In a deal worth $24.6 billion at $34.10 a share, Albertsons Cos. agreed to a deal with Kroger Co. back in October of 2022. The buyout would mean the two largest grocers in the United States would become an emporium capable of offering much more than groceries.
The companies expect the merger to be completed by 2024. But in the meantime, the Federal Trade Commission (FTC) is in the process of reviewing the proposed merger. The two grocers announced a divestiture, agreeing to sell up to 300 stores worth up to $1 billion to smooth over antitrust concerns. Kroger has over 2,700 stores, while Albertsons operates nearly 2,300 stores.
The megamerger would bring together some of the most well-known banners in the country, including Safeway, Vons, Ralphs, Fred Meyer, King Soopers, Harris Teeter, and others. The advantage and scale the merger would give the companies is unprecedented, setting the stage to compete with retail giants like Amazon and Walmart.
What this means for the consumer
As a new supermarket titan, Kroger and Albertsons would have around 5,000 stores nationwide, serving 85 million households, and would account for 13% of the U.S. grocery market.
For the average consumer, the grocery experience is personal. While businesses coming together might not be that important, the consumer does care about access to food — in terms of when they need it and at prices they can afford. For many Americans, the pandemic put a spotlight on this issue.
According to Kroger, this megamerger will create savings for customers. The idea is that when stores become stronger and have more economies of scale, they’re able to bring prices down. So it would stand to reason that bringing two large grocery chains together should bring down prices. However, the extent to which stores are going to be able to pass costs onto consumers will remain to be seen.
What this means for employees
At the same time, the newly formed company will also feel pressure to make the business combination even more profitable than they already were. Both companies have improved year over year in terms of earnings. Total sales for Kroger’s fourth quarter total sales increased by 5.9% (excluding fuel) compared to the same period the year before. For its third quarter in December 2022, Albertsons achieved an even higher percentage increase year-over-year.
Politicians that are opposed or skeptical about this merger are concerned about what will happen to the workers. That’s why the FTC is involved in what the new company will look like once the deal goes through. In each market, regulators are looking at how much overlap exists and how much competition would be lost if the grocery stores they own happened to be under the same roof.
For these reasons, FTC’s divestiture strategy to approve the merger involves Kroger and Albertsons selling hundreds of their stores to other companies. What happens to the workers at those stores is completely dependent on who those stores are sold to. As of now, Kroger and Albertsons employ over 700,000 people.
What this means for grocery stores
At the moment, Kroger says they will keep the names (called banners) of individual stores. So, the question remains, “Will consumers see much of a difference if this deal gets done?”
Historically, people have had connections with their local grocery store, and for many reasons — location, familiarity, routine, etc. So, as mergers have taken place over the years, large grocers have wanted to keep their brand equity within specific markets. If Kroger acts in the same manner, we’ll likely see most or all of its brands stick around after the merger is completed.
So for now, you can rest easy knowing your local grocery store under Kroger or Albertsons most likely won’t experience too many noticeable changes, for now.