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For Sale

Mention the name “Cerberus”, and some supermarket shoppers shudder. The private equity firm saddened thousands of shoppers and employees when it shut down or sold two-thirds of the roughly 600 Albertsons locations it acquired in 2006. And customers of several chains acquired by Cerberus earlier this year are wondering whether their stores will suffer the same fate.

But could we be seeing a kinder, gentler Cerberus – one that actually likes to run grocery stores instead of closing them? It’s worth paying attention to, if your favorite store is now owned by Cerberus. And even if it isn’t – it could be soon.

The Wall Street Journal reports this morning that Cerberus Capital Management is in the market for even more acquisitions. Citing an unnamed “person familiar with the matter”, the newspaper says the firm is looking at “about a half-dozen grocery chains” it might want to acquire next. Among them is Harris Teeter, which said in February that it was exploring a possible sale (read: “For Sale at Harris Teeter: The Entire Chain?”).

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More on what that might mean for Harris Teeter shoppers in a bit. But first, the very notion that Cerberus might be looking into buying more grocery chains would be a significant turnabout for a company with a reputation – deserved or otherwise – as a “vulture capitalist” that wrings profits out of picking supermarket chains clean. Some analysts have described Cerberus as a real estate investor that just happens to also own supermarkets. “They are not in this because they have a passion for running grocery stores,” supermarket consultant David Livingston said when Cerberus acquired the grocery chains Jewel-Osco, Acme, Shaw’s and Star Market. He described them as “grocery store morticians” who “take dead stores and embalm them, making them presentable for viewings, and then bury them when they’re ready to be sold off.”

Using that logic, many feared their Jewel-Osco, Acme, Shaw’s and Star Market stores were doomed – that Cerberus would sell them off for the value of the land they lie on. But the company has said no large-scale closures are planned. And the fact that it may be considering expanding, rather than contracting, its holdings could indicate it’s discovering a newly-found “passion for running grocery stores.”

Or, it’s just discovered that there are ways to make a profit in the grocery business other than selling off stores and pocketing the cash. While some analysts are seeing signs that the company may well be looking to sell off some of its assets, the Wall Street Journal’s sources say Cerberus believes acquiring more stores could help produce additional economies of scale, making it possible and efficient to keep most of the stores it already owns.

So for shoppers at Jewel-Osco, Acme, Shaw’s and Star Market, the news provides some consolation that Cerberus may not, in fact, have bought the chains only to bury them. For shoppers at Harris Teeter, a potential acquisition by Cerberus may or may not be seen as good news. Cerberus has emphasized new lower prices in the chains it acquired earlier this year, and Harris Teeter is known as a more high-end chain. Lower prices might be nice, but Cerberus operates (as the Wall Street Journal charitably puts it) “mostly down-market chains.” So Harris Teeter fans may not like lower prices if it means lower quality. And some other changes Cerberus has implemented in its stores, including the elimination of store loyalty programs, self-checkout stations and consistent coupon policies – as well as a poorly-received effort to help Jewel-Osco shoppers to their cars – may not go over well with Harris Teeter shoppers either.

But then Cerberus is only one of Harris Teeter’s potential suitors, and Harris Teeter is only one chain that Cerberus is reportedly interested in. If there’s this much interest in buying and selling grocery stores, though, maybe there’s some hope for the industry after all – forestalling the day when we all just shop at Walmart for everything.

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