Updated Oct 14, 2022 - Economy

Kroger pledges to reduce prices after Albertsons deal

Illustration of an Albertsons' grocery bag inside of a Kroger's bag.

Illustration: Shoshana Gordon/Axios

With inflation raging, Kroger on Friday pledged to use its proposed acquisition of rival Albertsons to reduce prices.

  • That promise could help sell the deal. Still, experts and consumer watchdogs are split on whether a combined grocery chain behemoth will ultimately come to fruition.

Driving the news: On Thursday, Kroger confirmed its plans to buy Albertsons for about $24.6 billion, in a deal that pairs up two of the nation's four largest food retailers.

  • Part of the announcement: "Kroger plans to invest in lowering prices for customers and expects to reinvest approximately half a billion dollars of cost savings from synergies to reduce prices for customers," the company said in a statement.

State of play: Together, Kroger and Albertsons have about 5,000 stores, 4,000 pharmacies and about 2,000 fuel centers — not to mention dozens of distribution centers and manufacturing plants.

  • In other words, their collective purchasing power is significant — so they should be able to extract concessions from their vendors.
  • Albertsons has "long trailed Kroger in terms of their pricing, and I do think this can have a real positive impact," Ken Fenyo, a former Kroger executive who now serves as president of research and advisory at Coresight Research, tells Axios.

Yes, but: Consumer watchdogs are questioning Kroger's sincerity, expressing concern about the impact on customers already grappling with surging food inflation.

  • "With food prices rising, the last thing Americans need is a supermarket merger that will spike food prices even further," Robert Weissman, president of Public Citizen, said in a statement.
  • "Rejecting this merger proposal should be a no-brainer for federal antitrust officials,” he added.

By the numbers: About 1 in 3 Kroger shoppers also frequent Albertsons locations — and the other way around, according to ShopperScape data provided by Kantar.

  • Kroger's brands include Harris-Teeter, Fred Meyer and Roundy's, while Albertsons' include Safeway, Jewel-Osco and Acme.

What to watch for: Whether the Biden administration seeks to block the deal, or extract concessions like the divestiture of sales.

  • Coresight's Fenyo said Kroger may want to sell off some of its overlapping locations anyway — but on the whole, "there's plenty of competition" in food retail, he said.
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