Kroger and Albertsons, two prominent players in the supermarket industry, have recently unveiled plans to sell off additional stores as part of their efforts to address concerns raised by federal regulators regarding their proposed merger. This strategic move aims to alleviate regulatory apprehensions and pave the way for the completion of their merger, which could significantly reshape the grocery landscape in the United States.
The proposed transaction involves the sale of a total of 579 stores, where there is geographic overlap between Kroger and Albertsons, to C&S Wholesale Grocers, a well-established grocery supplier and operator headquartered in New Hampshire. This deal comes with a hefty price tag of $2.9 billion, representing a notable expansion of the original divestiture plan, which had initially outlined the sale of 413 stores to C&S for $1.9 billion.
Despite these divestiture efforts, uncertainties persist regarding whether the revised plan will garner approval from regulators. In February, the US Federal Trade Commission (FTC) took legal action to block the $24.6 billion merger, citing concerns about potential anti-competitive effects. Specifically, the FTC expressed apprehensions that the consolidation of Kroger and Albertsons could lead to higher grocery prices and diminished wages for workers. The regulatory body also criticized the initial divestiture plan, deeming it “inadequate” and arguing that it would leave C&S with a fragmented assortment of unconnected stores and brands, undermining its competitiveness vis-à-vis a combined Kroger and Albertsons entity.
Under the updated proposal, Kroger intends to divest its Haggen banner to C&S, while C&S will also secure licenses for the Albertsons banner in California and Wyoming, as well as the Safeway banner in Arizona and Colorado. Additionally, C&S will gain access to certain private-label brands currently featured in these stores. Importantly, the plan stipulates that C&S will commit to maintaining all acquired stores and honoring existing labor agreements, thereby ensuring continuity in operations and employment conditions.
Eric Winn, CEO of C&S Wholesale Grocers, expressed confidence in the expanded divestiture package, highlighting its capacity to sustain the ongoing success of these stores in serving their respective communities over the long term. The merger between Kroger and Albertsons, initially announced in October 2022, was framed as a strategic imperative aimed at bolstering their competitiveness against formidable rivals such as Walmart and Amazon.
In the local market landscape, Albertsons boasts ownership of the Star Market and Shaw’s chains, further complicating the potential ramifications of the proposed merger for consumers and competition within the grocery sector. As stakeholders await regulatory decisions on the revised divestiture plan, the outcome of this merger saga will undoubtedly have far-reaching implications for the grocery industry and consumers nationwide.