Kroger/Albertsons merger necessary for stores’ mutual survival, industry expert says

Scott Moses, head of grocery, pharmacy and restaurants for Solomon Partners, presented an on-the-record update Tuesday to various media outlets regarding the state of the proposed Kroger/Albertsons merger and potential impacts in Colorado as well as the current state of Colorado’s grocery industry. 

Kroger, owner of City Market and King Soopers, issued a press release in October 2022 announcing its plans to acquire Albertsons for $24.6 billion, raising a number of concerns from state and federal officials of a grocery monopoly forming from a merging of the two grocery giants.

According to an article in Bloomberg News, the two stores began talks of selling more than 400 locations throughout the country to C&S Wholesale Grocers as a way of securing regulatory approval.

In his Tuesday presentation, Moses illustrated how the rise of companies such as Walmart has led to the need of the Kroger/Albertsons proposed merger for the sake of the stores’ mutual survival. 

According to Moses, Walmart has a $318 billion US grocery business and it has quadrupled in the past 20 years. Moses added that over 90% of Americans live within 10 miles of a Walmart with the majority of sales going to groceries. Walmart’s grocery business is three times the size of Kroger and Costco, and five times that of Albertsons and Amazon.

“Walmart dominates American grocery to an extent that most people just don’t know and just don’t appreciate,” Moses said.

Moses also pointed out that unionized grocers’ jobs have fallen from about 50% to 14% among the top 15 grocers over the past 20 years. A non-union company such as Walmart has seen its grocery share increase by 12% from 2003 to 2023, whereas Kroger has dropped by 1% with Albertsons dropping by 7%. Furthermore, Moses showed that in 2003, union and non-union grocer jobs were tied at 50%; however, by 2023 non-union jobs had increased to 85% with union jobs decreasing to 15%.

Despite these statistics, however, the United Food and Commercial Workers International Union announced in a statement last May opposition against the proposed merger, stating it would pose a “serious threat” to members’ livelihoods.

“Given the lack of transparency, and the impact a merger between two of the largest supermarket companies could have on essential workers — and the communities and customers they serve — the UFCW stands united in its opposition to the proposed Kroger and Albertsons merger,” UFCW stated.

In response to the question of whether union reps can expect job loss and salary reductions should the merger not come to fruition, Moses said he thought it was important to look at the history of unionized grocery over the past 20 years as an indicator of what could potential transpire in the future, again, pointing to the proportion of unionized jobs in grocery falling considerably from roughly 50% to 15%.

“Without this transaction to help strengthen these stores, and preserve these jobs, I think broadly you can assume that that puts union jobs at risk,” he said. “That’s why this transaction is so important, because as Kroger has done over the last 20 years, they’ve added well over 100,000 union jobs … Their very clear plan, as they’ve stated publicly many times, is to invest in better wages, and to strengthen these stores, strengthen those jobs, and enable this supermarket grocer to continue to compete in this industry that has become incredibly difficult for most supermarket grocers.”

Moses said companies have been “very clear that they’re having constructive dialogue” with the Federal Trade Commission who is still currently considering the merger’s outcome.

In a press release from earlier this month, Kroger announced an updated closure timeline, stating it anticipates closing will occur in the first half of the company’s fiscal 2024. Kroger’s fiscal second quarter ends on Aug. 17.

“While this is longer than we originally thought, we knew it was a possibility and our merger agreement and divestiture plan accounted for such potential timing,” the press release stated. “We remain committed to closing the transaction and providing the meaningful and measurable benefits that we promised when we originally announced the transaction.”

In response to Kroger’s original announcement in 2022, Attorney General Phil Weiser conducted a multi-state investigation last year, as well as led a statewide tour throughout Colorado in order to hear directly from consumers on this issue. Through the Attorney General’s website, Weiser released the following statement in October of the same year.

“As Colorado’s attorney general, I take very seriously our department’s responsibility to review mergers that threaten Colorado consumers,” he stated. “At a time of rising food prices, the possibility of undue consolidation in the grocery business raises serious concerns, particularly since King Soopers and Safeway have a large footprint in Colorado. My department and I will closely monitor and review this proposed merger between Kroger and Albertsons to ensure it does not harm consumers or workers.”

To reach Jonson Kuhn, email him at jkuhn@aspentimes.com.