On November 29th, both Kroger Co. Chairman and CEO Rodney McMullen and Vivek Sankaran, President and CEO of Albertsons Companies went before the Senate Judiciary Subcommittee to testify and clarify concerns regarding the merger of the two largest supermarket chains in the U.S. A significant concern was the impact on consumers and employees of the companies as it would lead to higher prices and “food deserts”. Kroger and Albertsons defended their proposal by saying it would put the combined company at a better advantage to compete with giants like Amazon, Walmart, and Costco.
Consumer rights advocate and Senior Researcher of Technology Competition at Consumer Reports, Sumit Sharma, explained that “food deserts” are essentially situations in which prices increase and consumers are left with fewer choices and reduced supermarket access. He elaborated on this by explaining that the merger between Kroger and Albertsons would only serve to over-concentrate grocery retail which makes the situation worse as competition becomes lessened with these two competitors joining as one.
However, Kroger Chairman and CEO McCullen pointed out the very reason for the merger: since 2010, online retailers have increased their share of grocery sales by more than 14% and those increases often come at the expense of companies like Kroger. He also states that Kroger is ranked fourth in total revenue among the U.S. grocery retailers, and will remain fourth after merging with Albertsons. The merger would boost its ability to compete better with the other giants, Walmart, Costco, and Amazon.
Sen. Amy Klobuchar (D-Minnesota), chair of the subcommittee expressed concern over how the impact would be on the prices for consumers should the merger follow through. Mr. McCullen pointed out various financial commitments the company has made for the merger, including $500 million for lower prices, $1.3 billion for employee and customer experience improvement, and $1 billion for raising employee wages and benefits. These investments would take effect on day one of the companies merging, he explains.
The merger is still a ways away – Kroger and Albertsons have said the expectant year of the close would be 2024, pending federal and state regulatory approval and other customary closing conditions. Wall Street analysts say since this is the largest U.S. supermarket merger ever, clearance on the transaction will take longer, possibly up to two more years.
The concerns from legislators are the impacts on shoppers, labor, food access, and grocery retail competition. Both CEOs are assuring it will run smoothly and are strategizing ways to accommodate everyone and everything that is a part of the merger. Will this create better competition with other players in the game? Or will it create a “food desert” leaving out the incentive to compete? Only time will tell.
This blog post is part of the CIMA Law Group blog. If you are located in Arizona and are seeking legal services, CIMA Law Group specializes in Immigration Law, Criminal Defense, Personal Injury, and Government Relations.
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