Nearly 16 months after announcing a $24.6 billion merger, grocery chains Kroger and Albertsons continue to sell their plan to federal and state regulators, workers and customers. Union members are pushing back against the transaction with the public and policymakers. And analysts don’t see the merger as a done deal.
A partner with the financial services company Solomon Partners told reporters during a call last week that the merger between Kroger, which owns and operates King Soopers and City Market stores in Colorado, and Albertsons, which operates Safeway stores, will strengthen the unionized grocers and lower prices for customers.
“Their very clear plan is to invest in better wages and to strengthen these stores, strengthen those jobs and enable them to continue to compete in this industry that has become incredibly difficult for most supermarkets,” Scott Moses, head of Solomon Partners’ practice that includes grocers. said.
Moses, hired by Albertsons to research the merger’s impact, said the failure of the transaction would endanger union jobs as national grocery giants such as Walmart, Costco and Amazon, largely nonunion, continue to gain ground.
But unions representing Kroger and Albertsons have been fighting the proposed merger since it was announced in October 2022. In a recent call with the media, union representatives said consolidating the two large grocery chains will erode union members’ bargaining power, local suppliers’ access to the marketplace and consumers’ choices.
“This kind of consolidation, when talking about the food ecosystem and our food supply chain, should be very concerning to everybody because this isn’t like Taylor Swift tickets and (ticket seller) Ticketmaster. This is where our communities get their fuel, pharmacies and food,” said Kim Cordova, president of the United Food and Commercial Workers Local 7, which represents workers in Colorado and Wyoming.
Kroger said in an email Monday that opposing the merger only serves to further strengthen larger, non-unionized retailers like Walmart and Amazon.
“The facts are clear — this merger is inherently pro-union, and we have the track record to prove it. Kroger added more than 100,000 good-paying union jobs since 2012 and invested $1.9 billion to grow associate wages and industry-leading, comprehensive benefits since 2018,” Kroger said.
Kroger and Albertsons expected the merger to close early this year, but said in a Jan. 15 news release that they now anticipate the closing to happen in the first half of the 2024 fiscal year, which ends Aug. 10. While it’s taking longer than originally thought, the companies said they “remain in active and ongoing dialogue with the Federal Trade Commission” and state attorneys general.
The FTC will decide whether to approve or try to block the merger. Lina Khan, head of the FTC, said during a public meeting organized in November by Colorado Attorney General Phil Weiser that agency lawyers are investigating to determine whether the merger would violate antitrust laws.
The Biden administration has been more aggressive about challenging mergers on antitrust grounds. And as he confronts public upset over inflation, President Joe Biden is pressuring grocery chains to cut food prices.
There are several other twists the grocery chains’ proposal could take, said Christine Bartholomew, a professor at the University at Buffalo School of Law. The FTC could approve the merger and later sue to undo it if there are problems. She said the companies could go to court to get approval.
And other lawsuits are pending or could be filed, said Bartholomew, who practiced consumer protection and antitrust law. Bob Ferguson, Washington state attorney general, filed a lawsuit Jan. 15 to block the merger, arguing that it would create a near monopoly and hurt customers and employees.
“I think this is not an easy merger to get approved. It will create a greater concentration in a market that is already pretty concentrated,” Bartholomew said. “We’re talking about, if the merger goes through, 70% of the national retail food market being owned by three firms.”
Those would be Walmart, Kroger/Albertsons and Costco, she said.
In Colorado, the attorney general’s office is reviewing whether consolidation of the two grocers would unlawfully harm customers, employees, farmers and suppliers. Spokesman Lawrence Pacheco said in an email that Weiser held 19 listening sessions across the state in 2023 and has received more than 6,000 responses to an online survey.
Boon or bust for consumers, others?
Sanjai Bhagat, a finance professor at the University of Colorado-Boulder’s Leeds School of Business, said Kroger and Albertsons have pitched the merger as benefitting consumers because it will improve the supply chain logistics and allow for more targeted promotion of items.
“Finance economists have found generally these supply chain benefits don’t come about as advertised,” said Bhagat, who previously worked at the Securities and Exchange Commission.
For example, consumers haven’t fared well after consolidations in the pharmaceutical and airline industries, Bhagat added. Colorado customers might pay higher prices if they live in neighborhoods without other grocery stores, such as Walmart, because Kroger/Albertsons will have increased market power, he said.
As for the fate of the merger, Bhagat said the stock market appears skeptical. He said Albertsons’ share price rose after plans were announced, but has since returned to its previous level.
“The stock market is saying it’s not going to happen, but things can change,” Bhagat said.
A 2012 Federal Trade Commission analysis of 14 supermarket mergers found that price increases were more frequent in highly concentrated markets. Price declines were most often associated with less concentrated markets.
Kroger and Albertsons have proposed selling some of their stores nationwide to C&S Wholesale Grocers for $1.9 billion to spur competition. Cordova of the UFCW Local 7 said the original plan was to sell 213 of the stores to C&S, but the companies have increased the total to 510.
Fifty-two of the stores would be in Colorado and Wyoming. Union members fear a repeat of Albertsons’ acquisition of Safeway stores in 2015, when Haggen, a small supermarket chain, bought some of the stores. In less than a year, Haggen filed for bankruptcy.
Moses with Solomon Partners said C&S is considerably larger than Haggen, which went from owning 18 stores in Washington state to buying another 146. Moses, who worked on deals involving Haggen, said the company didn’t have sufficient capital.
By contrast, New Hampshire-based C&S is a $30 billion company that is roughly 50 times the size of Haggen, Moses said. Its subsidiaries include Grand Union and Piggly Wiggly supermarkets.
However, Cordova said C&S is the second-largest grocery wholesaler in the country, but it doesn’t have much experience running grocery stores or pharmacies. She said C&S, which would compete with Kroger, is being set up for failure.
Cordova also worries that while Kroger and Albertsons say they will honor the union contracts, the union has nothing in writing. She said the current benefits of Colorado and Wyoming union members were hard-won during a strike in January 2022.
“Our workers are in limbo. They don’t know where they will be going,” Cordova said.
Kroger said it and C&S have committed to no store closures or layoffs of frontline workers as a result of the merger.
Kroger owns 148 stores in Colorado and has nearly 22,000 employees. Albertsons operates 105 Safeway and Albertsons stores in the state.
Tom Olson, who has worked for Safeway in the Denver area for 14 years, still worries about what will happen to him and other employees.
“I remember in 2015, after the Albertsons-Safeway merger, many of us grocery store workers including myself were harmed. I had been a produce manager for Safeway and had to be relocated,” Olson said in a union call with reporters Jan. 26.
He got another job but was no longer a manager. Olson said his pay dropped about $4,000 a year because he didn’t earn bonuses as a clerk.
“That was a lot of money out of my pocket. Investors and corporations made a lot of money and I, along with a lot of co-workers, made less,” Olson said.
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