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Kroger seeks to create grocery giant in $20B Albertsons bid

Two of the nation’s largest grocers have agreed to merge in a deal they say would help them better compete with Walmart, Amazon and other major companies that have stepped into the grocery business.

Kroger on Friday bid $20 billion for Albertsons Companies Inc., or $34.10 per share. Kroger will also assume $4.7 billion of Albertsons’ debt.

Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands like Ralphs, Smith’s and Harris Teeter. Alberstons, based in Boise, Idaho, operates 2,220 stores in 34 states, including brands like Safeway, Jewel Osco and Shaw’s. Together the companies employ around 710,000 people.

The deal will likely get heavy scrutiny from U.S. antitrust regulators, especially at a time of high food price inflation. If approved, the deal is expected to close in early 2024.

Together, the stores would control around 13% of the U.S. grocery market, assuming the sale or closure of around 400 stores for antitrust reasons, according to J.P. Morgan analyst Ken Goldman.

Still, that is a distant second to Walmart’s 22% share. Amazon, which bought Whole Foods in 2017, is also a growing player in the space, with 3% share. Warehouse store Costco controls 6%.

Goldman said a stronger combined company could possibly help tame food price inflation, since it would have more power to reject food producers’ price increases.

Kroger said would reinvest approximately $500 million into price reductions, and spend $1.3 billion updating Albertsons stores and $1 billion on higher employee wages and improved benefits.

But critics questioned a merger at a time of high food price inflation. Food prices rose 13% in September compared with last year, according to U.S. data released Thursday.

“A Kroger-Albertsons deal would squeeze consumers already struggling to afford food, crush workers fighting for fair wages and destroy independent, community stores,” said Sarah Miller, executive director of the American Economic Liberties Project, a nonprofit that supports stronger corporate accountability and antitrust measures.

“When you look at the grocery industry overall, it tends to be a pretty low margin industry,” said Linfield University economics professor Eric Schuck. “The way that you make money in a low growth, low margin industry is you consolidate.”

While Kroger says the deal would benefit consumers, Schuck told KOIN 6 News that Kroger would certainly see cost savings, but because of increased prices due to inflation, he’s not sure how much savings will lower costs for shoppers.

“How fast or how well that translates into lower prices for consumers…that’s debatable. We generally see that the prices come down pretty slowly, a lot slower than they go up,” Schuck said.

Tom Geiger with UFCW 3000, a union representing grocery workers in Washington State, doesn’t trust the savings will trickle down to consumers.

“There’s already significant inflation happening in the economy, and it’s even more concentrated in food,” Geiger said. “They’re gonna make a lot of money in this merger, they’re gonna share that with their shareholders…and, you know, kind of good luck to the workers in the community.”

He says the deal would be devastating to essential workers and customers.

“It reduces the competition in that local community, so a shopper doesn’t necessarily have a choice anymore, where they go, the quality of the product or the price that the product is, that choice is gone. The other thing is that they just cut the jobs of stores that are shut,” Geiger said.

Geiger’s union and others are taking the fight to Washington D.C.

In a statement, Oregon Attorney General Ellen Rosenblum’s office said “for national mergers of this size, we often coordinate reviews with other states and other federal antitrust enforcers like the FTC and USDOJ. We anticipate that we will do that with this merger as well.”