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American Stores

From Alfawiki
American Stores Company, Inc.
Company typePublic
IndustryRetail (supermarkets and pharmacies)
Founded1917
FateAcquired (1998)
Headquarters
Salt Lake City, Utah
,
United States
Area served
United States
ProductsSupermarkets, pharmacies


American Stores Company, Inc. was a publicly traded American holding corporation overseeing a network of supermarket and pharmacy chains across the United States from its founding in 1917 until 1998. The company originated when The Acme Tea Company merged with four smaller grocery retailers around Philadelphia—Childs, George Dunlap, Bell Company, and A House That Quality Built—to establish American Stores. Over the next eighty years, it expanded to operate 1,575 food and drug retail locations spanning 38 states, generating nearly $20 billion in annual revenue by 1998 (equivalent to approximately $Template:Format price in today's dollars).

History

The genesis of American Stores dates back to 1917 through the consolidation of five distinct grocery businesses. At inception, Acme Tea Company operated 433 outlets; S. C. Childs Company managed 268; James Bell Company ran 214; Robinson & Crawford controlled 186; and George M. Dunlap Company held 122 stores. Leadership from Robinson & Crawford was appointed to oversee the unified chain of 1,223 stores.

By 1925, the company had expanded its footprint to nearly 1,800 retail locations. In 1928, American Stores acquired a portfolio of 305 grocery and meat outlets in northern New Jersey from United States Stores Corporation.

A proposed acquisition of Grand Union supermarkets in 1946 was rejected by Grand Union shareholders.

1960s–1970s

In 1961, American Stores broadened its reach by purchasing California-based Alpha Beta supermarket chain. During the 1970s, facing competition from discount grocers such as ShopRite and Pathmark—both of which did not provide trading stamps like S&H Green Stamps—Acme Markets introduced the Super Saver discount grocery brand in Pennsylvania.

The year 1979 marked a significant change when Skaggs Companies, Inc. acquired American Stores. The combined entity established headquarters in Salt Lake City, Utah, Skaggs' home base, yet retained the American Stores name. Despite this branding choice, control rested with Skaggs leadership under Leonard S. Skaggs Jr., commonly known as Sam Skaggs.

At the time of merger, American Stores was substantially larger with 758 supermarkets, 139 drugstores, 53 restaurants, and nine general merchandise outlets across nine states compared to Skaggs' 241 stores. In markets where both Alpha Beta supermarkets and Skaggs Drug Centers operated, these locations were either merged or expanded into unified food and drug stores branded as Skaggs Alpha Beta.

1980s

In 1983, American Stores reported earnings of $83 million on nearly $8 billion in revenue. Despite this strong financial performance, the company's footprint remained limited in regions such as the Midwest, New England, and Florida.

Acquisition of the Jewel Companies

American Stores completed the purchase of Jewel Companies, Inc. in June 1984 for $1.1 billion. L. S. Skaggs assumed the roles of chairman and CEO for the merged entity, while Jewel's chairman Weston Christopherson and several other executives were dismissed. Skaggs had previously explored merger possibilities with Jewel in both 1966 and 1978.

To finance this acquisition, American Stores divested its Rea and Derick, Inc. subsidiary, which operated 134 drugstores, selling it to People's Drug, a branch of Imasco Limited, in December 1984. Additionally, 33 Alpha Beta grocery locations in Arizona were sold to ABCO Foods. Another 22 Alpha Beta stores along with related support facilities in northern California were also offloaded.

The acquisition encompassed several chains including Illinois-based Jewel Food Stores, Osco Drug, Inc., Massachusetts-based Star Market, California's Sav-on Drugs, Montana's Buttrey Food Stores, and White Hen. The Osco Drug and Sav-on Drugs chains had origins linked to the Skaggs family. This merger expanded American Stores' portfolio by adding 193 supermarkets, 358 drugstores, 140 combined food and drug outlets, 301 convenience stores, and 132 discount stores.

Following the acquisition, the company encountered legal challenges due to an outbreak of salmonella food poisoning that affected approximately 20,000 people across the Midwest. The source was traced to Hillfarm Dairy, a supplier to Jewel stores during March and April 1985. In 1987, while Jewel was not held responsible for punitive damages by the Illinois Cook County Circuit Court, it consented to pay compensatory damages estimated between $35 million and $40 million.

In 1985, American Stores divested its White Hen convenience store chain as these outlets no longer aligned with its strategic direction. To generate capital and reduce debt, both Buttrey Food & Drug and Star Market were placed on the market. Although these subsidiaries continued operations throughout the decade, investments in renovations and new store developments for them as well as for Acme Markets remained minimal.

By 1987, American Stores had become the largest drugstore operator nationwide but ranked only third among grocery retailers and lagged behind competitors in performance. During October of that year, the company withdrew from drugstore markets in Idaho and Washington by selling 25 Osco Drug locations to Pay Less Drug Stores.

Renaming of Sav-on

After acquiring Jewel, American Stores aimed to establish a nationwide pharmacy presence using the Osco Drugs brand. In February 1985, it was announced that the Skaggs Drug Center outlets in the Northwest would be rebranded as Osco.[1] By August 1986, the company had renamed its 184 California-based Sav-on stores to Osco Drug, expanding the chain's total to 645 locations nationwide.[2]

However, the Osco brand failed to gain traction with Sav-on’s Southern California customers. Consequently, by 1989, American Stores opted to revert the former Sav-on stores back to their original name.[3] At the time, speculation suggested the change was due to 'Osco' sounding like the Spanish word 'asco' (pronounced oss-ko), meaning disgust or revulsion—a significant concern given Southern California’s large Hispanic demographic. American Stores denied this explanation for the rebranding.[4]

Lucky Stores Acquisition

In March 1988, American Stores launched an unsolicited bid for Lucky Stores, a competitor of Alpha Beta known for its operational efficiency and competitive pricing.[5][6] At that time, Alpha Beta was underperforming in California due to elevated prices and poor service reputation. Lucky held a dominant position as California's top grocery retailer, partly because it maintained a strong footprint across both Northern and Southern California.

Lucky initially declined American Stores’ offer.[7] Within weeks, American Stores proposed increasing its bid contingent on Lucky’s acceptance of a friendly acquisition. This proposal was again rejected by Lucky’s management, who considered defensive measures. Subsequently, American Stores raised its offer to $2.5 billion, equating to $65 per share. Lucky accepted this bid, positioning American Stores as the largest supermarket operator in the U.S., surpassing both Kroger and Safeway.[8][9]

This acquisition encompassed Lucky Stores headquartered in Dublin, California, with locations across California, Nevada, and Arizona; Tampa-based Kash n' Karry stores in Florida; and a minority stake in Milan, Illinois’s Eagle Food Centers.

In August 1988, California Attorney General John Van de Kamp petitioned the Federal Trade Commission to nullify the deal, arguing that a merged Lucky and Alpha Beta entity would reduce competition and cost consumers approximately $400 million (~$Template:Format price in Template:Inflation/year).[10] The FTC approved the merger; however, Van de Kamp filed suit against American Stores to block it.[11] Subsequently in September 1988, a federal judge in Los Angeles issued a preliminary injunction halting the merger.[12] Concurrently, the FTC mandated divestiture of 37 Alpha Beta and Lucky locations to mitigate antitrust issues.[13][14] American Stores appealed this decision; in April 1989, a Ninth Circuit panel in San Francisco overturned the injunction. Van de Kamp escalated the matter by appealing to the U.S. Supreme Court.[15] Meanwhile, American Stores proceeded with integration plans for Lucky while awaiting removal of the injunction as directed by the appellate court.

On August 22, 1989, Associate Justice Sandra Day O'Connor, acting as Circuit Justice for the Ninth Circuit, issued an interlocutory stay on returning the mandate to district court, maintaining the preliminary injunction.[16] Following oral arguments on January 19, the Supreme Court ultimately ruled in favor of California on April 30, 1990.[17]

To avoid protracted litigation thereafter, in May 1990 American Stores reached a settlement with Van de Kamp allowing conversion of 14 Alpha Beta outlets into Lucky stores while agreeing to divest 161 Southern California locations (152 Alpha Beta and nine Lucky stores) within five years. The agreement imposed no constraints on future expansion in California nor did it require state approval regarding purchasers or sale terms.[18]

In 1989, Kash n' Karry management purchased their stores from American Stores for $305 million (~$Template:Format price in Template:Inflation/year).[19] Additionally, American Stores sold its minority stake in Eagle Food Centers acquired through Lucky to Odyssey Partners based in New York.[20]

Relocation of Headquarters to Southern California

In July 1988, American Stores shifted its main corporate offices from Salt Lake City to Irvine, California. The company stated that this move aimed to position the headquarters within one of its key operational markets, thereby aligning more closely with its core business activities. However, by 1989, the corporate headquarters returned to Salt Lake City for reasons that were not clearly disclosed.[21][22]

Jewel-Osco Expansion into Florida

On March 16, 1989, American Stores launched a 75,000-square-foot Jewel-Osco combination store in Largo, Florida, marking the company's return to the Southeast region after nearly twenty years. The newly formed Jewel-Osco of Florida division was led by Mark S. Skaggs, son of L.S. Skaggs.[23][24]

This division operated independently from the midwestern Jewel Food Stores chain and the Osco/American Drug Stores unit. Unlike the Midwest model—where Jewel managed the grocery portion and Osco handled pharmaceuticals—the Florida stores were overseen by a single manager, resembling the management style of Skaggs Alpha Beta stores.[24]

Only six Jewel-Osco outlets were established in Florida before all were sold to Albertsons in 1992 as part of a $300 million transaction involving 74 stores and an Oklahoma distribution facility. This sale resulted in American Stores exiting markets in Texas, Arkansas, Oklahoma, and Florida.[23]

Creation of American Drug Stores, Inc.

In 1989, American Stores created a subsidiary named American Drug Stores, Inc., which consolidated its pharmacy operations including Osco Drug, Sav-on Drugs, and the pharmaceutical departments within the Jewel-Osco combination stores.[25]

By 1997, American Drug Stores joined forces with Longs Drugs by merging their pharmacy benefit management services to form RxAmerica. Both companies initially held equal ownership stakes in this joint venture.[26] Longs Drugs took full ownership of RxAmerica by 2001.[27]

1990s

At the start of the 1990s, the company's primary focus was on diminishing its substantial $3.4 billion debt, a goal largely achieved through the sale of various assets. By the close of fiscal year 1992, long-term liabilities had been reduced to $2.1 billion from the initial $3.4 billion.

Divestitures

During the early 1990s, American Stores undertook numerous property divestitures. In November 1990, a management-led leveraged buyout valued at $184 million acquired 44 Buttrey Food & Drug locations spanning Montana, Wyoming, Washington, Idaho, and North Dakota. In March 1991, American Stores agreed to sell 51 Osco Drug outlets in Colorado, Utah, and Wyoming to Pay Less Drug Stores, then a division of Kmart, for $60 million. Additionally, 152 Alpha Beta supermarkets in California were sold to the Yucaipa Companies for $251 million during this period.

The company initially listed its 275-unit ACME Markets chain for sale in early 1991 but retracted the offer rather than transferring ownership to the company's union. In January 1992, a total of 74 Jewel-Osco combination stores across Texas, Oklahoma, Florida, and Arkansas—recently rebranded and renovated—were sold to Albertsons for $455 million.

In August 1994, American Stores sold its Star Market grocery division to Investcorp Bank for $285 million. At that time, Star Market ranked fifth in market share within the Greater Boston region and operated 33 stores across Massachusetts and Rhode Island. The decision to divest Star Market was driven by American Stores' strategy to concentrate on markets where it held either first or second place in market share. Subsequently, in January 1995, the company sold 45 Acme Markets stores located in New York and northern Pennsylvania to the Penn Traffic Company for $94 million.

Acquisitions

Amid significant divestitures, American Stores pursued strategic smaller acquisitions to bolster its presence in critical markets. In December 1991, American Drug Stores purchased 85 CVS locations in California from the Melville Corporation. These outlets were rebranded under the Sav-on Drugs and Sav-on Express names. Later that year, the company acquired 30 Thrifty and Rx Plus drugstores situated in Arizona and Nevada.

By May 1993, American Drug Stores declared plans to acquire 110 Reliable Drug Stores across Illinois, Indiana, Iowa, Kansas, and Missouri, which were emerging from bankruptcy. Shortly after, these stores were rebranded as Osco Drug locations. In August of the same year, the company also secured ownership of the final four Thrifty drugstores in Nevada.

In December 1994, American invested approximately $37 million to acquire 17 Clark Drug stores located in southern California; these were subsequently converted to the Sav-on Drugs brand.

Transformation into an Operating Company

Historically managed as a decentralized holding company, American Stores initiated its Delta Plan in 1992 to evolve into a unified operating company capable of competing more effectively in the aggressive retail landscape of the 1990s. The primary objective was to develop a more profitable national supermarket enterprise with enhanced shareholder returns by centralizing procurement functions and expanding combined food and drugstore formats.

As part of this restructuring, the company centralized key operations including purchasing, warehousing, inventory management, distribution, marketing, payroll, and human resources. Previously fragmented procurement and inventory systems across divisions were replaced with a standardized platform. This also led to the consolidation of central support services for store operations. Concurrently, American Stores prioritized opening new outlets over acquiring existing ones. This comprehensive strategy aimed at operational efficiencies garnered strong investor confidence.

Between 1992 and 1998, American Stores streamlined its operations and transferred major subsidiary responsibilities to its headquarters in Salt Lake City, Utah. By August 1998, the American Stores Tower housed nearly 2,000 corporate staff members. Notably, during this timeframe, American Stores did not maintain any food or drugstore operations within Utah, having divested its Osco Drug and Alpha Beta locations there in 1991.

Super Saver Food

At the beginning of 1994, American Stores introduced the Price Advantage discount warehouse grocery concept in California. New locations were established in Anaheim, Indio, National City, and Oceanside, while several existing Lucky stores in Sacramento, Pittsburg, Vacaville, and Woodland were transformed into this warehouse-style format. However, due to a legal threat from Price Club over alleged name infringement, the chain was promptly rebranded as Super Saver Food. This change occurred so rapidly that on the eve of grand openings, every label, tag, and sign bearing the word "Price" had to be manually altered.

The Super Saver Food name was not new; it had previously been used by Acme Markets during the 1970s and early 1980s for their discount grocery stores in Pennsylvania. The trademark remained under American Stores' ownership.

Kap's Kitchen and Pantry

In 1997, American Stores launched Kap's Kitchen and Pantry in Salt Lake City, Utah as a pilot project targeting the upscale food retail segment. The store offered a variety of natural and organic items along with fresh produce, seafood, meat and poultry, bakery goods, groceries, and prepared meals. Despite this ambitious attempt to enter the premium market, the concept was discontinued within a year.

Skaggs Family Exit

In 1995, L.S. Skaggs stepped down from his role as chairman of American Stores at age 72, passing leadership to president and CEO Victor L. Lund. Skaggs retained an 18.3 percent ownership stake and a board seat. By June 1996, he informed the SEC of his intentions to potentially divest his shares, sparking speculation about a possible breakup or sale of the company. Uncertainty surrounded whether Skaggs aimed to initiate a proxy contest for control or sought changes in management or corporate strategy.

By February 1997, American Stores reached an agreement to repurchase approximately 12.2 million shares from Skaggs for $550 million (adjusted for inflation). The remaining shares were sold publicly through a secondary offering. This transaction reduced Skaggs’ ownership to around five percent—below the threshold required for him and his family to maintain board representation.

Acquisition by Albertsons

On August 3, 1998, it was revealed that Albertsons planned to purchase American Stores for $11.7 billion (approximately $Template:Format price in Template:Inflation/year). The Federal Trade Commission (FTC) opposed the deal, arguing that it would significantly reduce competition among supermarkets in California, Nevada, and New Mexico, potentially leading to increased prices or diminished quality and variety for shoppers. To address these concerns, Albertsons and American Stores consented to divest 144 grocery outlets—comprising 104 Albertsons locations and 40 Lucky supermarkets from American Stores—across 57 different markets. This divestiture was the largest retail store sale ever mandated by the FTC at that time.

Because of the required store sales, finalizing the acquisition extended close to a year. By June 1999, the transaction was completed, American Stores was removed from the New York Stock Exchange, and the company ceased its independent operations. After the merger, the combined entity operated 2,400 food and drug retail locations spanning 38 states.

In 1999, Albertsons relocated its drugstore operations division and general merchandise purchasing functions from Salt Lake City to Scottsdale, Arizona, establishing what became known as Albertsons Drug Region. Meanwhile, the support functions for food divisions were consolidated and transferred from Salt Lake City to Albertsons’ headquarters in Boise.

Following the completion of this acquisition, Albertsons briefly held the title as the largest food and drug retailer in the United States, until later that year when Kroger finalized its purchase of Fred Meyer. Throughout this period, Albertsons retained brand names such as Acme Markets, Jewel-Osco, Osco Drug, and Sav-on Drugs. In November 1999, Albertsons announced plans to rebrand all Lucky stores under the Albertsons banner due to overlapping store locations in northern and southern California. (The Lucky brand would later be revived in 2006 by SuperValu.)

References

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  14. ↑ Lua error in Module:Citation/CS1/Configuration at line 2123: attempt to index field '?' (a nil value).
  15. ↑ Lua error in Module:Citation/CS1/Configuration at line 2123: attempt to index field '?' (a nil value).
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  18. ↑ Lua error in Module:Citation/CS1/Configuration at line 2123: attempt to index field '?' (a nil value).
  19. ↑ Lua error in Module:Citation/CS1/Configuration at line 2123: attempt to index field '?' (a nil value).
  20. ↑ Lua error in Module:Citation/CS1/Configuration at line 2123: attempt to index field '?' (a nil value).
  21. ↑ Galante, Mary Ann. "American Stores Moving Main Offices to Southland." Los Angeles Times, April 27, 1988.
  22. ↑ Galante, Mary Ann. "American Stores Co. to Move Headquarters Back to Utah." Los Angeles Times, January 27, 1989.
  23. ↑ 23.0 23.1 Albright, Mark. "Jewel Osco stores sold to Albertson's." Tampa Bay Times, January 30, 1992.
  24. ↑ 24.0 24.1 Frederick, James. "Jewel Osco dazzles Tampa with sparkling new format." Drug Stores News, April 3, 1989.
  25. ↑ Los Angeles Times Archives. "CVS Stores Acquired: American Drug Stores Inc.,..." February 11, 1992.
  26. ↑ Colliver, Victoria. "Longs was the last regional chain drugstore." SFGate, August 14, 2008.
  27. ↑ "Longs Drugs to Acquire Full Ownership of RxAmerica." Progressive Grocer, August 17, 2001.

External links

Template:Supermarkets of the United States

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