>
The largest US supermarket chain, Kroger, is in talks to merge with its biggest rival Albertsons in a combination that would create a supermarket titan, people familiar with the matter said Thursday.
The merger of the country’s No. 1 and 2 grocers, if achieved, could give retailers stronger bargaining power with suppliers in an era of sharp price increases that have battered retailers.
Kroger, based in Cincinnati, operates 2,800 stores in 35 states under its own name, as well as subsidiaries such as Smith’s, Fred Meyer, Ralphs, King Soopers and Harris Teeter.
Albertsons, headquartered in Boise, Idaho, operates 2,200 supermarkets in 34 states, with approximately 20 banners, including Safeway, Jewel-Osco, Acme and Tom Thumb.
A deal would create a combined company with a market value of approximately $47 billion, representing one of the largest mergers in the retail space in recent years.
Last year, Kroger posted annual sales of $137 billion, while Albertson’s sales were $69 billion.
The largest US supermarket chain, Kroger, is in talks to merge with its biggest rival Albertsons in a combination that would create a supermarket giant
A map shows the dominant supermarket chain in each state. Albertsons also operates Safeway, Acme and Tom Thumb, while Kroger owns Smith’s, King Soopers and Harris Teeter
A deal could be announced this week if talks don’t fall apart, the sources said, requesting anonymity as the talks are confidential.
Some critics noted that a supermarket mega-merger could reduce competition among US supermarket chains and potentially lead to higher prices for US shoppers.
Sarah Miller, executive director of the American Economic Liberties Project, an anti-monopoly nonprofit, said the deal “would put pressure on consumers who are already struggling to afford food.”
“This merger is a clear case of monopoly power, and enforcers should block it,” Miller said.
Any merger would almost certainly undergo an antitrust investigation. But the two chains would likely point out that for the most part they operate in different areas, meaning their stores rarely compete directly in the same cities.
They could also argue that their combined economies of scale would actually reduce costs for consumers by having a stronger influence on suppliers.
Major consumer products companies around the world have announced plans to raise prices at a faster pace as they try to curb the impact of rising raw material costs on their margins.
Albertsons, headquartered in Boise, Idaho, operates 2,200 supermarkets in 34 states, with approximately 20 banners, including Safeway, Jewel-Osco, Acme and Tom Thumb
Kroger CEO Rodney McMullen (left) and Albertson’s CEO Vivek Sankaran can be seen above
Neither Kroger nor Albertsons immediately responded to requests for comment. The news was first reported by Bloomberg.
Consultant Burt Flickinger, who owns shares of both Kroger and Albertsons, said a merger would give the two supermarket operators more purchasing power, making it easier for them to compete with Walmart Inc.
Groceries represent about 55% of Walmart’s annual sales. Walmart has traditionally used its power to demand the lowest possible prices from packaged food and beverage companies, putting rivals at a disadvantage in their own negotiations with suppliers.
About 25 percent of all dollars spent on groceries in the United States is spent at Walmart, according to Euromonitor data.
According to Euromonitor, Kroger and Albertsons have approximately 8 percent and 5 percent of the U.S. grocery market, respectively.
A customer receives a call from a cashier at a Kroger supermarket in Houston in July. Last year, Kroger had annual sales of $137 billion
Amid high inflation, Kroger and Albertsons could try to increase their power to negotiate favorable prices from suppliers through a combination
The specter of Amazon may also have contributed to the merger talks.
Michael Pachter, an analyst at Wedbush Securities, estimates that the online retailer has acquired about $4 billion in market share from Kroger and Albertsons in the past two years — small compared to an $800 billion supermarket market, but a threat nonetheless. “Amazon is driving the bejeezus out of conventional retailers,” he said.
The Seattle-based tech company is betting that the checkout and contactless payment systems it adds to stores, including at its subsidiary Whole Foods Market, will win its customers over in the long run.
Shares of Albertsons closed 11.5 percent on Thursday, while Kroger shares closed the session at 1.5 percent.
The wafer-thin margins of standalone US supermarket chains have been weighed down by rising costs and supply chain disruptions after a boom at the height of the pandemic.
A deal could be reached as early as this week, Bloomberg reported, adding that no final decision has been made and talks could still be delayed or falter.