The proposed $24.6bn merger of Kroger and Albertsons could have dramatic consequences for customers, including higher prices for groceries and more food deserts, experts say.
The agreement between two of the largest supermarket chains in the US – which own brands such as Ralphs, Mariano’s, Fred Meyer, Safeway and Vons – would give the combined company control of nearly one-fifth of the US grocery market, with about 5,000 stores across 48 states. If the deal is approved by regulators, it is expected to close in 2024.
Store closures are one likely outcome since some neighborhoods have shops from both chains, said Stacy Mitchell, a co-executive director of the Institute for Local Self-Reliance, a non-profit that helps communities attract grocery stores and other services. “This merger is incredibly dangerous,” she said. “It’s highly likely if it goes through it will result in more communities not having a grocery store.”
Higher prices are another. Christine Bartholomew, a law professor at the University of Buffalo who previously practiced antitrust and consumer-protection law, said that price hikes have followed grocery store mergers before, and that the same pattern is likely after any big grocery merger. One reason is the loss of private labels, or store brands that are generally cheaper than name brands, she said. Consolidation would mean fewer options.
“I’m deeply concerned about the consumer choice aspects of this,” Bartholomew said. “It may not sound like a big deal, but private labels are among the most affordable brands.”
The merger comes as food prices rise precipitously – 11.2% from September 2021 to September 2022, according to the US Department of Agriculture – and as several pandemic-aid programs end, sending more Americans to food banks to make ends meet.
Kroger’s chief executive, Rodney McMullen, told investors last week: “We will take the learnings from each company to bring greater value and a better experience to more customers, more associates and more communities.” He also said in an interview following the deal that the company would “invest in pricing to make sure they can stretch their budget better”. The company has also said the merger is necessary to compete with Walmart, Costco and Amazon, which purchased Whole Foods in 2017.
The move has also been blasted by Senators Bernie Sanders and Elizabeth Warren. “At a time when food prices are soaring as a result of corporate greed, it would be an absolute disaster to allow Kroger, the 2nd largest grocery store in America, to merge with Albertsons, the 4th largest grocery store in America. The Biden Administration must reject this deal,” Sanders tweeted.
Warren tweeted: “I’m calling on the FTC to block this deal. Big grocery chains like Kroger and Albertsons are already gouging families with inflated prices. More mergers and less competition would mean even higher prices – and layoffs for employees.”
The merger still faces some hurdles, including clearing federal antitrust regulations and legal challenges, Bartholomew said.
But it’s part of a broader trend of supermarket consolidation in recent decades. A joint investigation in 2021 by the Guardian and Food & Water Watch found consumers already have few choices when they shop for groceries, with just a handful of companies controlling the majority market share of nearly 80% of everyday grocery items such as breakfast cereals, canned vegetables and rice.
A subsequent Food & Water Watch report revealed that four companies took two-thirds of all grocery sales in 2019. Half those sales were at Walmart.
The food industry also has many of the country’s lowest-paying jobs, so the Kroger-Albertsons deal could also have dire consequences for the companies’ 710,000 employees and others who raise cattle, grow produce, bake bread or work at any other company that supplies supermarkets.
“We are very much firmly of the opinion that consolidation of the food industries is what leads to exploitation of workers,” said Suzanne Adely, co-director of the Food Chain Workers Alliance, a coalition of organizations representing more than 375,000 food workers. “In the past it has led to store closings and loss of good jobs. That is something we know to be true of this kind of race of companies to consolidate.”
Dan Gillotte, general manager of the Greenbelt Co-op in the suburbs of Washington DC, said consolidation can also lead grocers to cut back on innovation that lowers prices and provides other benefits to shoppers.
“You’re trying to be more clever than the company down the street,” he said. “If you own the company down the street, you don’t need to be that clever.”