Last week's announcement that Kroger intends to spend $24.6 billion to buy Albertsons has been met with mixed reactions from independent grocers, who already face stiff competition from grocery retail giants.
Next month, the Senate will hold a hearing to examine the proposed merger and the combined entity willalso be under review from the Federal Trade Commission (FTC), which raises the question of whether enforcement of U.S. antitrust laws such as the Robinson-Patman Act will be adhered to.
“While I think the FTC will ask for some trimming of the combined entity, I sincerely doubt there will be any application of the Robinson-Patman Act,” Ryan Mathews, a former journalist, editor, publisher and declared “philosopher of e-commerce” by Wired magazine, told WGB.
The Washington, D.C.-based National Grocers Association (NGA), which represents 21,000 independent grocers throughout the U.S.,will be monitoring the situation closely as it moves through the regulatory process and recognizes there are concerns for independent grocers regarding the merger.
“The merger would create a second indispensable buyer for suppliers,” NGA told WGB. “With grocery reconsolidation comes increased leverage of the consolidated firms, which allows a handful of players to command preferential terms from suppliers. That works against the ability of the independent grocer to compete for better terms on everything from pricing to allocations of goods in short supply. In turn, independents must compete in other areas, such as quality, convenience, customer service and other actions that promote customer loyalty, which can be a challenging task in the current inflationary environment.”
Independent grocers and industry experts are weighing both the pros and cons of the proposed merger.
“There is no reason to allow two of the biggest supermarket chains in the country to merge—especially with food prices already soaring,” said Sarah Miller, executive director of the American Economic Liberties Project, in a statement. “With 60% of grocery sales concentrated among just five national chains, a Kroger-Albertsons deal would squeeze consumers already struggling to afford food, crush workers fighting for fair wages, and destroy independent, community stores. This merger is a cut and dry case of monopoly power, and enforcers should block it.”
With the likelihood of store closures in some areas, independent grocer Natural Grocers sees opportunity for new shoppers to visit its stores.
“As many have pointed out, without these companies competing against each other, prices could go up and their stores may close to eliminate redundancy,” Lakewood, Colorado-based Natural Grocers told WGB. “Many people will be looking for alternative places to shop for better prices, closer proximity or a better shopping experience. We look at the planned merger between Kroger and Albertsons as an opportunity to reach folks that may not be readily familiar with us.”
Founded in 1955, Natural Grocers by Vitamin Cottage, Inc. operates in 21 states and has 164 stores. “If the merger goes through, this could be a catalyst for some customers to give us a chance. And then it’s up to us to win them over with our high-quality product selection,” the grocer said.
For some independent grocers, the gap between dominant and smaller players is more about an opportunity for smaller grocers to adjust their lens when it comes to the consumer.
“A Kroger-Albertsons merger puts independent grocers like Barons Market in a unique position to nurture and cultivate connections with potential shoppers, current customers and the community. Simply put, we do things differently and better than the large grocery stores,” said Rachel Shemirani, SVP of independent grocerBarons Market, a family-owned and -operated grocer with nine stores in Southern California.
When big grocery chains merge, these organizations tend to focus on the bottom line rather than their customers and employees, Shemirani explained.
“As with any merger, layoffs or potential store closures could be on the horizon. So, what do you do when your favorite grocery store closes or your grocery store bestie is laid off? You search for that sense of community elsewhere,” Shemirani said in a statement.
Looking for a silver lining, Shemirani sees this proposed merger as an opportunity for showcasing the strength smaller grocers have with their shoppers.
“If and when this merger is finalized, it will shine a spotlight on the flexibility, heart and passion that independent grocery stores have," she said. "Giving us the opportunity to potentially open new stores, attract and retain quality talent and better serve our community.”