By Heidi Ganahl | Commentary, Rocky Mountain Voice
The proposed Kroger-Albertsons merger has become a critical issue in Colorado, where both companies maintain a significant presence.
Kroger operates 148 King Soopers and City Market stores, while Albertsons operates 105 Safeway and Albertsons locations.
To address concerns about reduced competition, Kroger and Albertsons have proposed selling 91 stores, including Safeway and Albertsons locations, to C&S Wholesale Grocers. C&S is a national distributor and operator of grocery chains such as Piggly Wiggly. The companies have committed to ensuring no store closures or layoffs of frontline workers as part of this divestiture plan, and C&S has committed to honoring collective bargaining agreements in the acquired stores.
Despite these reassurances, Colorado Attorney General Phil Weiser has sued to stop the merger on the claim that Kroger and Albertsons engaged in a no-poach agreement during the 2022 King Soopers strike, an inaccurate and misrepresentation of the facts. While AG Weiser highlighted an email communication between executives from Kroger and Albertsons, Kroger has explicitly denied that this email reflects any illegal agreement. The Colorado state court trial started on Sept. 30.
A decision to pause the merger could potentially halt the deal altogether, as Albertsons has indicated that without the merger, the company may need to consider cost-cutting measures such as layoffs, store closures or exiting certain markets. This could significantly disrupt local economies and communities in Colorado, particularly in rural areas, potentially creating food deserts.
The Kroger-Albertsons merger is necessary for preserving competition, protecting jobs and lowering prices in Colorado. By divesting stores to a proven player like C&S, Kroger and Albertsons addressed the concerns about consolidation and market dominance. The merger will enable both companies to stay competitive in a rapidly evolving grocery industry, delivering long-term benefits to consumers, workers, collective bargaining agreements and local communities across the state.
No closures, no layoffs, better pricing
The proposed divestiture plan by Kroger and Albertsons ensures no store closures and no layoffs of frontline workers, preserving competition in the state, while maintaining employment.
The divestiture to C&S includes established grocery banners, private labels and critical infrastructure, enabling C&S to operate competitively. Kroger has proactively addressed regulatory concerns, positioning the merger to meet Colorado’s unique market demands.
Merger opponents ignore the fiercely competitive and rapidly evolving marketplace in which Kroger and Albertsons operate.
The companies have stated that the merger is crucial to competing against retail giants like Walmart, Amazon and Costco, which continue to grow their market share in Colorado. Collectively, it has increased by 12% and they now control nearly half of the state’s grocery market (48%). In contrast, Kroger and Albertsons have seen their combined market share decrease by 14% during the same period.
Walmart is the country’s largest grocer by a wide margin with a 29% U.S. grocery market share. Costco’s U.S. grocery business is over 40% larger than Albertsons. Kroger is fourth in revenue behind Walmart, Amazon, and Costco and will continue to be fourth after the merger.
Kroger has committed to investing $1 billion to lower prices at Albertsons locations starting the day following the merger. This includes a $40 million commitment in Colorado. In previous mergers, Kroger invested in the market to lower prices and with millions in capital per store. Kroger’s CEO Rodney McMullen says prices would be immediately lowered on essential items.
One way shoppers will benefit, is Albertsons prices are presently 10-12% higher than Kroger, and the merger will reduce the disparity. But, if the merger does not proceed, Albertson customers will continue to pay more.
The merger is necessary for Kroger and Albertsons to compete on price with Walmart.
In addition to Kroger having a strong history of working with unions, the company has publicly stated that no frontline associates will lose their job as a result of the merger.
Both companies have committed to maintaining their unionized workforce, a necessary counterbalance to non-unionized competitors like Walmart and Amazon. Kroger’s $1 billion investment in associate wages and benefits over the next five years underscores their dedication to workers. As previously discussed, C&S has also committed to honoring collective bargaining agreements for the employees of the divested stores.
Over the past decade, Colorado’s grocery industry has experienced a 14% decline in unionized jobs. The merger between Kroger and Albertsons is crucial to reversing the trend, as it will strengthen their ability to compete with non-unionized giants like Walmart and Amazon.
Turning to the court
While Colorado’s Attorney General is pursuing an independent lawsuit, much of the same antitrust concerns are already being addressed at the federal level by the Federal Trade Commission. Colorado’s case risks duplicating federal efforts and diverting state resources that should be focused on fighting crime.
The FTC focuses narrowly on traditional supermarkets. Today, the competitive landscape includes big-box retailers like Walmart and Target, hard discounters like Aldi and Lidl, and online platforms like Amazon.
The merger enables Kroger and Albertsons to remain competitive against these global giants, ensuring that consumers in Colorado benefit from a wider range of choices and better pricing across grocery formats.
Walmart controls 22% of U.S. grocery sales. Together, Kroger and Albertsons would control 13%.
A review of C&S finds them to be well-capitalized with a nationwide distribution network that serves three times the number of stores as Albertsons operates today. That’s before considering C&S will be supported by Kroger in private label brands, IT infrastructure, customer data and distribution management for several years following the merger. C&S will be given three years to re-banner the stores.
Editor’s note: Opinions expressed in commentary pieces are those of the author and do not necessarily reflect the opinions of the management of the Rocky Mountain Voice, but even so we support the constitutional right of the author to express those opinions.