The Kroger-Albertsons merger announcement was a surprise to many and faces high regulatory hurdles. Some say “it’ll never happen” while others aren’t so pessimistic as long as the two companies make the appropriate – and difficult – decisions in terms of divestitures and closures. In an article posted yesterday, Russell Redman of Supermarket News detailed some of the ramifications of such a merger. Here’s a summary.
According to Wall Street analysts, the $24.6 billion deal would create a supermarket company with the resources to fend off competitors like Walmart and Amazon, and bring the combined operator significant cost savings and lower prices for shoppers.
For smaller supermarket chains and independent grocers, the merger would create a competitor that could siphon more market share. In addition, the integration of two large companies would probably lead to some job cuts.
In order to satisfy regulators and to avoid store redundancy, Kroger and Albertsons – each with about 20 supermarket banners, resulting in sizable market overlap – would have tough decisions to make in terms of store divestitures and closures, not to mention the potential for some store banners to disappear altogether. The loss of stores would certainly impact grocery store access in some communities.
Kroger and Albertsons said their combination would form a company with 4,996 stores, 66 distribution centers, 52 manufacturing plants, 2,015 fuel centers, and more than 710,000 associates across 48 states and the District of Columbia. With 3,972 pharmacies, the combined entity would be the fifth-largest retail pharmacy operator.
The two companies expect the transaction to close in early 2024, pending regulatory approval and clearance under the Hart-Scott-Rodino Antitrust Improvements Act.