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Saturday, July 13, 2013

Paraphrasing Indiana Jones: Why'd it have to be Kroger?

Kroger's pending acquisition of Charlotte-based Harris Teeter reminds me of Piedmont Airlines, once headquartered in North Carolina and a victim of industry consolidation in 1988. Piedmont was adored by business travelers in the mid-Atlantic states. US Air, nicknamed Useless Air for good reason by those same frequent flyers, acquired Piedmont and then botched the integration. Twenty-five years later, only the Charlotte hub of the "Up and Coming" Piedmont remains in place -- soon to be folded into American Airlines when the US Airways brand is deservedly euthanized.

This history makes North Carolinians rightfully concerned that Harris Teeter will suffer the same fate. A somewhat upscale grocer, HT is clearly better than low-end stores like Food Lion but more affordable and less snooty than high-end stores like Trader Joe's and Fresh Market. HT has maintained a solid record of community involvement, in particular with the Inter-Faith Food Shuttle whose Board of Directors I chaired for a year. For 20 years HT has been our neighborhood grocer, although we also shop at Costco.

Kroger says they will retain the HT brand and will not close any HT stores. Every acquirer says something like that but seldom means it. Maintaining a second brand costs money. Because of the proliferation of both Krogers and HTs throughout the Triangle, something's gotta give.

I doubt that the U.S. Dept. of Justice will block the transaction on anti-trust grounds. The leader in market share among grocers in Raleigh and almost everywhere is Walmart. They and to a lesser extent Costco and BJ have made life very difficult for traditional grocers. Rumor has it that Florida's highly successful Publix is about to enter North Carolina aggressively. I understand why HT had to sell out in the face of this perfect storm, but I wish the buyer would have been Publix.

As for Kroger, my experience is consistent mediocrity -- except that on late evenings in Atlanta 1980-1981, it was a lot of fun to shop at the "Disco Kroger" next to the infamous Limelight. Where else could you see drag queens buying bread and milk for breakfast?