(C) Common Dreams
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Kroger and Albertsons Plan $25 Billion Supermarket Merger That May Face Hurdles [1]
['Lauren Hirsch', 'Julie Creswell', 'Jordyn Holman']
Date: 2022-10-14
These days, the biggest grocery retailer is Walmart, which generated $218 billion last year from food sales, or 55 percent of its U.S. revenue. Amazon, which acquired Whole Foods in 2017 and sells groceries on its website, is a smaller presence but is pressuring rivals as it reaches further into the industry.
It’s an industry at a pivotal juncture, after revenues and profits soared early in the pandemic as consumers ate most of their meals at home. Now people are eating more meals away from home than they did two years ago, inflation is slicing into store profit margins and some shoppers are shifting to less-expensive stores like Walmart.
In June, Rodney McMullen, the chief executive of Cincinnati-based Kroger, told Wall Street analysts that the chain was seeing a significant shift in behavior among shoppers because of inflation. While some consumers continued to buy premium products, others were “aggressively” switching to store brands, he said.
Still, little of that seems to have harmed the company’s bottom line. In the most recent quarter, which ended Aug. 13, Kroger’s operating profits grew 13.7 percent from a year earlier, allowing it to boost its dividend to investors by 24 percent. It has also repurchased $975 million of its own shares this year.
As part of their pitch to regulators, Kroger and Albertsons are likely to argue that their combined scale is needed to compete against stores like Aldi and Lidl — two European chains that have been expanding quickly in the United States — as well as Walmart, Amazon and Costco.
The Federal Trade Commission has not always been convinced by that argument. In 2015, it successfully sued to block a merger between Office Depot and Staples, even after the retailers had positioned their merger as an effort to take on Amazon and lower prices.
In its review, the F.T.C. is likely to consult with consumer advocates, competitors, suppliers and others. Regulators will also look at whether Kroger promised that past acquisitions would lower prices, and whether those promises came to fruition. The review could take months, keeping the companies and their employees grappling with uncertainty.
Kroger and Albertsons, which is based in Boise, Idaho, said Friday that they expected to close the deal in early 2024, and that Kroger would pay Albertsons $600 million if the merger fell apart over antitrust concerns.
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[1] Url:
https://www.nytimes.com/2022/10/14/business/kroger-albertsons-merger.html
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