Grocery Carts
Grocery Carts
Grocery Carts
Grocery Carts
Grocery Carts

Looking Hard at the Grocery Megadeal

Nov. 4, 2022
What are the implications of Kroger’s purchase of Albertsons for food processors?

If I were a major food processor, I would be sending a big, fat bouquet of roses right now to Bob Ferguson, the attorney general for Washington state.

Ferguson got a judge to agree to an injunction stopping Albertsons, the huge grocery chain, from making a $4 billion payout to its shareholders in advance of an acquisition by Kroger, an even bigger chain. Despite Albertsons’ demurrals, the payment is an obvious sweetener to make the deal go down easier; more importantly, it would leave Albertsons with very little cash to continue operating independently, making the acquisition all but inevitable.

If Kroger buys Albertsons, it would be a marriage of America’s No. 1 and 2 pure-play grocers, with unavoidable effects on competition. Almost all of the attention has been focused on the bad consequences this would have for consumers. But what about the processors who would have to supply this new behemoth?

Let’s face it: The relationship between processors and their retail trade customers has always been more adversarial than cooperative, because processors want higher prices for their goods and retailers want to keep prices down. This is especially true in inflationary times, when processors keep trying to make product price increases “stick,” while retailers worry about the effects on sales. This plays out in battles, not only over prices, but discounts, promotions, etc.

If Kroger is allowed to swallow Albertsons, the new entity will be close to the only game in town in many markets, especially in the Midwest. The feds will probably make the new company divest stores in some markets, but it’s hard to believe that they’ll be able to maintain the current level of competition everywhere.

The one bright spot is that Kroger is very advanced when it comes to shopper analytics. If it’s willing to share that data with its supplier partners – a big “if” – there’s the potential to greatly increase supply-chain efficiency. But I suspect most processors would find that cold comfort when faced with a “here’s our price, take it or leave it” situation in an important market.

The Kroger-Albertsons deal is going to get a lot of well-deserved scrutiny. Processors should be grateful for anything that slows it down. And also remember that gratitude if the shoe ever  ends up on the other foot.

About the Author

Pan Demetrakakes | Senior Editor

Pan has written about the food and beverage industry for more than 25 years. His areas of coverage have included formulations, processing, packaging, marketing and retailing. Pan worked for Food Processing Magazine for six years in the 1990s, where he was operations editor (his current role), touring dozens of food plants of every description. He has also worked for Packaging and Food & Beverage Packaging magazines, the latter as chief editor, during which he won three ASBPE awards. He is a graduate of Stanford University with a BA in communications.