More than a year after announcing their merger plans, Kroger and Albertsons could soon be nearing the finish line with a $24.6 billion deal.
Whether the two major grocers complete their merger early next year as planned will depend on the Federal Trade Commission and state attorneys general, who are threatening lawsuits.
The big picture: Kroger and Albertsons argue that the merger is necessary to compete with big box stores, club grocers and online retailers such as Walmart, Costco and Amazon. The partnership will affect Food 4 Less Kroger stores in the Central Valley, Foods Company and Albertsons’ Vons brand.
- Twenty years ago, Kroger trailed Walmart by $24 billion in grocery sales. Walmart’s lead will grow to $205 billion in 2023, with a 29% market share, compared to Kroger’s 10%.
- Twenty years ago, supermarket food stores accounted for nearly 80% of the market; now national discount grocery stores account for less than 40% of the market.
- Kroger and Albertsons are two of the largest union grocers in the United States, and in 2003, half of all grocery store jobs were union jobs. Union jobs currently account for only 15% of the market, as companies like Walmart, Amazon and Costco expand.
- Kroger also launched its Customer First program in 2003 to compete with Walmart and other national discount retailers. Profit margins have declined 5% over 20 years, compared to Walmart’s 1% increase, Dollar General’s 3% increase and Ahold Delhaize’s 4% increase. percent, Amazon is up 21 percent.
Opposite side: The FTC is currently reviewing the deal and could sue to block it if there are antitrust concerns, but individual states, including California, are moving to block the merger. There is a possibility.
- California Attorney General Rob Bonta made headlines last month when he said his office was concerned about the deal.
- “At this point, there’s not much reason not to file a lawsuit,” Bonta said at the time.
- His concern was that consumers would have to pay higher prices and California farmers would receive lower payments. Bonta also worried that the deal would create a food desert and negatively impact Kroger and Albertsons employees.
Go deeper: As part of the merger, Kroger will sell 413 stores to C&S Wholesale Grocers LLC as part of a divestiture plan.
- C&D Wholesale Grocers has committed not to close stores or lay off employees, and Kroger has also committed not to lay off employees.
- Once the merger is complete, Kroger said it will invest $500 million to lower prices and $1.3 billion to improve the customer experience from day one. This is based on his $5 billion invested over the past 20 years to drive down prices.
- Kroger also announced it will increase the number of local products in its stores by 10 percent and add at least 30 new local products to each store.
What they say: “If this merger is blocked, only non-union retailers like Walmart and Amazon will benefit,” a Kroger spokesperson said. “In fact, Kroger’s partnership with Albertsons will lower prices for customers, preserve union jobs, provide more food for hungry families, and help provide 100 more people in need across America by 2030.” A billion meals will be provided.”
- Scott Moses, head of Grocery, Pharmacy and Restaurants at Salomon Partners, said supermarkets need to build scale to invest in better prices and wages to compete with the rise of online grocery. said.
- “If people derail these deals, we’re going to end up in a situation a lot like a department store,” Moses said. “It may not be their intention, but it’s an undeniable outcome. It’s not fair. It’s not good for the country. It’s not good for the customers. It’s not good for the employees and it’s not good for the community.”