In October, the largest traditional grocery company in the country — Kroger — announced plans to acquire the second-largest such company — Albertsons — for $20 billion. In Chicago, the news meant one thing: Mariano’s parent company, Kroger, wants to buy da Jewels.
For years, Chicago was largely a two-grocery town: as recently as the late 1990s, Jewel and its No. 2 rival at the time, Dominick’s, controlled two-thirds of the local grocery market.
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But the grocery landscape in 2022 is vastly different. Dominick’s has been gone for nearly a decade, while Jewel and 21st-century rival Mariano’s face increased competition from major retailers such as Walmart, Costco and Amazon Fresh as well as specialty grocers, including Trader Joe’s and the Amazon-owned Whole Foods.
Jewel is still the most-commonly cited grocery-shopping destination for Chicago-area families, according to Nielsen data, but Aldi is nipping at its heels, having transformed itself from the stock-up store of the 1990s. Throw in a handful of online delivery startups that popped up during the pandemic and shoppers have more options than ever, squeezing Jewel from all sides.
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“It’s difficult to be caught in the middle,” said Jon Hauptman, president of Price Dimensions, a retail consultancy firm based in the Chicago area. “But they’ve been pretty successful at doing that for quite a while.”
Jewel, part of the Albertson’s umbrella, has 183 stores in Illinois and a handful in Indiana and Iowa. Kroger has 44 stores operating under the Mariano’s banner in Illinois and about 10 Food 4 Less stores in the region.
But with significant overlap between Mariano’s and Jewel, the companies are likely to divest some stores in order for the merger to get antitrust approval, raising questions about what Chicago’s hometown grocer will look like when and if the deal goes through.
“I think that (the merger) does stand to create some change here, the likes of which we probably haven’t really seen since Dominick’s left the area,” said Zain Akbari, an analyst with the Chicago-based financial services firm Morningstar.
Jewel’s history as a hometown grocery staple began at the turn of the 19th century, when Frank Skiff, the son of a grocer, started the company as a horse-drawn delivery service selling tea, coffee and spices door to door.
By 1915, the company was serving 850 routes and doing $8 million in business; it soon expanded to the coasts and started roasting coffee in San Francisco, New Orleans and Hoboken, New Jersey, according to the Tribune archives.
The Jewel Tea company got into the retail grocery business in March 1932, when it acquired more than 70 Chicago grocery stores from the Canadian-owned Loblaw Groceterias Inc.
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Jewel presented itself as a modern option for grocery shopping, said historian Tracey Deutsch, an associate professor of history at the University of Minnesota who wrote a book about 20th-century American grocery stores.
Jewel claimed to have surveyed more than 18,000 local housewives and remodeled the stores based on what it said were their responses; the shops were painted white, for example, to emphasize their sanitariness. Jewel, Deutsch said, was “for savvy, modern-minded housewives.”
By Jewel’s 50th anniversary in 1949, it was operating more than 150 retail stores and posting total sales of more than $150 million a year. It acquired Osco Drug Inc. in 1961, long before most other grocery chains had started selling pharmaceuticals, and went public in 1967. The first Jewel-Osco combined stores opened in the ’60s.
“What they were very successful at was kind of integrating themselves in the everyday lives of many, many Chicagoans,” Deutsch said.
In the early 1980s, with door-to-door service becoming less and less profitable, Jewel sold off that part of the business to a cooperative owned by the Jewel routemen themselves.
“The ‘Jewel Tea man,’ who often sold his wares to an entire neighborhood of klatsching housewives, is becoming an anomaly among the supermarkets, fast food franchises, and convenience stores,” the Tribune wrote.
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A few years later, Jewel was purchased by the American Stores Co. in a hostile takeover valued at more than $1 billion. It was the first of a series of acquisitions. Albertsons bought American Stores in 1999 in a $12 billion deal that created the second-largest grocery chain in the country — after Kroger.
In 2006, an investor group led by Cerberus Capital Management acquired more than 650 Albertson’s stores as part of a broader deal that broke up the grocer. Minnesota-based SuperValu acquired more than 1,100 Albertson’s-owned stores in the transaction, including Jewel. In 2013, SuperValu sold Jewel to Cerberus as part of a $3.3 billion acquisition that also included Albertsons.
For years, Jewel’s chief rival in the Chicago area was Dominick’s, founded in 1925 by Sicilian immigrant Dominick DiMatteo as a small corner market on the city’s West Side. After a series of ownership changes, Dominick’s was purchased by Safeway in 1998 for more than $1 billion and the assumption of millions of dollars in debt.
In 2013, well after Chicago ceased being a two-grocery town, Safeway shuttered the struggling Dominick’s chain for good, opening the door for the rise of Mariano’s.
On a recent afternoon in Bronzeville, the parking lot at Mariano’s was noticeably fuller than its Jewel counterpart a few minutes’ drive north on Martin Luther King Drive. That was typical, a number of shoppers said.
At both Jewel and Mariano’s, many shoppers said they didn’t have strong feelings about the merger, but food prices — which are up almost 12.5% over last year — were top of mind. (One woman, however, when asked about the deal on her way into Jewel, told the Tribune, “I hate it. Quote: hate!”)
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Ashaki Ray, a nonprofit employee and the mother of twin girls, said she sometimes has better luck finding the products she wants at Mariano’s instead of Jewel.
“I would hope that things don’t change and prices don’t increase, because prices have already gone up,” said Ray, who lives in the Back of the Yards neighborhood. “It’ll just make it really hard for people to be able to afford to buy food for their families.”
Kroger has said it plans to spend about $1.3 billion to “enhance the customer experience” at Albertsons-owned stores and reinvest about half a billion dollars in cost-savings achieved through the merger into lowering prices.
While lower prices would help the combined company woo customers from lower-cost rivals such as Walmart and Costco, some experts and lawmakers have raised concerns that more grocery consolidation would send prices in the other direction.
“Kroger will have more buying power to try and get lower prices from its suppliers,” said Claire Kelloway, program manager for fair food and farming systems at the Open Markets Institute, a nonprofit focused on the prevention of monopolies. “But they don’t have to pass that on to consumers.”
If Kroger maintains ownership of Jewel under the deal, shoppers can expect products, especially private label brands and prepared foods, to look more like Kroger’s over time, said Amanda Lai, senior consulting manager with the Chicago-based retail consultancy McMillanDoolittle.
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“Since being acquired by Albertsons, the name is still the same on the front of the store, but over time, the assortment has increasingly looked like other Albertsons brands,” Lai said.
Kroger did not respond to requests for comment about antitrust criticism of the deal, but said in a statement to the Tribune that it has no plans to change the names of Albertsons banners such as Jewel. But if the stores are sold, that would no longer be Kroger’s decision.
The high degree of overlap between Jewel and Mariano’s stores in the Chicago area makes the market a likely candidate for store divestitures. Some stores are almost on top of one another. In Roscoe Village, a Jewel is across the street from a Mariano’s; in south suburban Alsip, a Food 4 Less is located just across Pulaski Road from a Jewel.
Kroger and Albertsons have said they are prepared to spin off between 100 and 375 stores into a stand-alone publicly-traded company in order for the deal to pass muster with regulators.
But questions remain about how regulators will approach their analysis. Regulators evaluate both the geographic overlap between the brands and the presence of nearby competition when deciding where to require divestitures, experts said. Will they take a hyper-local approach, analyzing competition block by block? How will they define the competition? Will corner stores that sell food count?
[ Albertsons $4 billion payout to shareholders amid merger paused ]
In Chicago, where grocery companies have faced criticism from residents and local elected officials for shuttering stores in disinvested neighborhoods on the South and West sides, the potential for divestitures has led to concern about store closures.
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“These companies will sell off, typically, the stores they don’t want, the stores they view as less profitable,” said Kelloway, the antitrust expert with Open Markets Institute. “The concern is that those will be stores in communities of color, which just tend to be the stores that historically these grocery chains have closed first.”
A divestiture doesn’t mean a store would close, but questions remain as to whether divested stores will be in a position to compete with the combined behemoth grocery company.
“The evidence that we’ve seen from past mergers is the companies that buy these stores are not always in the best position to compete,” Kelloway said. “And there’s a decent chance that they’re sold off over time.”
When Safeway pulled the plug on Dominick’s, it left behind more than 70 vacant grocery stores in the Chicago area. The most desirable were scooped up by other chains, including Jewel and Mariano’s.
But three years after the closures, vacant former Dominick’s still haunted the Chicago suburbs. (In 2015, Albertsons bought Safeway, and took control of most of the remaining Dominick’s leases in the Chicago area.)
“Even in markets in which a company has a decent amount of scale and has a number of stores, that doesn’t necessarily guarantee success,” said Akbari, the Morningstar analyst. “And so for companies that might look to acquire stores as a way to kind of get into a market because of these divestitures I think that they’ll look at Dominick’s as a cautionary tale.”
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Anita Duesenberg, who works in the bake shop at a Jewel-Osco in Evanston, has worked for the company through its sale to Albertsons, SuperValu and Cerberus.
“Every time it gets bigger,” Duesenberg said, “the everyday store-level worker gets further away from where decisions are made.”
After 31 years working at Jewel, Duesenberg, 70, said she makes $15.45 an hour to decorate cakes and track inventory in the bake shop. That includes a 75-cent raise she earned in the latest union contract renewal.
Duesenberg started working for Jewel in the early 1990s, when the company was owned by American Stores. She remembers that at the time, a veteran bake shop employee was earning $17 an hour — more than Duesenberg makes today. When her mother-in-law worked in a Jewel deli in the 1980s, she made about the same amount of money as Duesenberg makes now, she said.
“It used to be a really good middle-class place to work, and I don’t know exactly when it changed,” Duesenberg said.
Jewel, which employs about 30,000 people mostly in the Chicago area, recently emerged from a protracted dispute with United Food and Commercial Workers Local 881. In August, its members rejected a contract proposal and voted to authorize a strike before approving a second contract proposal last month.
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Local 881 represents about 18,000 workers in positions such as cashier, while another 4,000 meat, fish and deli workers are unionized with the UFCW’s Local 1546. Together they represent a sizable chunk of grocery workers in Illinois; market research firm IBISWorld estimates there are about 92,000 total grocery workers in the state.
About a dozen Local 881 workers spoke with the Tribune, some of whom had worked for Jewel for decades. Many said they did not recall their union ever voting down a contract; Local 881 did not respond to requests for comment. The sticking point, the workers said, was pay.
Some suburban workers, including a few who have been with Jewel for more than a decade, said they made less than $15 an hour before the latest contract renewal. (In Chicago, the minimum wage is $15.40; the minimum wages throughout much of the suburbs are lower.) Many workers described being exhausted by a lack of staffing at their stores and said they’d been asked to take on additional work as the company struggled to hire staff.
In a statement to the Tribune, Albertsons said Jewel is “proud to offer a market leading wage and benefit package to our outstanding associates in the Chicagoland area.”
“The most recent Local 881 contract settlement continues to build upon our investment in our team and we continue to seek talented customer-focused individuals to add to our company,” the company said, adding that it believed the merger would benefit workers.
Mariano’s is also unionized with the UFCW, and Kroger has said the merger will allow the companies to compete better against larger nonunion competitors like Walmart. The company also said it will invest $1 billion into raising employee wages, though it didn’t say by how much.
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Local 881 opposes the merger with Kroger, saying it would violate antitrust laws and create an “unfair monopoly.”
“In addition to destroying good union jobs, this merger will all but eliminate competition in some communities, which in turn will have severe financial consequences for Illinois consumers who are facing already rising prices of groceries, medicine, and gas due to inflation,” Local 881 President Steven Powell said in a statement.
Duesenberg, the bake shop employee, said she feels Kroger is better-run than Albertsons; she cites the company’s digital footprint and its promise to invest money into updating Albertsons stores.
She isn’t convinced, however, that a better shopping experience would change things for workers.
“As far as what employees are going to get, it’s nothing better,” she said.
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