THE FRIDAY 5: How Kroger, Albertsons Navigate Merger Uncertainty; Big Lots' Store Closures

1. Kroger and Albertsons: A Case Study

As with most other weeks these days, readers were interested in coverage of the pending merger between The Kroger Co. and Albertsons Cos. This week, PG Editor-in-Chief Gina Acosta took a deep dive into how both companies are navigating merger uncertainty by staying focused on value creation models. For Kroger, that means solving problems for customers and maximizing value for them.

“When we work to solve “what’s for dinner?” for our customers, we don’t think about “the grocery industry” … we think about how to make meals easier, fresher and more affordable,” said Kroger CEO Rodney McMullen. “When meals are a problem to solve, families come to Kroger for the answer. When people think food, we want them to think Kroger.”

As for Albertsons, the grocer is moving along on its own transformation path, which it calls Customers for Life. Launched in 2022, the five-pronged strategy is designed to place the customer at the center of everything that Albertsons does, with the ultimate goal of supporting customers every day, every week and for a lifetime. 

On July 25, the retailers and the state of Colorado all agreed to an order to again delay the proposed $24.6 billion merger between The Kroger Co. and Albertsons Cos. The order grants a temporary injunction, and Kroger and Albertsons now must wait until a September trial to see whether they can move forward with their plans to merge.

2. Big Lots Is Downsizing

News of restructuring for Big Lots made waves this week, with the company working to shore up its liquidity and make other moves to ensure its future success. In a new filing with the Securities and Exchange Commission, the Ohio-based discounter revealed it may shutter up to 315 stores under amended credit and loan terms. In a June SEC filing, Big Lots, which has about 1,390 stores nationwide, said it was planning to close between 35 to 40 stores in 2024. In the same filing, the company also warned of its ability to survive as a "going concern.”

California ranks as the state with the most shutterings, with 75 of its 109 stores going dark. No closings are cited in Texas, where the company operates 116 stores, the most of any state.

In its June filing, Big Lots noted it had net losses and used cash in operating activities in 2022, 2023 as well as the first quarter of 2024. While it currently is in compliance with its credit agreements, the retailer said that it "expects to experience further operating losses and expects to experience difficulty remaining in compliance with such covenants."

3. Grocery Pricing ‘Strike Force’ Gets to Work

U.S. regulators are again taking aim at the grocery sector. On Aug. 1, the chair of the Federal Trade Commission announced that the agency is looking into grocery costs and retailers’ performances in recent history marked by elevated inflation. 

“I’ll be asking [the] commission to join me in launching an inquiry into grocery prices to shed light on why it is that prices and profits remain so high, even as costs appear to come down,” said Lina Khan, during the first meeting of the Strike Force on Unfair and Illegal Pricing. That Strike Force was formed in March, as President Joe Biden announced efforts to stop what it called “illegal corporate behavior” that results in higher prices for consumers.

Khan, along with leaders from other agencies including the Department of Justice, U.S. Department of Agriculture, U.S. Department of Health and Human Services and Attorney General’s office, among others, said that the group will explore the tactics of what it called big grocery chains. The multi-agency initiative will also investigate pricing deeper in the supply chain, back to farmers and producers.

4. ALDI Makes Big Tech, Private Label Moves

Instacart and ALDI SOUTH Group announced a major collaboration this week as the two companies team up to introduce Instacart’s Connected Stores technologies across ALDI stores in the U.S. and test smart carts in a European market. As such, ALDI locations in the U.S. will leverage Connected Stores’ physical store and e-commerce capabilities. 

Omnichannel solutions include Instacart’s in-store mode that allows shoppers to see what’s in stock, sort items by aisle and access in-store promotions and discounts through the Instacart app, among other features. ALDI operators can also use Carrot Tags to help customers find products easier by choosing an item on their phone and watching for a corresponding shelf label to flash. 

ALDI is on a roll in other areas, as well. New research from Numerator showed that the grocer is on top of the own brand game, with 80% of units sold at ALDI U.S. stores being private label products. Other retailers with more than a quarter of their overall sales volume coming from private label products include Costco, Sam’s Club, H-E-B, Walmart and Dollar Tree.

5. Ahold Delhaize Focuses on Growth, Efficiency

Ahold Delhaize was in the news multiple times this week as the company reported its Q2 financial results, with group net sales of €22.3 billion (USD $24.3 billion), a 0.7% increase at constant exchange rates and up 1.2% at actual exchange rates. According to the retail conglomerate, its group net sales were spurred by comparable-sales growth, excluding gasoline, of 0.6% and net store openings, including the conversion of Jan Linders stores. 

“As growth rates in the industry normalize, our omnichannel ecosystems are proving a major competitive advantage and source of market share gains,” said President and CEO Frans Muller. “In the U.S., the shift in demand to more profitable channels and our initiatives to optimize the store-first fulfillment model are paying off.”

Meanwhile, four Ahold Delhaize USA brands – Giant Food, The Giant Co., Hannaford, and Stop & Shop – have chosen Havas Media Network North America as their media agency of record as they continue to increase efficiency via scaled media. 

“Reaching customers digitally is and will remain an integral part of advancing our brands' omnichannel strategies,” noted Ahold Delhaize USA Chief Digital Officer Keith Nicks. “As we continue to equip our brands to compete in their marketplaces, being efficient with media not only enables our brands to be where their customers are with relevant offers, but [also] save to reinvest in more of what their customers want.”