Who Will Get Lucky?

The Lucky chain began in 1935 with a grocery store in Berkeley, California and grew to become one of the largest supermarket operators in California and Nevada. In 1988, the company was merged into American Stores, a retail conglomerate that ten years later was acquired by Albertsons, then one of the nation's largest grocers. Albertsons retained the ACME and Jewel names in Philadelphia and Chicago, respectively, but in California and Nevada the company decided to retire the Lucky name in favor of its own.

Although Albertsons had operated stores in California and Nevada for decades, some industry observers considered Lucky to be the stronger brand, with a long history and a reputation for low prices. In April 2006, Grocery Outlet, an "extreme value" retailer with "no-frills" stores, decided to resurrect the name, opening a Lucky store in Rocklin, California. A legal battle ensued as Albertsons claimed that it still owned the trademark.

Shortly after Grocery Outlet brought Lucky back, Albertsons was sold to three seperate entities after several years of financial troubles. All of the company's drug stores were acquired by the CVS chain and nearly two-thirds of its supermarkets, including stores in Southern California and Nevada, were acquired by grocer Supervalu. The remaining supermarkets, including the Northern California division, were sold to an investment group led by Cerberus Capital Management.

In July 2006, the U.S. District Court in San Francisco barred Grocery Outlet from using the Lucky name, a decision that was subsequently appealed. Also in July, Supervalu began opening a handful of Lucky stores in Southern California and Las Vegas, confirming speculation that Albertsons had sold its disputed right to use the name in those markets. Supervalu's small Lucky operation is oriented towards the budget-conscious customer.

The Cerberus-owned Albertsons stores in Northern California were sold to Save Mart Supermarkets, a chain based in Modesto, California, in February. Last week Save Mart announced that it would convert 72 Bay Area locations to Lucky, bringing the brand back to its former home turf in a big way. Albertsons signs will vanish from the Bay Area as dozens of former Lucky stores revert to their original name.

Eric Lindberg, co-CEO of Grocery Outlet, responded to Save Mart's announcement by stating his company will prevail in court and be recognized as sole owner of the Lucky trademark. Mr. Linberg claims that Albertsons could not have legally sold rights to the name to Supervalu and Cerberus last year, meaning that the recent transfer from Cerberus to Save Mart is also invalid. If Grocery Outlet wins its court case, the company will force the closure of any Lucky stores owned by Supervalu and Save Mart.

The peculiar controversy over the Lucky name highlights the importance of a well-recognized brand. Nearly seven years after Albertsons retired the banner, shoppers throughout California and Nevada hold fond memories of Lucky's past, providing an opportunity for the name to return and be profitable for a new owner. The courts will decide whether that opportunity belongs to Grocery Outlet or Supervalu and Save Mart.

Previously on P.U.

Getting Lucky Again (8/28/2006)