Supermarket giants Kroger and Albertsons announce merger, creating grocery empire

Two of the biggest grocery chains have formed a merger agreement to help them get an edge over major competitors. Kroger announced on Friday that it plans to buy Albertsons in a deal worth $24.6 billion. It was a merger that would combine the two chains changing the US retail industry.

The merger, affecting millions of customers, might draw criticism from federal regulators. Kroger and Albertsons combined will form a new supermarket empire when there are increasing food prices. In September, grocery prices soared 13%.

Kroger CEO Rodney McMullen said that the merger could result in more efficient distribution, manufacturing, and shared assets in technology. Mcmullen added that they could save $1 billion annually with lower administrative expenses.

A grocery mega merger. Kroger to acquire Albertsons in a $24.6b deal. The combined company would have more than 700,000 employees and nearly 5000 stores. And a 13% market share of U.S. grocery sales, just behind the 22% Walmart has. Kroger CEO joins @CNBCClosingBell pic.twitter.com/FiaiG8D7BL

— Sara Eisen (@SaraEisen) October 14, 2022

In addition, he assured that the company could reap those savings back into lower prices of goods, better stores, and higher employee wages. McMullen said, “We will take the learnings from each company to bring greater value and a better experience to more customers, associates, and communities.”

Kroger is the biggest supermarket chain in the US, with 2,700 stores and 420,000 employees. While Albertsons is the nation’s second-largest supermarket, with 2,300 stores and 290,000 employees. The companies said their joined force would include branching 375 stores into a separate business.

Kroger also confirmed on Friday that it will  “reinvest approximately half a billion dollars of cost savings from synergies to reduce prices for customers.” In addition, the company will put in $1 billion to raise the workers’ benefits and salaries.

Kroger and Albertsons’ Competitors

Apples are displayed for sale at the produce area as customers browse grocery store shelves inside Kroger Co.’s Ralphs supermarket amid fears of the global growth of coronavirus cases, in Los Angeles, California, U.S. March 15, 2020. REUTERS/Patrick T. Fallon/File Photo

Walmart is a significant competitor for both supermarket chains. It is a nationwide chain that offers more groceries and goods than Kroger and Albertsons combined. The two companies also have Amazon and Costco as key competitors. 

Moreover, the Biden administration has promoted changes in their approach to merger deals. The government has declined megadeals stating a significant impact on consumer prices and competition.

Former chair at the Federal Trade Commission William Kovacic said that Kroger and Albertsons are “going to get a much closer look than earlier transactions received in this sector. They’re going to face a great deal more skepticism about the potential benefits of the consolidation.” However, the federal regulators have already lost in lawsuits over trying to block merger deals. 

The grocery store chain Kroger plans to buy rival Albertsons in a merger valued at $24.6 billion — a deal that is likely to draw intense antitrust scrutiny from federal regulators as food costs soar.https://t.co/IrvvB0Ru4u

— NPR (@NPR) October 14, 2022

Kovacic said, “So there’s likely to be a difficult passage through the review by the FTC. It does not mean that the FTC will prevail if it decides to go to court and challenge the deal.” Moreover, the FTC is looking at anti-competitive actions in the grocery industry. They have also requested information from Krogers and other companies on the reasons for surging prices and empty shelves.