“This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors. As a combined entity, we will be better positioned to advance Kroger’s successful go-to-market strategy by providing an incredible seamless shopping experience, expanding Our Brands portfolio, and delivering personalized value and savings.”
So says Kroger CEO, Rodney McMullen promoting this mega merger. As a 45+ year food industry veteran marketing to our nation’s retailers, I have witnessed this story play out exactly the opposite too many times. In a carefully worded combined statement by the two chains, they say the “merged companies would pass along as much as $500 Million in savings to their customers.” Does anyone really believe this? The more likely result will be store closures, employee layoffs, and higher prices for consumers.
Big box food retailers have used the Covid-19 pandemic and headline inflation figures as a free pass to raise prices to consumers, well in excess of their cost inputs. Despite the tight labor market, both companies have enjoyed double digit increases in operating profits during the past year. In the quarter ending August 13, Kroger’s operating profit grew by 13.7 percent from a year earlier. Both companies argue that this merger is needed to compete against stores like Aldi, Walmart, Costco and Amazon. Amazon? Really?
When I entered the Southern California food industry in 1973 as a lowly banana salesman, there were six food chains dominating that market – Alpha Beta, Safeway, Lucky, Ralphs, Vons, and little bitty Albertsons, complimented by a handful of small regional chains and independents, none of which had more than a 10 percent market share. Since then, Alpha Beta was acquired by American Stores and eventually dissolved and rebranded to Ralphs and Lucky Stores. Ralphs was acquired by Kroger. Albertsons, through some masterful financial engineering, eventually gobbled up American Stores (Lucky Stores), Safeway, and Vons. And when the dust settled, there were two – Kroger and Albertsons.
According to Stacy Mitchell, co-executive director of the Institute for Local Self-Reliance, and advocacy group that challenges concentrated corporate power in the grocery industry, “if this merger is allowed to go through, the combined Albertsons-Kroger and Walmart would control 70 percent or more of the market in 167 cities in the United States.” This is hardly a recipe for increased competition and lower food prices in America.