PORTLAND, Ore. – If Kroger succeeds in taking over its rival Albertsons, the promised $1 billion in lower grocery costs likely won’t go to current Kroger shoppers.
Instead, the money will be invested in making its struggling Boise, Idaho, suitor more competitive, company officials indicated on Monday during a critical legal hearing in U.S. District Court in Portland, Oregon, on the controversial $25 billion grocery merger. Albertsons prices are about 12% higher than Kroger’s, company officials disclosed in court.
Both regulators and company officials squared off Monday during a hearing on whether to grant a federal court order to prevent the two supermarket chains from joining forces. If successful, the deal would transform Kroger into nearly as large a grocer as Walmart: from a supermarket company with 2,700 supermarkets doing $150 billion in sales into one with 4,400 stores doing $208 billion in sales.
Both retailers say the deal will save shoppers money, preserve union jobs and allow them to compete with Walmart, Amazon, Costco and other nontraditional rivals. But regulators say the deal will lead to less competition, higher prices, job losses and fewer choices for consumers.
Albertsons may ultimately be sold to another rival
On Monday, an attorney for Albertsons painted a bleak picture of the future for the retailer if the merger isn’t approved:
“The backup plan is worse for consumers and workers … (Albertsons will) need to fundamentally change costs,” Enu Mainigi told the court, adding the retailer would have to consider potential layoffs, store closures and even retreating from entire geographic markets in the next few years. “It will be a candidate for sale to someone else.”
Kroger attorney: Injunction could kill the deal
Meanwhile, an attorney for Kroger predicted the retailers’ impasse with federal and state antitrust regulators could end quickly with the outcome of the hearing to decide whether to grant a preliminary injunction to block the merger sought by the Federal Trade Commission, which wants to kill the merger.
While an FTC attorney on Monday asked the judge to “push pause” on the deal to allow the agency to pursue its administrative case against the deal in Washington, D.C., Kroger attorney Matthew Wolf said the added delay would be too much for the business deal to go forward.
“This merger will not occur if this injunction is in place,” Wolf told the court.
Obsession with grocery pricing
After opening statements, the FTC called several retail executives to testify about how much they scrutinize rivals’ pricing and how they adjust their own prices.
Peter Van Helden, the CEO of Southern California grocer Stater Brothers, Tony Silva, a vice president at Albertsons, and Andy Groff, a Kroger executive, all disclosed they scoured reports on pricing of tens of thousands of items at rival chains. They all added they closely watched what traditional supermarket chains did with their pricing and would adjust their own prices to stay competitive.
Van Helden and Silva said they watched other traditional supermarket rivals, like Kroger, to keep their prices competitive. Groff said Kroger tracked traditional supermarket rivals to keep its prices lower and also tried to stay competitive with lower-priced Walmart.
The testimony was significant because the FTC is arguing competition in several communities would be hurt if two traditional supermarket chains were combined into one company. Kroger and Albertsons have argued grocery shopping in America has changed with consumers turning increasingly to mass discounters (like Walmart), online giants (Amazon), warehouse clubs (Costco), dollar stores (Dollar General), drug stores (CVS) and others to buy food.
Nonetheless, the retailers admitted they most closely tracked prices at traditional supermarkets. FTC attorneys indicated that showed how critical a role supermarkets still played in the industry. But Kroger and Albertsons executives said part of why they track supermarket data is because it was easier to obtain.
Union workers protest outside courthouse
Before the hearing, workers from several local chapters of the United Food and Commercial Workers International Union held a press conference calling for regulators to stop the deal.
“We’re fighting back because we know that the proposed mega-merger between Kroger and Albertsons would likely lead to job losses, store closures, pharmacy and food deserts, and higher prices, which would harm working families in both rural and urban communities across the country,” said Kim Cordova, UFCW International vice president and president of Local 7, representing workers in Colorado and Wyoming.
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Alexander Coolidge reports for The Cincinnati Enquirer.
