King Soopers’ parent company Kroger and Albertsons to move forward with $25 billion merger – Boulder Daily Camera

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Kroger — the parent company of King Soopers, the state’s largest grocery store chain headquartered in Denver — will merge with Albertsons in a move that will impact two of Colorado’s well-known retailers.
The Friday announcement joins King Soopers and Safeway, which operates under Albertsons Companies Inc. Kroger, headquartered in Cincinnati, Ohio, and Albertsons, based in Boise, Idaho, are both industry heavyweights, qualifying as two of the nation’s largest supermarket companies.
Kroger will acquire Albertsons for almost $25 billion. The merger agreement was unanimously approved by each company’s board of directors, according to a news release.
Fearing a grocery monopoly, opponents of the merger are already calling on antitrust enforcers to look into — and potentially block — the deal, which is expected to close in early 2024.
Walmart, Kroger, Albertsons and Target sit at the top of the grocery market pyramid, with Kroger ranking as the largest traditional grocery retailer and Walmart operating as the largest U.S. retailer of grocery products, according to the Agriculture Department. The agency called Kroger “a major player in mergers-and-acquisitions activity.”
Combined, Kroger and Albertsons employ more than 710,000, with almost 5,000 stores across 48 states and Washington, D.C. In fiscal year 2021, the two made $210 billion in total revenue and $3.3 billion in net earnings.
The merged company would serve a customer base of 85 million households.
The news also comes at a time when consumers are paying more for their groceries. Cereal, bakery and dairy products all jumped about 16% over the past year, according to latest Consumer Price Index Summary by the Bureau of Labor Statistics. Meat, poultry, fish and eggs also spiked 9%.
With its roots in Colorado, King Soopers & City Market operates as the state’s largest, full-service retail grocery chain. City Market launched in 1925, while King Soopers was first established in 1947.
Kroger operates 148 stores – including King Soopers locations – with around 22,000 associates in Colorado. King Soopers ranks as the state’s third-largest employer. Safeway manages 103 locations in the Centennial State.
Kroger held almost 34% of the Denver area’s grocery market share last year, with Walmart at almost 17% and Safeway at 11%, according to a report by Axios Denver. A spokesperson for Walmart, a major competitor in the grocery industry, declined to comment Friday.
“We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders,” said Rodney McMullen, Kroger chairman and CEO, who plans to serve in the same roles at the combined company. “Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores.”
However, many aren’t pleased with the announcement. Greg Ferrara, president and CEO of the National Grocers Association, said the merger “would not only put smaller competitors at an unfair disadvantage, but also increase anticompetitive buyer power over grocery suppliers, which ultimately would harm consumers.”
The U.S. is home to 21,000 independent grocers – many operating as family or employee-owned retailers – as of last year, according to the trade association. They produce $131 billion in sales and create 944,000 jobs.
Independent grocers are now facing threats, as “large, national chains increasingly control the grocery sector,” the National Grocers Association reports.
Dozens of mom-and-pop grocers cater to Mile High City area residents, such as Sun Market at 2201 Lafayette St., Pacific Mercantile Company at 1925 Lawrence St. and Decatur Fresh at 995 Decatur St.
The Denver Metro Chamber of Commerce, the Colorado Chamber of Commerce and the Colorado Business Roundtable declined to comment on the merger.
The National Grocers Association expects “this deal will receive rigorous scrutiny from federal antitrust enforcers.”
“A merger of the nation’s top two grocery chains should raise serious questions about a single supermarket giant gaining unprecedented dominance over the nation’s food supply chain,” Ferrara said.
Kim Cordova, president of the United Food and Commercial Workers Union Local 7 – which represents 17,500 members in Wyoming and mostly Colorado – described the merger as “devastating for workers and consumers alike and must be stopped.”
Stores within close proximity to each other could potentially mean closures in the future, a union representative said.
The overarching United Food and Commercial Workers International Union represents 1.3 million workers in grocery stores, meatpacking plants and other North American industries. Its president, Marc Perrone, said the merger “has serious implications for hundreds of thousands of our UFCW members and America’s families who are more concerned than ever about inflation’s impact on the price of their food and groceries, prescription drugs, and gas.”
The union is discussing it, and “will oppose any merger that threatens the jobs of America’s essential workers, union and non-union, and undermines our communities.”
The American Economic Liberties Project, a nonprofit that backs antitrust regulation enforcement, pushed against the idea.
“There is no reason to allow two of the biggest supermarket chains in the country to merge — especially with food prices already soaring,” said Executive Director Sarah Miller. “With 60% of grocery sales concentrated among just five national chains, a Kroger-Albertsons deal would squeeze consumers already struggling to afford food, crush workers fighting for fair wages, and destroy independent, community stores.”
She called the merger “a cut and dry case of monopoly power.”
In 1997, the top four grocers in the U.S. controlled 25% of the market share, the nonprofit reported. In 2018, that slice jumped to 44%.
Mark Johnson, director of operations at Marczyk Fine Foods, views the news of the Kroger-Albertsons merger from a different perspective, though. “We’re such a specialized niche; I think it will probably help us more than hurt us.”
Established in 2002, the locally-owned neighborhood market consists of two Denver locations at 770 E. 17th Ave. and 5100 E. Colfax Ave., with a third planned in Westminster next spring.
“We don’t really try and compete at their level,” Johnson said. “We can’t put Cheerios on our shelves because we’ll never compete price-wise with them, so why even bother?”
Instead, they carry “dramatic” amounts of local products and one line of beef, pork and lamb from Niman Ranch, which works with more than 740 family farmers and ranchers nationwide.
“We know our people; we know their kids; they know us,” Johnson said. “It’s just a really different customer service model.”
The possibility of consolidation-related store closures could also provide a boost to Marczyk Fine Foods’ labor force, he added.
All in all, the deal “separates us even more,” Johnson said. “I think it’s a good thing.”
Jose Tamez, managing partner at grocery retail and wholesale talent search firm Austin-Michael LP, in Golden, agreed that for niche players in the grocery industry, such as Natural Grocers, “this doesn’t affect you at all.”
For Whole Foods, the merger won’t impact the brand as much as its ongoing competition with Kroger in the natural and organic space, he added in a telephone interview.
“It has potential to impact consumers in a lot of different ways — certainly on a positive end,” Tamez said, as the combined buying power of the merged company could potentially lower costs for customers. “I don’t think it will end up being as negative as some people think.”
The fact that Albertsons was up for sale — if not as an entire entity, then at least some of its divisions — didn’t catch the grocery industry off-guard, he added, although it was “a bit of a surprise to the industry that Kroger ended up being the one.”
Under the merger, over $1 billion would be incrementally invested into Albertsons stores “to enhance the customer experience,” according to the news release, and the merged company expects to put another $1 billion toward raising associate wages and benefits.
“Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities,” McMullen added in a statement.
The companies argue that the merger would make them better positioned to help shoppers with the impacts of inflation, as their combined portfolio of private-label products across premium, natural and organic would jump up to 34,000.
The deal would also lead to Albertsons creating a subsidiary called SpinCo, a standalone public company that its shareholders would pick up once the merger closes. Kroger and Albertsons would decide which stores make up SpinCo, estimating that the number could range between 100 to 375.
The vision for SpinCo is “a new, agile competitor with quality stores, experienced management” and more, according to the news release. Further details are expected before the deal wraps.
“It just remains totally unknown what it could be in the end,” Tamez said about SpinCo.
Talk of the merger was first reported by Bloomberg on Thursday morning.
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