms. Rockwell said the goal is to switch the stores as quickly as possible.

The big question within the industry is which banner the new stores will fly. Ms. Rockwell confirmed that the purchase included the "Lucky" store brand name. That was a very strong name in California, and many have said that the retailer's biggest mistake after acquiring Lucky was to jettison the name. Ms. Rockwell said that no decision has been made about the use of that trademark.

Mr. Odron said that the Lucky name has excellent recognition in the Bay area and would give Save Mart an immediate presence. He indicated that it would cost millions of dollars, and probably be impossible, to build the same recognition for the Save Mart name over the next nine months.

Save Mart Chairman and Chief Executive Officer Bob Piccinini said in a statement: "Today we begin the process of making the best privately owned, regional grocery chain in the country much larger and more efficient. I committed to this purchase because I knew collectively we had the talent, experience and drive to get it done. We will work hard to implement the best practices of both companies, making our entire chain of stores a superior shopping experience for all our valued customers."

Leadership for the transfer and continued operations of the Albertson's stores will be the responsibility of Steve Junqueiro, vice president of Save Mart operations, with oversight from Bob Spengler, president and chief operating officer, and Mr. Piccinini.

Mr. Junqueiro is well known in the produce industry as he was previously in charge of produce operations for Save Mart before being promoted in 2005. Although Ms. Rockwell said that it was too early to specifically say how each department would handle the transition, she said that suppliers of Albertson's, including produce suppliers, should proceed as usual until informed otherwise. "There will be a meeting of the major suppliers soon to discuss the transition."

She added that the purchasing of the two distribution centers was a key element of the Albertson's acquisition. She indicated that this acquisition will give the chain greater internal control over supply chain management.

On Tuesday, Feb. 26, Montvale, NJ-based A&P announced that it was in negotiations for a cash-and-stock deal for Pathmark, which is headquartered in Carteret, NJ. A&P has 410 stores in nine states, while Pathmark operates about 140 stores in many of the same markets.

A&P has had a roller-coaster ride in the supermarket industry over the past 60 years. At one time, it was the nation's largest chain with more than 10,000 stores. It was still a dominant player through most of the second half of the 20th century, though its store count dropped dramatically and it twice filed for bankruptcy protection. In recent years, it has sold off several divisions, including a very strong Canadian presence, and concentrated its efforts as an East Coast operation. Pathmark also filed for bankruptcy protection in 2000 but emerged shortly thereafter as a publicly traded company. It has been the subject of takeover rumors ever since.

Some say that the A&P-Pathmark acquisition could have Federal Trade Commission problems because of its new-found dominance in some markets. But others say that consumer options, including the ability to buy groceries in many non-supermarket environments such as Wal-Mart, Target and dollar stores, should pave the way for FTC approval.

The Produce News columnist and retail consultant Ron Pelger, who spent many years as a produce executive for A&P, said that the merger seems like a good fit and may eventually work out well. But he reminded that "in all the mergers and acquisitions I have been involved in, it takes at least one or two years for everything to settle down. For a while, it will be a tough go."

He said that A&P has done very well in recent years in some of the stores that it has converted to put greater emphasis on the perishable departments, such as produce. "Pathmark has some very nice stores that will fit very well in this format," he said.

Mr. Pelger does not believe that the two chains will have problems with FTC approval. "I don't think that will be a problem because if they don't merge, there would probably be greater hardships."

He indicated that the merger might allow the combined chain to compete better against Wal-Mart and other such stores, giving consumers more rather than fewer choices.