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Albertsons Cos., which is preparing to go public this week, says it can use natural and organic foods to bring customers back to the supermarket chain. The question is whether investors will buy it.

The company faces a more competitive market than ever for organic produce and meats, with Wal-Mart Stores Inc., Kroger Co. and other chains all pushing deeper into the category. That’s put a strain on Whole Foods Market Inc., an organic pioneer that’s now suffering from slowing growth. With Albertsons arriving relatively late, it may be hard to stand out in a crowded field.

Total sales of natural and organic groceries are growing in the mid-teen percentages, said Brian Yarbrough, an analyst at Edward Jones. But he expects that to slow down, making it harder for Albertsons to capitalize on the trend.

"It’s not going to be a growth stock," said Yarbrough, who covers grocery stores and consumer companies. "I don’t see it as a growth industry."

Albertsons has been pitching its strategy to investors en route to an initial public offering, in which it could raise as much as $1.7 billion, according to data compiled by Bloomberg. The company is selling 65.3 million shares for $23 to $26 apiece in an IPO scheduled to price Wednesday.

In its prospectus, Albertsons said improving its product line will contribute to better sales growth. The company also is absorbing the acquisition of Safeway Inc., a move that made it the second-largest stand-alone grocery chain but also increased expenses and debt. Albertsons posted a net loss of $329.4 million, including the Safeway acquisition, on $57.5 billion in sales during the year ended Feb. 28.

‘Changing Tastes’

"We continue to enhance and upgrade our fresh, natural and organic offerings across our meat, produce, service deli and bakery departments to meet the changing tastes and preferences of our customers," Albertsons said in the prospectus. The Boise, Idaho-based company declined to comment further.

In addition to the shift to more natural offerings, Albertsons is expanding its in-house brands such as O Organics and Open Nature. The company also is looking to its loyalty programs and wellness clinics to help boost sales.

Albertsons’ private-equity backer, Cerberus Capital Management, acquired Safeway earlier this year and merged the two supermarket chains. The company operated more than 2,200 stores as of June. But even with that scale, Albertsons has lost customers to a swath of competitors, according to Bloomberg Intelligence analyst Jennifer Bartashus. And it has trailed its peers in same-store sales, the key benchmark for retailers.

The supermarket industry -- especially the organic-food segment -- is getting squeezed from different directions. Whole Foods appeals to higher-end customers, while Wal-Mart lures the price-conscious shoppers. Amazon.com Inc., meanwhile, ships nonperishables to people’s doors.

Standing Still

For Albertsons, adding more natural produce and meats may just help the chain stay even with competitors, Bartashus said.

“It’s not necessarily going to be a competitive advantage,” Bartashus said. “They need it to be able to to not lose ground on the others.”

Albertsons’ stock, which is expected to start trading on Thursday, also has to confront choppy equity markets. Digicel Group Ltd., the company that was poised to be the second-biggest U.S. IPO this year, canceled its offering last week. Investors also still have concerns about the Chinese economy after a market rout in August, and it’s unclear when the Federal Reserve may raise interest rates. First Data Corp., the payments processor taken private by KKR & Co. in 2007, is seeking to raise as much as $3.2 billion in its own IPO scheduled to price Wednesday.

Goldman Sachs Group Inc., Bank of America Corp., Citigroup Inc. and Morgan Stanley are leading the Albertsons offering. The company will trade on the New York Stock Exchange under the ticker ABS.

In addition to the Albertsons and Safeway brands, the company operates Vons, Jewel-Osco, United Supermarkets and Pavilions. Albertsons has said that integrating Safeway will generate annual cost savings of $800 million by the end of fiscal 2018.

But the combined company lacks a specific allure for customers, said Mike Paglia, director of retail insights at research firm Kantar.

"It was two mediocre retailers that have become one large mediocre retailer," Paglia said.