When Kroger announced its merger with Albertsons in October 2022, the food consumers greeted the news with a collective side-eye—mostly because they were dealing with already rising prices at the food stores.
To understand how grocery store mergers could affect food prices, it’s important to first examine the reasons why these mergers are happening. One major driving force behind the trend is the intense competition that exists in the grocery industry. With so many different retailers vying for a share of the market, companies are looking for ways to gain an edge over their rivals. By merging with other companies, they can increase their size and scale, which can help negotiate better deals with suppliers and streamline operations to cut costs.
However, while these mergers may benefit the companies involved, there are concerns that they could have negative consequences for consumers. One of the most significant ways in which grocery store mergers could impact food prices is by reducing competition in the market. When companies merge, they become larger and more dominant players in the industry, which can make it more difficult for smaller companies to compete. This reduced competition could lead to higher prices, as companies have less incentive to offer lower prices to attract customers.
Already this is the case. Supermarket News reported on March 14, 2023, that a “group of consumers have filed a class-action lawsuit and the Arizona Attorney General is looking into the merger.”
Another potential way in which grocery store mergers could affect food prices is through changes in the supply chain. When companies merge, they often have more bargaining power with suppliers, which can allow them to negotiate better deals on the products they sell. However, this could also result in smaller suppliers being squeezed out of the market, as larger companies may prioritize their relationships with larger suppliers. This could lead to a reduction in the diversity of products available on the market, as smaller suppliers may struggle to compete.
Finally, grocery store mergers could also impact food prices through changes in the way that companies operate. For example, larger companies may be able to invest in more efficient supply chain systems, which could help them cut costs and improve profit margins. However, these changes could also result in job losses or reduced wages for workers, which could have negative consequences for the broader economy.
So, what does all of this mean for consumers? Ultimately, the impact of grocery store mergers on food prices will depend on a range of factors, including the specific companies involved, the nature of the merger, and the competitive landscape of the industry. In some cases, mergers may lead to higher prices, as reduced competition and changes in the supply chain lead to higher costs. In other cases, mergers may lead to lower prices, as companies are able to operate more efficiently and pass those savings on to consumers.
Kroger said as much in the 2022 press release announcing the merger.
“Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. Consistent with prior transactions, Kroger plans to invest in lowering prices for customers and expects to reinvest approximately half a billion dollars of cost savings from synergies to reduce prices for customers.”
The merger would not only decrease food prices, but also raise workers’ wages, according to the press release.
“An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience. Kroger will also build on its recent investments in associate wages, training and benefits. Kroger has invested an incremental $1.2 billion in associate compensation and benefits since 2018. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close.”
However, according to Supermarket News, “Unions representing more than 100,000 Kroger and Albertsons workers have been protesting the deal since it was first announced.”
It’s also worth noting that the impact of grocery store mergers on food prices may be felt differently depending on where consumers live. In areas where there are already limited options for grocery shopping, a reduction in competition could have a significant impact on prices due to store closures. Such closures also mean a loss of jobs. However, in areas where there are multiple retailers operating in close proximity, the impact of mergers may be less pronounced.
The merger could also affect farmworkers. Eater, a food website, interviewed Edgar Franks of Familias Unidas por la Justicia, an independent farmworkers’ union with a collective bargaining agreement that covers around 500 workers in Washington state. He told Eater that the union “opposed to the merger for the risks it poses to farmworkers.”
“The way that the grocers buy all the products, they almost set a price,” he said.
Eater reported that a letter to the Federal Trade Commissions from a group of growers’ associations explains the process further. The letter said, in part, according to Eater that “Kroger already employs an egregious ‘take-it-or-leave-it’ contract pricing structure against which few produce shippers have leverage to negotiate. A merger would just give the grocers even more power, and while farmers could technically not accept their terms, most can’t afford to not sell to them.”
Kroger and Albertsons believe that, at the end of the controversies, the merger will be approved. They’ve employed lobbyists and consultants to gain the ears of federal legislators. Former Speaker of the House John Boehner and Caren Street, the former chief of staff for Los Angeles Mayor Karen Bass, are serving as consultants for Kroger. Bass used to chair the Congressional Black Caucus when she was U.S. Representative for California. Albertsons hired Jeff Miller to lobby on its behalf. Miller, according to Supermarket News, has ties to Speaker Kevin McCarthy.
So, what can consumers do to protect themselves from the potential negative impacts of grocery store mergers on food prices? One option is to support smaller, independent retailers who may be better able to offer competitive prices and a wider variety of products. Consumers can also stay informed about the mergers and acquisitions happening in the industry and pay attention to any changes in pricing or product availability that may result.
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