| Former type | Public |
|---|---|
| Industry | Retail |
| Fate | Acquired by Albertsons |
| Founded | 1917 |
| Defunct | 1999 |
| Headquarters | Original company in Philadelphia, Pennsylvania; Later moved to Salt Lake City, Utah |
| Area served | United States |
| Products | Food, Prescriptions, Liquor, Photo, General Merchandise |
| Revenue | $19.9 Billion USD (1998) |
| Employees | 120,000 |
| Subsidiaries | Acme Markets Alpha Beta Buttrey Food & Drug Jewel Food Stores Lucky Food Stores Osco Drug Sav-on Drugs Skaggs Drug Centers Star Market |
American Stores Company was an American public corporation and a holding company which ran chains of supermarkets and drugstores in the United States from 1917 through 1999. The company was incorporated in 1917 when The Acme Tea Company merged with four small Philadelphia, Pennsylvania area grocery stores (Child's, George Dunlap, Bell Company and A House That Quality Built) to form American Stores. In the following eight decades, the company would expand to 1,575 food and drugstores in 38 states with $20 billion in annual sales in 1998.
Contents |
By 1925, American Stores had grown from 5 supermarkets in 1917 to nearly 1,800 stores. In 1946, a proposed acquisition of Grand Union supermarkets was turned down by Grand Union stockholders.
In 1961 American Stores company acquired California's Alpha Beta chain of supermarkets. In the 1970s, in order to compete with lower priced grocery retailers such as ShopRite and Pathmark (competitors which did not offer trading stamps), Acme Markets launched its Super Saver discount grocery chain in Pennsylvania.
American Stores itself was acquired in 1979 by Skaggs Drug Centers, 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 9 general merchandise stores in nine states when compared to the 241 Skaggs stores. Although the resulting entity bore the American Stores Company name, it was controlled by Skaggs management headed by Leonard S. Skaggs Jr. more familiarly known as Sam Skaggs. Stores in several markets having both an Alpha Beta supermarket and a Skaggs Drug Center drugstore presence were combined (or expanded) to combination food and drug stores and re-branded Skaggs-Alpha Beta.
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 another attempt to merge with the Jewel Companies, Inc. in 1984.
The Jewel Companies, Inc. chairman Weston Christopherson was opposed to a merger and Sam 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 Companies, Inc. 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 Cline 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 Inc. and accepted American Stores' offer. To help raise cash for the deal, American Stores sold its Rea and Derick, Inc. subsidiary comprising 134 drugstores in December 1984 to People's Drug, a division of Imasco Limited. 33 Alpha Beta grocery stores in Arizona sold to ABCO Foods, 22 Alpha Beta grocery stores and support facilities in northern California were also sold.
The acquisition of Jewel Companies consisted of the Melrose Park, Illinois based Jewel Food Stores supermarket chain, Oak Brook, Illinois based Osco Drug, Cambridge, Massachusetts based Star Market, Anaheim, California based Sav-on Drugs, Buttrey Food Stores and White Hen Pantry. This acquisition also returned L. L. Skaggs's Osco Drug chain to the Skaggs family ownership. And Sav-on Drugs, another Jewel Companies 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.
This merger added 193 supermarkets, 358 drugstores, 140 combination food and drug stores, 301 convenience stores, and 132 discount stores to American Stores' holdings. But in 1985, the company 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 Hillfarm Dairy that had supplied tainted milk to Jewel stores in March and April 1985. In 1987, Jewel was found not liable for punitive damages in Illinois Cook County Circuit Court but agreed to pay compensatory damages estimated at $35 to $40 million.
In 1985 American Stores sold the White Hen chain, since convenience stores did not fit into the company’s plans. Buttrey Food & Drug and Star Market were put up for sale in order to raise capital and pay down debt. Although the company continued to operate these subsidiaries, investment in remodeling and new construction for these stores and for Acme Markets was minimal throughout the 1980s.
By 1987 American Stores Company was the largest drug retailer in the United States, but only the third-largest grocery retailer and underperforming its peers. In October 1987, the company exited the Idaho and Washington drugstore markets with the sale of 25 Osco Drug units to Pay Less Drug Stores.
In March 1988, American Stores made an unsolicited tender offer for Lucky Stores, an Alpha Beta competitor noted for high efficiency and low prices. American Stores’ Alpha Beta chain in California was struggling, plagued by high prices and a reputation for poor service. At the time, Lucky was California's leading grocery retailer, due in part that it was the only chain with a significant presence in both northern California and southern California. Lucky refused American Stores' first offer. Within a month, American Stores proposed to up its bid if Lucky would agree to a friendly takeover. Again Lucky management 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 on track to become the largest supermarket chain in the United States, over the Kroger and Safeway chains.
In August 1988, California Attorney General John Van de Kamp asked the Federal Trade Commission to void the sale, claiming that a Lucky-Alpha Beta juggernaut would cost California consumers $400 million by reducing competition. The Federal Trade Commission refused but did force the divestiture of 37 Alpha Beta stores, which were sold in December 1988, the same month 38 Lucky stores in Arizona were also sold. Van de Kamp then took his case to court, and on September 1988, a federal judge in Los Angeles issued a preliminary injunction against the merger. American Stores appealed, and in April 1989, an appeals court judge in San Francisco, California overturned the injunction. Van de Kamp appealed this reversal to the U.S. Supreme Court; meanwhile, American Stores continued to plan its assimilation of Lucky. The U.S. Supreme Court in April 1990 ruled in favor of the California attorney general. Wishing to avoid additional lengthy litigation, the following month American Stores reached an agreement with Van de Kamp whereby the company was allowed to convert 14 Alpha Beta stores to the Lucky name but also had to sell 161 southern California stores (152 Alpha Beta stores and 9 Lucky stores) within 5 years. The deal put no restrictions on American Stores' future growth in California and did not require state approval of the buyer or terms of the sale.
Based on a recommendation by Booz-Allen, American Stores relocated its corporate headquarters from Salt Lake City, Utah to Irvine, California in July 1988. At the time, the company indicated the reason for the move was to place the headquarters in one of the company’s major operating market areas and therefore closer to its business interests. However, the corporate headquarters was moved back to Salt Lake City, Utah in 1989 with little explanation.
American Stores plans to build a coast-to-coast drugstore chain in the United States were underway. The strategy was to build a nationwide network of pharmacies, streamline operations and advertising in order to gain national recognition for the brand, especially for the high-margin private label products. The name Osco Drug was chosen as the national chain banner because of the large number of stores which already had that name and existed in various parts of the United States. The name change was completed for the Skaggs drugstores in 1985 and then for the Sav-on stores in 1986. The name "Osco" did not resonate well with Sav-on's southern California customer base. American Stores eventually made the decision to change the name of the former Sav-on stores back to Sav-on Drugs. Rumors circulated at the time claiming that the reason for the name change back to ‘Sav-on’ was due to "Osco" having the same pronunciation as the Spanish word "asco" (oss-ko) which means disgust or loathing, a considerable factor within southern California’s heavily Hispanic market. Ironically, American Stores abbreviated is "ASCO". This explanation for the name change was refuted by American Stores. The name change on all stores was completed in 1989 and the Sav-on Drugs brand was re-launched in southern California and Nevada.
In 1989, a new subsidiary American Drug Stores, Inc. 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 earlier in 1989 as a mail service prescription fulfillment center with a facility in Salt Lake City, Utah.
In April 1989, the company opened a 75,000-square-foot Jewel-Osco combination store in Largo, Florida. This marked American Stores’ re-entry into the Southeast after an absence of nearly two decades. Mark S. Skaggs, son of Sam Skaggs was president of the new Jewel-Osco of Florida division. This was a wholly separate division of the company and was not part of the Jewel Food Stores chain in the Midwest or the American Drug Stores subsidiary. Unlike the combination stores in the Midwest, where Jewel ran the food side of the combination stores and Osco ran the drug side, the Florida stores were run by a one overall manager, similar to the way a Skaggs Alpha Beta store was managed. Only six Jewel-Osco stores were opened in Florida and all were sold to Albertsons in 1992.
In the early 1990s, reducing the $3.4 billion in debt load became the prime challenge for the company; doing so was mainly accomplished through asset sales. By the end of fiscal 1992 long term debt was down from $3.4 billion to $2.1 billion.
In the early 1990s, American Stores divestitures included:
At the same time that the company was making major divestments in the early 1990s, American Stores also looked for opportunities to make strategic minor acquisitions, ones that would enhance its position in the main markets where it needed to strengthen market share.
American Stores had long been run as a decentralized holding company, but in order to compete in the fierce retail environment of the 1990s the company announced plans in 1992 to transform itself into an integrated operating company. As part of this transition, the company also began to centralize companywide its procurement, warehousing, inventory control, distribution, marketing, payroll and human resources operations. Another aspect of the plan involved the consolidation of the central support organizations of the drugstore and grocery store operations. At the same time, American Stores sought to initiate faster growth, this time primarily through the opening of new stores and not through acquisitions. This ambitious plan to create better efficiencies won a lot of support from investors. The plan, called the Delta Project, was expected to turn American Stores into a more profitable national supermarket company with greater shareholder value by centralizing its buying operations, as well as putting together more food and drugstore combination stores.
From 1992 up through 1998, American Stores consolidated operations and moved major responsibilities of their subsidiaries to their headquarters in Salt Lake City, Utah. The company’s employees based in Salt Lake City, Utah increased from fewer than 100 in 1992 to over 1,200 by 1998. During this period, American Stores itself did not operate any food or drugstores in Utah having sold-off the Osco Drug and Alpha Beta Utah stores in 1991.
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 several existing Lucky stores were converted to this warehouse format in Sacramento, Pittsburg, Vacaville, and Woodland. Initially, these stores were named Price Advantage, based on a 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 Food. Super Saver Food 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 still owned by American Stores.
In 1997, the company opened Kap's Kitchen and Pantry in Salt Lake City, Utah a prototype for entry into the high end food retail market with selections of natural and organic products, produce, seafood, grocery, meat and poultry, bakery and prepared foods. The venture was quickly abandoned and the store was closed within a year.
In 1994, at the company’s annual shareholder meeting, the company board elected Sam Skaggs’ son Don L. Skaggs a director effective October 1, 1994 to fill the position rendered vacant by the resignation of Aline W. Skaggs, wife of Sam Skaggs. Don L. Skaggs was also the Executive Vice President and General Manager of Skaggs Telecommunications Service, Inc. a non-retail subsidiary of American Stores consisting of an audio media production company, a satellite teleport U.S. Satellite Corporation and an operation that sold equipment to law enforcement agencies. 72 year-old Sam Skaggs relinquished the chairmanship of American Stores to Victor L. Lund in 1995. Skaggs still held an 18.3 percent stake in the company and a seat on the company board, and when he announced in July 1996 that he was exploring options for his stake, speculation about a possible takeover ran wild. The company was not certain if Skaggs’ intention was to launch a proxy fight for control of American Stores or to alter its current management or direction. By February 1997 an agreement was reached between American Stores and Skaggs whereby the company would repurchase about 12.2 million of Skaggs's shares for $550 million, with the remaining shares subsequently be sold to the public through a secondary offering. This purchase reduced Skaggs’ stake in the company to five percent, insufficient ownership for him and his family members to retain seats on the company's board.
At the company's June 17, 1998 annual meeting of shareholders in Salt Lake City, Utah, American Stores highlighted its accomplishments over the past year and its plans for the sustained long-term growth. In his keynote address, chairman and chief executive officer Victor L. Lund said, "During the past year, we have transformed many of our key plans for the future to reality. We are confident that our plan for growth is working and is squarely on track. We've set our sights very high because we know our visions of tomorrow will be achieved". A day earlier, American Stores had held a ceremony marking the opening of the American Stores Center, its 24 story corporate office building in downtown Salt Lake City, Utah. The building had a company-owned Italian restaurant, Il Sansovino and a convenience store, the The American Store, on the ground level floor.
Six weeks later, on August 3, 1998 it was announced that Albertsons would acquire American Stores for $11.7 billion. Soon after the announcement, the Federal Trade Commission charged that Albertsons' 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, Albertsons and American Stores agreed to sell 144 supermarkets (104 Albertson's supermarkets, 40 American Stores' Lucky supermarkets) in 57 markets in order to resolve. The divestiture agreement, was the largest retail divestiture ever required by the Federal Trade Commission. Due to the mandated sale of stores, the acquisition took nearly a year to complete. In June 1999, the acquisition was complete, ASC was de-listed on the New York Stock Exchange and American Stores ceased to exist.
During 1999, the drugstore operations division and general merchandise procurement functions were moved from Salt Lake City, Utah to Scottsdale, Arizona operating as Albertsons Drug Region. 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.
For a very short time after the American Stores acquisition was completed, Albertsons was the largest food/drug chain in the United States 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 in 2006 by SuperValu).
On June 2, 2006, the sale of Albertsons essentially split the company into three parts.
Both SuperValu and Albertsons LLC use the Albertsons store banner name.
On LinkedIn, there is an American Stores Alumni Group established for former ASC employees.
The drugstore division has an Alumni Club website where membership is open to current employees, retirees and former employees of Osco Drug, Jewel Osco, Sav-on Drugs and affiliated companies - both past and present: Supervalu, Albertsons, American Stores Company, American Drug Stores, Buttrey Food & Drug, Skaggs Drug Centers, Jewel Food Companies, Republic Lumber, Turn*Style, RxAmerica, Health'n'Home.