In a mega-deal that could create a grocery behemoth, Kroger announced Friday plans to acquire rival Albertsons.
The $24.6 billion deal, if approved by regulators, would unite two of the country’s largest grocers to create a supermarket giant with nearly 5,000 stores and annual revenue of about $200 billion.
“We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders,” Kroger Chairman and Chief Executive Officer Rodney McMullen, who will continue his role for the combined company, said in a statement.
Kroger and Albertsons want to combine to be more competitive against giants like Walmart and Amazon. But the merger will first face scrutiny from the Federal Trade Commission and lawmakers are calling for regulators to block the deal.
Here’s what the merger could mean for shoppers.
Details of the merger:Kroger to acquire Albertsons in $24.6B deal
‘Absolute disaster’:Bernie Sanders blasts Kroger’s $24.6B Albertsons deal
Would the deal lower food prices?
The companies said Kroger plans to reinvest approximately $500 million in cost savings from the deal to reduce prices for costumers. They will also invest $1.3 billion in Albertsons to “enhance the customer experience.”
Lawmakers and experts, however, worry that the merger will lead to higher costs for shoppers, who are already grappling with soaring food prices.
“They have a lot of statements about how there is going to be an enhanced consumer experience,” said Christine Bartholomew, a University at Buffalo law professor and antitrust scholar. “But the materials are a little quiet about how they’re actually going to reduce costs for consumers.”
A 2008 study found that in four of the five mergers evaluated, prices increased between 3% and 7%. The authors noted, however, that the study isn’t representative of the impact of all transactions.
Any increase in food prices could have a huge impact on consumers. The cost of food in the U.S. increased 11% last month compared to the same period last year, according to the Bureau of Labor Statistics.
“Even though every merging company says, ‘This merger is going to reduce price costs,’ it just doesn’t manifest in actual pocketbook saving for consumers,” Bartholomew said.
Kroger CEO answers:Why is Kroger buying Albertsons, and how will it affect shoppers?
McMullen told The Cincinnati Enquirer, part of the USA TODAY Network, that he expects the impact for consumers “to be very limited.”
“The thing that it will allow us to do is obviously bigger-scale,” McMullen said. “We’ll be able to continue to invest in our associates on pay and invest in the customers on pricing.”
Will Kroger and Albertsons close stores?
Together, the companies currently employ more than 710,000 people and operate a total of 4,996 stores across 48 states and Washington D.C.
To appease regulators, the new combined company is expected to divest 100 to 375 stores that will be spun out into a separate company that will be established as an Albertsons subsidiary.
Bartholomew said the combined company may close down some stores in areas where they overlap.
“Without knowing specifically the plans in terms of which closures they might need to take, I have concerns about this merger creating even more food deserts,” Bartholomew said.
What happens next?
The deal is expected to close in early 2024 after regulatory and anti-trust review.
Sens. Bernie Sanders (I-Vermont) and Elizabeth Warren (D-Massachusetts) have called on the FTC to reject the deal.
“Big grocery chains like Kroger and Albertsons are already gouging families with inflated prices,” Warren tweeted. “More mergers and less competition would mean even higher prices—and layoffs for employees.”
The Senate judiciary antitrust subcommittee announced Tuesday that it will hold a hearing to examine the proposed merger.
“We have serious concerns about the proposed transaction between Kroger and Albertsons,” Senators Amy Klobuchar (D- Minnesota) and Mike Lee (R- Utah) said in a joint statement. “The grocery industry is essential, and we must ensure that it remains competitive so that American families can afford to put food on the table.”
The food industry has consolidated in recent decades and more than half of American grocery sales are concentrated among the top five grocers—Walmart, Kroger, Amazon, Albertsons and Ahold Delhaize, according to estimates by the National Grocers Association.
“There is no reason to allow two of the biggest supermarket chains in the country to merge — especially with food prices already soaring,” Sarah Miller, Executive Director of the American Economic Liberties Project, said in a statement. “With 60% of grocery sales concentrated among just 5 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.