KROGER IN COURT: Grocery Merger Allows Better Competition With Global Behemoths
Day two of the Federal Trade Commission’s (FTC) lawsuit against the proposed $24.6 billion merger between The Kroger Co. and Albertsons Cos. focused on competition and price.
U.S. District Judge Adrienne Nelson of Oregon is overseeing the FTC’s request for preliminary injunction against the merger, which, if granted, would put the deal on hold while the FTC undertakes an administrative hearing against the deal.
The FTC is skeptical that consolidation in the grocery space at this scale would benefit consumers. But as the two grocers point out, the government agency has a flawed way of thinking.
Kroger and Albertsons claim the FTC is limiting its perception of grocery competition to “traditional supermarkets.” In reality, the landscape of grocery shopping has expanded to a diverse assortment of retailers that are dominating grocery retailing. This includes club stores such as Costco and Sam’s Club; discounters such as ALDI and Lidl; competitors like Amazon, which not only owns Whole Foods Market but also sells groceries through its e-commerce platforms; and big-box retailers like Walmart and Target. In fact, the biggest food seller in the United States isn’t a “traditional supermarket;” it's Walmart.
Both Kroger and Albertsons say the proposed merger allows them to team up to better compete with global behemoths like Walmart. Plus, the merger will reportedly produce significant efficiencies.
As part of the merger, Kroger says it will invest in lower prices, capital improvements and associate wages and benefits at Albertsons stores across the country – specifically, Kroger will invest $1 billion dollars in lowering prices at Albertsons stores. Albertsons is currently priced relatively high compared to competitors.
The two companies are also quick to point out that without the merger, Albertsons would be the one who suffers, leaving it unable to compete. This would result in a change to Albertsons' cost structure in order to operate on its own longer term, which could include layoffs, closures, a market exit or a sale to another competitor. Kroger and Albertsons say the merger addresses all those concerns.
Lower prices are a key component of Kroger’s business model. Since the beginning, Kroger said its pricing strategy will remain unchanged following close of the merger.
Meanwhile, to further help ease FTC’s competition concerns, Kroger and Albertsons have already agreed to divest 579 stores to C&S Wholesale Grocers.
The hearing is expected to last three weeks. Today’s court proceedings will focus on labor.
Cincinnati-based Kroger serves over 11 million customers daily through a digital shopping experience and retail food stores under a variety of banner names. The grocer employs 420,000 associates and is No. 4 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America.
As of June 15, Albertsons Cos. operated 2,269 retail food and drug stores with 1,725 pharmacies, 403 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. The Boise, Idaho-based company operates stores across 34 states and the District of Columbia under more than 20 well-known banners. Albertsons is No. 9 on The PG 100. Keene, N.H.-based C&S is No. 18 on PG’s list.
