In a mega-deal that could have a huge impact on grocery shopping in America, Kroger and Albertsons announced Friday plans to merge.
If approved by regulators, the nearly $25 billion deal would be one of the biggest in US retail history.
The proposed merger, which the companies expect to complete in 2024, would combine the fifth and tenth largest retailers in the country. The companies own dozens of chains, including Safeway, Vons, Harris Teeter and Fred Meyer and reach a combined 85 million households.
Kroger (KR) and Albertsons, which both employ mostly union workforces, want to merge to be more competitive against non-union giants such as Walmart (WMT), Amazon (AMZN), and Costco (COST). The grocers are also facing increased pressure from Aldi, the fast-growing German discount supermarket chain.
There’s no guarantee the deal will go through, however.
The merger will face intense scrutiny from the Federal Trade Commission and other regulators. Opponents, Sens. Bernie Sanders and Elizabeth Warren, have already called on regulators to block the deal. The companies say they will divest hundreds of stores in areas where they overlap to win regulatory approval.
Here’s how the mega-merger could impact grocery shopping in America.
Lower prices…for now
Prices at the grocery store are a major concern for shoppers right now.
Grocery prices increased 13% in September over the last year, the fastest pace in decades.
The companies say that they will be able to use $500 million in cost savings from the deal to reduce prices for shoppers and tailor promotions and savings. They will also invest $1.3 billion in Albertsons, including on lowering prices.
“Our expanded portfolio, along with more personalized promotions and benefits, will help customers save… and help to relieve the inflationary pressures facing shoppers across the country,” Kroger CEO Rodney McMullen said Friday.
Albertsons stores are concentrated more on the West Coast, while Kroger is dominant in the Midwest.
Albertsons has higher prices than Kroger and other grocers, analysts say, and they predict Kroger will try to reduce Albertsons prices to be more competitive against discount chains like Aldi.