Grocery store giants Kroger and Albertsons say it’s going to take a little longer than expected to iron out their proposed merger. The deal was supposed to happen early this year, but now the companies say it could be pushed out to August.
In the meantime, Washington state is suing to block the merger. And the deal is under scrutiny from the Federal Trade Commission and several state attorneys general over antitrust concerns.
Albertsons and Kroger say the retail food market is changing, and joining forces will help them keep up.
“In many instances, you now see supermarkets competing with non-supermarkets in the food space,” said Bobby Gibbs, a consultant at OliverWyman.
Non-supermarkets like Walmart and Amazon and even dollar stores are capturing more of our grocery spending. But if you look at the number of supermarkets across the country, Kroger and Albertsons are still two of the largest chains.
“Combining these two giants, if you would, is going to give them a formidable place in the marketplace,” said Phil Lempert, a food industry analyst.
He said the acquisition would give Kroger more size and scale. It would also make its apps and websites more attractive to advertisers.
Additionally, it would increase the company’s negotiating power with brands, said Claire Kelloway with the Open Markets Institute.
“To say, ‘Look, you want to be on our shelves, you need to give us a lower price,'” she said.
Kroger and Albertsons say those savings will be passed on to shoppers, but attorneys general in states like Arizona, New Mexico, Colorado and Washington fear that consolidation will drive prices up.
Kelloway said there’s a reason so many Western states are urging the FTC to block the merger. That’s where Kroger and Albertsons are especially dominant.
“It’s just the simple logic of competition,” she said. “If you’re the one game in town, are you really going to be trying to offer those doorbusting prices or coupons?”
In some small towns, you might have a Kroger Smith’s grocery at one end of Main Street and an Albertsons Safeway on the other. But maybe not a Walmart or the option to order groceries from Amazon.
