Kroger which is the largest supermarket operator in the U.S., with 420,000 employees and more than 2,700 stores, including Ralphs, Harris Teeter, Fred Meyer, and King Soopers is planning to merge with Albertsons.
Albertsons is the country’s second-largest supermarket company, with 290,000 employees and almost 2,300 stores, including Safeway and Vons.
Together, Kroger and Albertsons manage nearly 5,000 stores across the country, as well as pharmacies and gas stations. But their combined annual revenue of $209 billion last year falls short of Walmart’s annual grocery sales (their biggest competitor), of about $218 billion.
Not many people are too happy about the merge, as it is coming when the prices of groceries are high, so the resulting grand supermarket chain would be under national scrutiny.
The deal, which values Albertsons at about $24.6 billion including debt, is likely to invite severe scrutiny from regulators who are focused on the potential for large companies to influence prices and have a history of blocking deals that may directly affect consumers.
Most mega grocery stores are dealing with considerable pressure as inflation cuts into their profit margins and customers return to eating outside their homes. That’s while Amazon and Walmart have delved into the digital and delivery parts of their businesses.
In the Friday announcement, Kroger said it would “reinvest approximately half a billion dollars of cost savings from synergies to reduce prices for customers” and invest $1 billion to raise wages and benefits for workers.
To address regulatory scrutiny, The two supermarket giants said they planned to sell stores to competitors and would consider spinning off between 100 and 375 stores into a separate stand-alone company.
Consumer protection groups raised concerns about the deal following reports of a possible merger on Thursday.
The American Economic Liberties Project, a nonprofit that promotes antitrust legislation, criticized it as a “bad deal for consumers, workers, and communities.”