What the proposed Kroger-Albertsons merger might mean for shoppers

Though a proposed merger of grocery store corporations Kroger and Albertsons has been sharply criticized by labor unions and the National Grocers Association, a Chicago-based market research firm suggests consumers and communities could benefit from the deal.

"I don't see this as Kroger trying to create a Goliath but to better compete with Walmart," said Kathleen J. Blum, vice president of Shopper Insights at C+R Research in Chicago. "This is going to create a stronger competitor, but I don't know that Walmart is that scared."

Indeed, the nontraditional grocer that is Walmart appears to be the dominant player in the industry - both before and after a Kroger-Albertsons merger.

According to data compiled by Numerator, another Chicago-based market researcher, Walmart took in 18% of the dollars spent on groceries by American consumers on 2021. Kroger was a distant second at 8.8%, with the top five rounded out by Costco at 6.4%, Albertsons at 4.7%, and Ahold Delhaize at 4.3%.

Blum said consolidation has become increasingly common in recent decades, with Ohio-based Kroger most strongly represented in the Chicago area by the Mariano's brand and Idaho-based Albertsons by Jewel-Osco.

With the latter a long-standing brand, and Mariano's seen by many as a replacement of the defunct Dominick's chain, both are names Chicago-area shoppers have rallied behind for years, Blum said.

Those shoppers likely would benefit from the efficiencies the companies are seeking through the merger, which would make them a truly nationwide operator, she added.

"I think (customers) can gain greater convenience and value," Blum said. "They may not initially notice that it's happened."

Both companies are among those that have encouraged customer loyalty through financial rewards and private-label products, she added. Kroger in particular has concentrated on freshness by emphasizing distribution hubs.

While Kroger and Albertsons were quick to tout consumer benefits when the proposed merger was announced last month, others were just as fast to voice objections.

"A merger of the nation's top two grocery chains should raise serious questions about a single supermarket giant gaining unprecedented dominance over the nation's food supply chain," said Greg Ferrara, president and CEO of the National Grocery Association, which represents smaller and independent grocery stores.

"A merger would not only put smaller competitors at an unfair disadvantage but also increase anticompetitive buyer power over grocery suppliers, which ultimately would harm consumers," he added. "It is our expectation that this deal will receive rigorous scrutiny from federal antitrust enforcers."

Leaders of the Teamsters and United Food and Commercial Workers International Union, whose members are employed by both grocery companies, expressed similar sentiments.

"Historically, mergers of this magnitude have a negative impact on workers and the public," Teamsters General President Sean M. O'Brien said in a statement. "Less competition almost always means higher prices and fewer choices."

UFCW International President Marc Perrone said the proposed merger has serious implications for hundreds of thousands of our union members and consumers already dealing with the effects of inflation.

"As America's largest union of essential workers, protecting the livelihoods of this nation's grocery workers, union and non-union, is our highest priority," he said.

But the CEOs of both Kroger and Albertsons issued statements touting the potential merger's benefits for consumers.

"We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders," said Kroger Chairman and CEO Rodney McMullen.

"At Albertsons Cos., we are guided by an ambition to create customers for life," Albertsons CEO Vivek Sankaran said. "Together with Kroger, our combined iconic banners will be able to provide customers with even more value and greater access to fresh food and essential pharmacy services. Given the similarities in the culture and values at Kroger and Albertsons Cos., I am confident that the combination will also have a positive impact on our associates and the communities we are proud to serve."

While the merger could result in the closing of hundreds of stores nationwide to avoid internal competition within specific markets, Blum noted Kroger and Albertsons plan to create a separate company called SpinCo to seek new tenants for those spaces. At this point the idea seems to be a combination of good business, good corporate citizenship and good PR, she added.

Factors such as individual store performance, age and the estimated cost of upkeep will factor in the decision of which stores to close, Blum said. A list of the properties that would make up SpinCo is expected to be completed before the anticipated 2024 completion of the merger, she added.