Kroger and Albertsons, Grocery Giants, Are Said to Be in Talks to Merge

“These two companies can combine their skills and scale and improve their buying or procurement power relative to Amazon, Costco or Walmart,” Mr. Flickinger said. “You really need the combination to lower the operating costs and, at the same time, give them more leverage to decisively lower prices to shoppers.”

While grocery stores rode high during the pandemic as homebound consumers stocked up on food, they have more recently faced pressure amid supply chain challenges and the rapidly increasing costs of food. Grocery chains must balance their relationships with consumer brands that sell products via their stores and shoppers who are squeezed by inflation and looking to save money, a formula for razor-thin profit margins.

The latest Consumer Price Index, released on Thursday, showed that inflation remained stubbornly high over the year through September, with food prices continuing to rise.

Still, mergers in the industry have a rocky track record. The two biggest food distribution companies, Sysco and US Food, called off their $3.5 billion deal in 2015 after the F.T.C. sued to block the deal. That same year, the F.T.C. required Albertsons and Safeway to sell more than 100 stores before their deal got clearance. The grocer that bought those stores, Haggen, later filed for bankruptcy.

Regulators are likely to scrutinize and require divestment of stores in cities and other areas where there is significant overlap between Kroger and Albertsons, said an investment banker who is not involved in the deal and who asked his name not be used. Key cities that the F.T.C. is likely to look at include Chicago, Denver and Seattle, he said.

The possible deal had already raised flags to consumer protection groups by Thursday afternoon. The American Economic Liberties Project, a nonprofit that promotes antitrust legislation, criticized the possible merger as a “bad deal for consumers, workers and communities.”

“A Kroger-Albertsons deal would squeeze consumers already struggling to afford food, crush workers fighting for fair wages and destroy independent, community stores,” Sarah Miller, the group’s executive director, said in a statement. “This merger is a cut-and-dry case of monopoly power, and enforcers should block it.”

Article source: https://www.nytimes.com/2022/10/13/business/kroger-albertsons-merger-talks.html