Royal Blue has announced a deal to acquire 100% ownership of Safeways, a grocery retailer that’s seen a decline in sales.
The deal, which Royal Blue calls “an opportunity to build a true sustainable grocery store brand,” would give Safeways a strong foothold in the U.S. marketplace and bolster its position in its current market, according to a news release from Safeway.
It also would bolster Royal Blue’s food sourcing and distribution business.
“The Safeway brand has been at the heart of our company for nearly a decade, and our acquisition will create a brand-building opportunity for Royal Blue that is unmatched in the industry,” said Royal Blue Chairman and CEO Jim Mohn in a statement.
“With Safeway at the forefront of food technology, we believe we can build upon our strong reputation and expertise in delivering the freshest, highest quality foods, in an industry that has come to rely on high-quality, local food.”
Royal Blue said the acquisition is expected to close in the second quarter of 2019.
Safeway, which operates in about 30 states and is based in California, is owned by Walmart and Kroger.
It was one of the largest grocery retailers in the country in 2019, according a report by the NPD Group, a consumer research firm.
In an interview with Fortune, Mohn said Safeway had experienced a number of problems with its distribution network.
The company, he said, had to cut out areas with poor quality food, reduce its inventory and reduce its workforce to meet the demand.
Mohn said the deal will enable Royal Blue to “take advantage of opportunities to better serve its customers, including increased supply of fresh foods, healthier food, and innovative delivery services that deliver high-value, fresh foods to customers in the best possible locations.”
Safeway has been losing customers to rivals like Trader Joe’s, Costco, Safeway and other chains.
Safeways is already facing a downturn in sales as more people are turning to food as an alternative to shopping online and ordering online.
Royal Blue expects to reach its goal of 5 million new grocery orders this year, up from about 2.5 million in 2019.
The announcement comes as Safeway has struggled with a number other problems, including food contamination from the food supply chain, the company said.
Safes stores also have struggled to retain customers.
Mahn said Safeways had been struggling with a variety of problems including poor management, poor customer service and inadequate staffing.
The deal is the latest sign that Safeways needs to focus on increasing customer service, he added.
Safeways also is looking to add some new products in 2019 to address the growing demand for fresh fruits and vegetables.
The store has been expanding its inventory, adding more produce, meats and cheeses.