The Kroger Co. is contending it will continue to lower prices after its merger with Alberstons in the face of another lawsuit attempting to block their merger.
Phil Weiser, the attorney general in the U.S. state of Colorado, filed a lawsuit in Denver District Court on 14 February to block the proposed USD 24.6 billion (EUR 22.8 billion) merger between Cincinnati, Ohio, U.S.A.-based Kroger and Boise, Idaho, U.S.A.-based Albertsons.
Across the U.S., Kroger operates 2,750 stores, and Albertsons operators more than 2,200 stores. In Colorado, Kroger operates 148 King Soopers and City Market stores, and Albertsons operates 105 Safeway and Albertsons stores. The merger, first proposed in October 2022, would eliminate head-to-head competition between the two chains, according to the lawsuit.
“Coloradans are concerned about undue consolidation and its harmful impacts on consumers, workers, and suppliers,” Weiser said. “After 19 town halls across the state, I am convinced that Coloradans think this merger between the two supermarket chains would lead to stores closing, higher prices, fewer jobs, worse customer service, and less resilient supply chains.”
In urban areas, where consumers shop close to home, the consolidation of Kroger and Albertsons stores would create significant market power, allowing the merged firm to raise prices and reduce quality and services, according to Weiser.
Consumers in other areas of the state would feel the effects even more, Weiser contended, pointing to towns like Gunnison, Colorado, where City Market and Safeway are the only supermarkets.
“The merger would make Kroger the only supermarket in this area, and a Gunnison resident would have to drive 65 miles to Salida or Montrose to reach a non-Kroger store, leaving them at the peril of their supply chain failing,” Weiser’s office said.
Weiser is also suing the two companies for a no-poach agreement that “harmed workers and blatantly violated antitrust law,” Weiser said.
“No-poach agreements stifle worker mobility and depress wages, and non-solicitation agreements harm consumers and raise prices,” he said.
However, Kroger contends that it will lower prices after the tie-up, pointing to its track record from previous mergers.
"We believe the way to be America's best grocer is to provide great value by consistently lowering prices and offering more choices. When we do this, more customers shop with us and buy more groceries, which allows us to reinvest in even lower prices, a better shopping experience, and higher wages," Kroger Chairman and CEO Rodney McMullen said.
After the merger, Kroger will invest USD 500 million (EUR 464 million) to lower prices and will invest USD 1.3 billion (EUR 1.2 billion) to improve Albertsons' stores, the company said.
Kroger has consistently lowered prices since 2003, resulting in USD 5 billion (EUR 4.6 billion) in customer savings, the company said. The grocery chain said it invested more than USD 125 million (EUR 116 million) to lower prices at Harris Teeter after its merger in 2014 and more than USD 100 million (EUR 93 million) to lower prices at Roundy's after its 2016 merger.
Kroger said over the past 20 years, its lowered prices reduced its gross margin by 5 percent, while during the same time period, Amazon, Ahold Delhaize, Walmart, and Dollar General have increased gross margins by 22 percent, 4 percent, 1 percent, and 2 percent, respectively.
Despite that, lawsuits attempting to block the merger persist, while consumer groups and legislators urge the Federal Trade Commission to block the merger.
Kroger and Albertsons also contend that the divesture of 413 stores to C&S Wholesale Grocers will help the merger progress. Kroger will also divest the Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals, and Waterfront Bistro private-label brands.
The Waterfront Bistro brand, launched in 2009 to provide a “convenient, at-home version of a high-quality seafood bistro experience,” features products ranging from frozen finfish and shrimp to heat-and-serve meals. It was relaunched in 2022 with a modernized logo and updated packaging.
Photo courtesy of Office of Colorado Attorney General
