Reassembling Albertsons: It Won't Be Easy, But It Has To Be Fast

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Putting Albertsons back together again won't be as easy as it looks. The grocery chain was split in 2006 between Supervalu and private equity firm Cerberus Capital Management, with both chains using the same logo in different geographic regions. But on January 10, the two owners decided to reunite what will now be a 650-store chain in a complicated deal that leaves only one thing very clear: These money managers aren't thinking about IT when it comes to reassembling the chain.

Yes, the Albertsons logo is the same on both sides. But seven years later, everything from self-checkout to loyalty to POS to prescription systems is now different across the soon-to-be-unsplit chain. And everything will have to be merged—and fast.

The Albertsons reunification is part of a $3.3 billion deal in which Cerberus and its real-estate partners get the Albertsons, Jewel-Osco, Shaw's, Acme and Star Markets chains and a few in-store Osco and Sav-on pharmacies (a total of 877 stores), plus four spots on the Supervalu board of directors (including the chairmanship). Supervalu keeps the Save-A-Lot, Cub, Fresh Farm, Shoppers, Shop 'n Save and Hornbacher's regional chains. It also gets $3 billion to pay off debt, along with the promise that Cerberus will acquire up to 30 percent of the company's stock.

Yeah, we're pretty sure we know exactly how much these deal-makers are focused on IT issues at the combined Albertsons stores.

And it seems like a slam-dunk. The chain has only been split since 2006. How much could have changed since then?

Well, aside from the fact that the Cerberus-owned Albertsons announced in mid-2011 that it was stripping self-checkout lanes out of all its stores, after which the Supervalu-owned Albertsons announced it was definitely keeping self-checkout in all its stores.

And two pharmacy databases that really need to be merged pronto, so prescriptions will be portable across all Albertsons stores.

And the fact that Supervalu's Albertsons has a loyalty card and a mobile app, while Cerberus's Albertsons has neither (it killed its loyalty card program in 2007) but does have its own YouTube channel and Twitter feed (and both sides have Facebook pages). And naturally, each side of the chain has its own Web site promoting different features.

Plus, everything that has shown up in POS since the split—new PIN pads, scanners, payment schemes and back-end technology, in addition to everything that has been done to meet PCI requirements since the split. IT divergence is pretty much a given.

But that's common enough in an acquisition. What's trickier in the case of Albertsons is that, because both versions of the chain kept the same name and logo after the 2006 split, each set of customers thinks they know what to expect in an Albertsons store. Some customers are going to be disappointed. Everyone is likely to be confused—and the sooner the systems are merged, the saner it will be for them.

If only it were that easy.Actually, there has probably already been confusion for any Albertsons customer who moved from the Supervalu zone to the Cerberus zone or vice versa. Customers really don't like it when a loyalty card stops working while they're on vacation, or the self-checkout they expected is nowhere to be found. And anyone who stumbled onto the wrong chain's Web site was likely to be puzzled at best and misinformed at worst.

Now, Cerberus's Albertsons will run the chain, though two-thirds of the stores (and their customers) are accustomed to the Supervalu Albertsons experience. The company can take its time with Jewel and Shaw's, because those chains are being shifted intact. But with Albertsons, there's no way to avoid confusion once the dueling Web sites are merged.

YouTube and Twitter? Not a problem—just clean up the branding. Loyalty program? That's messier. Shut it down, and you anger loyalty-loving customers of most of the stores. Keep it going, and there's no good way to keep from advertising it on the Web site to customers of the roughly 200 stores where the loyalty card can't be used today.

How fast can those 200 stores be connected to the loyalty system? And where will that system be? Supervalu doubled the size of its Albertsons datacenter in Boise, Idaho, after the split, so that's the logical place to put combined systems—unless the politics of consolidation says it isn't. (Both sides of the chain kept their respective headquarters in Boise after the split, even though for Cerberus Albertsons, its nearest store was two states away in Colorado.)

The two chains' pharmacy systems will have to be merged as an early priority. They've only had seven years to become completely incompatible. And the only thing customers hate more than a loyalty card that no longer works when on vacation is a prescription that no longer works.

Both chains even have slightly different privacy policies on their Web sites (due largely, but not entirely, to having or not having a loyalty program) that have to be harmonized.

Then comes the only-slightly-more-leisurely task of dealing with in-store systems that have to be reconfigured. Except for the great To Self-Checkout Or Not debate, those systems will have less of an impact on customer expectations, so they can wait a little while. But making POS systems consistent can't, or that first quarterly close will be a nightmare.

And those are only the obvious, highly visible IT issues. For anyone on the outside, this should be very interesting. Everyone on the inside probably has another word in mind.

At least they won't have to repaint the signs.