Since Kroger and Albertsons, two of the largest grocery chains in the country, announced plans for a merger almost two years ago, Jane St. Louis and her co-workers have been on edge. To assuage federal concerns about creating a grocery monopoly, the companies announced in April they would sell 579 locations of their various respective supermarket chains — including Mariano’s, Food 4 Less, King Soopers, Ralphs and Pick’n Save — to C&S Wholesale Grocers, the largest wholesale grocery supply company in the U.S. and current owner of the Piggly-Wiggly supermarket franchise.
St. Louis works at a Safeway, one of Abertsons’ subsidiaries, in Maryland and, while she and her fellow employees knew the merger would result in stores being sold, they had no idea which stores would be on the chopping block.
“You can’t imagine the anxiety we feel every day we come to work,” St. Louis said in a statement issued by a collection of representatives for United Food and Commercial Workers (UFCW) locals, the unions that represent many of the supermarket employees across the country. “We wonder: What will happen to our store? What will happen to our jobs? What about our pensions? Will I be able to retire after all these years?”
She continued: “You worry. You worry about your co-workers, your family and your customers. The uncertainty is causing a lot of anxiety.”
Kroger and Albertsons provided some answers in mid-July when they released the sprawling official list of locations that would be acquired by C&S if the merger were to be approved by the Federal Trade Commission, a reality that began to look less likely when, in March, the FTC sued to block the deal, alleging that it is anticompetitive. By since committing to divesting over 500 locations across the country, the supermarkets are obviously angling for federal approval in response.
However, a specter of uncertainty continues to shadow the deal, both as Kroger and Albertsons face numerous other lawsuits that are set to hit court later this month — and as community leaders nationwide begin to voice concern over whether their local grocery store would really be left in good hands were the merger to still go through.
As reported by Progressive Grocer, in February, Colorado Attorney General Phil Weiser filed a lawsuit in Denver District Court to block the merger. Kroger’s attempts to have the suit dismissed were ultimately unsuccessful and arguments in the Colorado lawsuit will begin on Aug. 12.
Similarly, Washington Attorney General Bob Ferguson filed an antitrust lawsuit in January in an attempt to block the merger. On April 26, a King County Superior Court rejected efforts by Kroger and Albertsons to dismiss the suit, which is scheduled to go to trial Sept. 16, according to Supermarket News.
There’s a risk that courts in both states might simply recommend additional divestiture as the solution, which is one that hasn’t sat well with representatives in Washington State, who, according to the Seattle Times, argue C&S is predominately a wholesaler and may not have the experience to successfully run the supermarkets it is set to acquire in the merger.
This isn’t a fear that’s unique to the state.
Since the release of the list, community leaders across the country have started taking tally of whether their local supermarket is one that will be affected in the merger. Representatives from C&S, Albertsons and Kroger have all maintained that no stores will close — and that no employees will lose their jobs or union benefits — as a result of the pairing, however that’s not historically been the case with large-scale supermarket deals like this, including Albertsons’ last merger.
As a refresher, in 2015, Albertsons wanted to acquire the Safeway brand, but would need to divest nearly 146 stores in order for the FTC to approve the deal (sound familiar?). The supermarket approached Haggen, a comparatively small grocery chain that had 18 stores with 2,000 employees scattered across Washington and Oregon, and offered them a way to explode into a 164-location brand with 10,000 employees essentially overnight.
Taken by the idea of expanding their footprint into California, Nevada and Arizona, Haggen quickly dropped $1.4 billion for the Vons, Pavilions and Safeways that Albertsons needed to jettison in order for the merger to be approved, but then buyer’s remorse quickly set in.
Haggen claimed Albertsons sabotaged the deal. Leadership from the company cited a few alleged transgressions; Albertsons, they said, reneged on providing Haggen with proprietary software needed for a smooth transition and purposely left the divested locations understocked so as to start new leadership on shaky footing. They then slapped Albertsons with a $1 billion lawsuit, which ultimately resulted in a $5.75 million cash settlement.
Six months later, Haggen filed for bankruptcy and closed a total of their 27 new locations, leaving thousands of union employees jobless for months, according to the UFCW.
However, according to a Kroger representative, the company is confident in its current divestiture plan.
“The comprehensive divestiture plan with C&S is critical to bringing the meaningful and measurable benefits of our merger with Albertsons to associates, customers and communities across America," the wrote via email.
The statement continued: "The divestiture plan ensures no stores will close as a result of the merger and that all frontline associates will remain employed, all existing collective bargaining agreements will continue, and associates will continue to receive industry-leading health care and pension benefits alongside bargained-for wages. C&S's strong operational focus coupled with its experienced management team and financial resources will position it to successfully operate divested stores for years to come. Importantly, we are committed to working closely with C&S to ensure a seamless transition of ownership for all divested stores and supporting operational infrastructure.”
Underpinning the entire conversation about the merger is another element of uncertainty, one that is decidedly more ambiguous and complicated, and that is the rapidly changing nature of the grocery landscape. Supermarkets in both urban neighborhoods and remote, rural areas are closing and being replaced by dollar and convenience stores. Simultaneously, companies that are already regarded by many as monopolistic, including Walmart and Amazon, are pushing even more steadily into the grocery segment of their businesses.
This is something Kroger’s chief executive officer, Rodney McMullen, told members of the Senate when he appeared before the Subcommittee on Competition Policy, Antitrust and Consumer Rights regarding the merger in 2022. McMullen pointed out that Kroger currently ranks fourth in total revenue among U.S. grocery retailers behind Walmert, Amazon and Costco.
A combined Kroger and Albertsons, McMullen argued, will remain at number four.
“While we firmly believe Kroger offers the best products at the best prices, we acknowledge both Walmart and Amazon have clear advantages,” he said. “Our combination with Albertsons will allow us to more effectively compete against non-union retailers, from Amazon and Walmart to Costco and Aldi.”
It’s unclear whether the federal courts will take that argument more seriously in light of the recently-released list of locations set to be divested. Kroger and Albertsons will have their first opportunity to test it out on Aug. 26 when the Federal Trade Commission will appear before a federal court in Oregon in an effort to halt the merger — though only temporarily, until the federal regulator can complete a full review of the deal.
UPDATE: This story has been updated with a statement from a Kroger representative regarding the planned divestiture.
