Kroger and Albertsons: A Bad Idea

It was recently announced that two of the largest grocery store chains in the United States, Kroger, and Albertsons, are planning to merge. If shareholders and regulators approve this merger, it will create a grocery store behemoth with annual sales of over $280 billion. The larger competitor left in the market will be Walmart. This ultimately would be bad news for consumers, as it would likely lead to higher prices and fewer choices.

Higher Prices for Consumers

Mandatory Credit: Photo by MICHAEL REYNOLDS/EPA-EFE/Shutterstock (12775703c) A customer looks at meat products at a grocery store in Arlington, Virginia, USA, 25 January 2022. Prices for consumers in the United States rose seven percent in December, the highest inflation rate in forty years, according to the US Department of Labor. The International Monetary Fund (IMF) downgraded the 2022 global growth forecast to 4.4 percent in the World Economic Outlook report published 25 January. The downgraded outlook indicates concerns over inflation and supply chain issues related to Covid-19 in the world’s two largest economies – the United States and China. Customers at a grocery store in Arlington, Virginia, Usa – 25 Jan 2022

If Kroger and Albertsons are allowed to merge, they will control nearly one-third of the grocery market in the United States. This increased market share would give the combined company considerable leverage over suppliers, which would likely lead to higher prices for consumers. In a time of recorded inflation hitting all consumers, this will affect their pocketbooks even more. In addition, the merged company would have less incentive to offer promotional discounts and coupons, as it could simply raise prices and still attract customers.

Fewer Choices for Consumers

In addition to higher prices, the merger of Kroger and Albertsons would also lead to fewer choices for consumers. The combined company would be able to dictate terms to suppliers, and those that did not comply would risk being cut off from access to the merged company’s 3,700 stores. This could lead to many products being removed from store shelves or never appearing in stores at all. In addition, the merged company would have less incentive to invest in new products or innovative store layouts, as it could simply rely on its existing products and stores to attract customers.

What’s Next?

The merger plan announces the new company will “reinvest approximately half a billion dollars of cost savings from synergies to reduce prices for customers.” In addition, $1 billion will be invested to raise worker wages and benefits. However, the proposed merger of Kroger and Albertsons is bad news for consumers. If the merger is approved, it is likely that prices will increase and choices will decrease. Hopefully, the FTC will look closely at the supermarket sector (especially here in the West) to find limited competition and choices for consumers.

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