Kroger’s plan to acquire supermarket rival Albertsons in a nearly $25 billion deal would create a grocery juggernaut with more than 4,500 stores in 48 states.
On Friday, Kroger CEO Rodney McMullen told The Cincinnati Enquirer, part of the USA TODAY Network, what he thought the deal would do for shoppers, workers and Cincinnati. Here are the highlights:
How will the Kroger-Albertsons deal affect shoppers and the products on store shelves?
McMullen: “A lot of supply chain savings will really be helping improve freshness of product because we’ll have warehouses closer to the stores and you’ll be able to take a day or two out of the cycle for those fresh products as well. … When I look at their (Albertsons’ private label) brands, they’ve done a great job. … Between the two companies, we have an amazing portfolio.”
He said Kroger studied Albertsons’ O Organics house brand when it created its own SimpleTruth label that is now a $3 billion brand. Private label or house brands are expected to be key tools in attracting and retaining customers as more shoppers turn to generic store brands to offset the cost of inflation. Combined, Kroger and Albertsons sell $43 billion in private-label products a year.
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How will this deal affect consumers?
McMullen: “I would expect (the impact) to be very limited. The thing that it will allow us to do is obviously bigger-scale. We’ll be able to continue to invest in our associates on pay and invest in the customers on pricing. … I’m sure we’ll learn from each other. We’ll get the benefit of that.”
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What does Kroger get from taking over Albertsons?
McMullen: “It does give us national scale, and we’ll be able to leverage technology and other things (using that) larger scale. … (Although) they run smaller stores better than what Kroger does.”
A major part of the deal’s appeal is it is a “complementary” or “bolt-on” acquisition. It mostly expands Kroger into territories where it has a thin presence or where Kroger isn’t.
Besides Kroger stores, the Cincinnati-based grocer operates several regional supermarket chains in 35 states, including Fred Meyer, Harris Teeter, Ralphs, Mariano’s, Fry’s, Smith’s, King Soopers, QFC and others. The company has nearly 2,800 stores and employs 420,000 workers. The deal would add the Albertsons, Acme, Safeway, Vons, Jewel-Osco, Shaws and other regional names. It would give Kroger stores in five New England states, New York and Pennsylvania, among others.
Will job cuts be part of the $1 billion in cost savings the combined companies are looking for?
McMullen: “We really wouldn’t expect it to be … we aren’t assuming savings there. … Over time, we’ve been able to grow, it’s actually gone the other way where we need more people.”
While Kroger expects to cut $1 billion in combined operating expenses, most of that is expected from improved sourcing (buying power) and more efficient manufacturing and distribution. In a complementary acquisition, there tends to be fewer overlapping functions and fewer resulting job cuts. Still, thousands of associates wouldn’t join Kroger because potentially hundreds of stores will be spun off to mollify antitrust concerns of regulators.
Where will you divest stores ‒ Los Angeles, Denver, Seattle?
McMullen: “Both companies have professional advisers helping us on understanding the FTC (antitrust regulator the Federal Trade Commission). … They really do look at it (market share) 3-mile circle by 3-mile circle. … So we’ll sit down with the FTC and go through it market by market.”
The deal isn’t expected to close until early 2024 after regulatory and antitrust review. To mollify regulators, 100 to 375 Albertsons stores are expected to be spun off into a separate company that would be owned by Albertsons’ shareholders.
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