Kroger announced last week that it’s in talks to buy Albertsons, which would bring a lot of SoCal supermarket chains under one umbrella, in a $24 billion deal. Kroger, which already owns Ralphs and Food4Less, would add Vons, Pavilions, and Albertsons to its roster. The deal would need approval from the Federal Trade Commission and the Department of Justice.
“The West Coast is one of the primary areas where Kroger and Albertsons both have some market overlap,” says Russell Redman, managing editor of Supermarket News, a grocery trade publication. “As with any merger, there's going to be some sort of shakeout of retail banners and store locations.”
Why are they considering this move? They’re facing competition from Walmart, Amazon, and Aldi, he says.
Kroger vows that if the merger happens, prices will drop. But the opposite will happen, warns Jamie Court, president of Consumer Watchdog.
“When there's less competition, prices generally go up, not down. But there's also going to be less choices, and there's gonna be fewer jobs. And that's the point of the merger — is to create what they would call economies of scale, to theoretically get a better price on things. But the theory doesn't always come into practice. I'm more concerned about convenience, I'm more concerned about choice,” he says.
People who work at Ralphs and Vons are protected by unions, and this proposed merger is an attack on unionism, Court says.
It could also exacerbate food deserts in Southern California, he adds. “It'll certainly translate into fewer choices for consumers, particularly consumers in places where they've had a harder time holding down grocery stores.”
Redman says the companies must clear a high hurdle to get the green-light for this agreement from the Federal Trade Commission. “I think it's going to really be going over with a fine tooth comb, as it should be with a merger of this size in one sector. So I think we still have to wait and see.”