What a major grocery merger means for consumers
Two of the largest grocery store chains in the country are planning to merge. Kroger’s announced last Friday that it will buy its competitor Albertsons for nearly $25 billion. Together, Kroger and Albertsons have about 5,000 stores and almost 750,ooo workers. This deal could change the way people buy food, as inflation pushes prices higher and higher.
- Plus, ten years of Xi Jinping’s leadership in China, and how the next five could affect the US.
Guests: Axios’ Claire Rychlewski and Bethany Allen-Ebrahimian.
Credits: Axios Today is produced by Niala Boodhoo, Sara Kehaulani Goo, Alexandra Botti, Fonda Mwangi, and Alex Sugiura. Music is composed by Evan Viola. You can reach us at [email protected]. You can text questions, comments and story ideas to Niala as a text or voice memo to 202-918-4893.
- Kroger snaps up Albertsons in grocery megamerger
- Kroger-Albertsons will spur more deals
- What China looks like after a decade of Xi Jinping's rule
NIALA: Good morning! Welcome to Axios Today!
It’s Monday, October 17th.
I’m Niala Boodhoo.
Here’s what we’re covering today: ten years of Xi Jinping’s leadership in China – how the next five could affect the US.
But first, what the merger of two of the country’s biggest grocery store chains means for American consumers. That’s today’s One Big Thing.
NIALA: Two of the largest grocery store chains in the country are merging. Kroger's announced last Friday that it plans to buy its competitor Albertsons for nearly $25 billion. Together Kroger and Albertsons have about 5,000 stores and almost three quarters of a million workers. The deal could also change the way people buy food as inflation pushes prices higher and higher. Axios Pro Editor Claire Rychlewski is here with the big picture.
Claire for consumers, how this merger plays out depends a lot on where you are. What would it look like, for example, in Chicago?
CLAIRE RYCHLEWSKI: Yeah, so I'm in Chicago where we could see Kroger and Albertsons through their subsidiaries, including the pretty major supermarket chains, Jewel and Marianos either closed or merged together. And, you know, especially in other markets, like in the West Coast, I think there's over 150 combined Kroger Albertson stores in Los Angeles alone. They own Ralphs, which is one of the major supermarkets in Los Angeles.
Kroger and Albertsons have said they're going to spin off 375 stores into like a new company. And that could include just selling it off to, you know, competing grocery chains or other potential buyers. You have to wonder, like, who's gonna buy those stores, who has the capital to actually maintain competition with a newly joined grocery store behemoth of Kroger Albertsons. For example, when Albertsons bought Safeway back in 2014, 2015, it had to sell off like 150 stores to a competitor called Haggens. Haggens ended up filing a suit against Albertsons for anti-competitive tactics and then filed for bankruptcy the next year and sold all of those stores back to Albertsons.
Essentially just like circumventing the entire anti-competition. So, if I were an FTC official, for example, I would really be looking very granularly at the local markets and what the actual competitive landscape looks like and, you know, if this is fair to the consumer.
NIALA: To your point about the FTC, first of all, this deal has to be approved by the FTC and there has been some backlash. Bernie Sanders called for the Biden administration to block the deal. He said in a tweet that the merger would be an absolute disaster. What have we heard from Washington so far?
CLAIRE: So, the Biden administration has made promises to be a little more stringent on mergers. I think he's instated an FTC that is going to be, habits tackles raised, in terms of anti-competition. But you know, we've seen large mergers go through before, so it's kind of hard to know how they're gonna react. But, this is not the best macroeconomic environment to be championing a mega merger when inflation is as it is with the supply chain pressures driving those prices even higher and consumers are very wary of a looming recession. And this is also just a deal that people hear about, right? Like everybody goes to the grocery store. Everyone is gonna feel the impact of this or feel a perceived impact of this.
NIALA: So Kroger did say in a statement, it plans to invest in lowering prices for consumers. Realistically, when we know how high food prices have gone, what would that look like?
CLAIRE: Kroger and Albertsons have committed, I believe, half a billion dollars toward price reductions.They haven't gone into exactly what that looks like. I will say half a billion against a $25 billion merger is sort of an interesting ratio. But, potentially I think something to be said for their combined purchasing power in terms of being able to negotiate with vendors on price.
NIALA: What happens next here?
CLAIRE: So, next this is in the FTCs hands. I think Kroger and Albertsons get into just sort of figuring out how they can make this deal work and get across the finish line. It's set to close in early 2024. That could be optimistic. It's a huge merger, it's a huge price ticket. So, it's really in the regulator's hands now.
NIALA: Axios Pro Editor Claire Rychlewski. Thanks, Claire.
CLAIRE: Thank you so much.
NIALA: After the break, Xi Jinping looks to hold on to power in China.
Ten years of Xi Jinping’s leadership in China, and how the next five could affect the US
NIALA: Welcome back to Axios Today. I'm Niala Boodhoo.
The National Congress of the Chinese Communist Party, that began yesterday, happens every five years and usually this is a leadership reshuffling. But, Xi Jinping, who's been the leader of the party for the past decade, is expected to continue his role in an unusual third term. Here to explain how China has changed over the past decade under Xi and what the future holds is Axios’ China Reporter Bethany Allen-Ebrahimian. She's based in Taiwan. Hi Bethany.
BETHANY ALLEN-EBRAHIMIAN: Hi, Niala.
NIALA: Since Xi first assumed power in 2012, China's economy has more than doubled. How has he used China's economy to expand its geopolitical power?
BETHANY: Well, what he's done is he has strengthened the state's control over foreign access to the economy at every level, and he has made it contingent upon companies, individuals, movie studios, and foreign governments towing the Chinese Communist party line. And that has obviously greatly encouraged and motivated people to at a bare minimum not speak out against what Beijing wants or in some cases to actively promote it.
NIALA: Bethany, we saw this most recently in Xinjiang, where many multinational corporations committed to no longer using products that maybe were produced with slave labor from the oppressed, weaker minority. Is that an example of what you're talking about here? Because we haven't heard very much about that lately.
BETHANY: Oh, exactly. So a good example of this would be H&M or Hugo Boss. Those companies both used Xinjiang cotton in their products. And Xinjiang cotton is known for being very high quality. However, cotton in Xinjiang is very closely linked to Uyghur forced labor. And so after these companies stated publicly that they would no longer use Xinjiang cotton, there was a big state fan consumer boycott in China that cost both of these companies a lot of money, especially H&M. And since then, they have gone pretty quiet about exactly what their relationship is with products from Xinjiang.
NIALA: I wanna ask you about in 2016, the Chinese government scrapped its decades long one child policy. What has the population chart looked like over the past decade for China and what are we expecting in the future?
BETHANY: Well, the birth rate has certainly not risen and in fact continues to decline. And, so we're looking now at what is likely the beginning of population decline in China. And now many countries around the world are experiencing population decline. But what's different in China is that it's not as wealthy a country as you typically see these population declines begin to occur. When you have an aging population that's putting pressure on social welfare on the working population who's supporting the elderly people, that really puts pressure on, you know, people's economic resources and can make in terms of, you know, China's position in the world, it's concerning to its leaders.
NIALA: Bethany, I'm guessing we didn't hear any of this conversation from Xi Jinping yesterday when he addressed the Chinese National Congress.
BETHANY: Well, he talked a lot about security. In fact, he said the word security about 50 times in his speech. He talked about the dangerous storms that are facing China. He talked about the challenges that what he said, you know, the Communist Party has led China through including COVID. Really, what he was doing, sort of issuing a warning to China to the population saying, look, the next five years are gonna be difficult, but he promised that he would continue to lead China in the right direction through that.
NIALA: And how do we anticipate the Biden administration or other western governments will respond to all of this?
BETHANY: Well, it's interesting because the Biden administration finally just released its national security strategy a few days ago. They also are very clearly focused on China. They mentioned China in some form more than 50 times as well. So you know, here you have this situation where China is very, very clearly laser focused on the US. The US is very clearly laser focused on China, and they both are feeling threatened and vulnerable.
NIALA: Bethany Allen-Ebrahimian is the author of the Weekly Axios China newsletter that she writes from Taiwan. Thanks Bethany.
BETHANY: Thank you Niala.
NIALA: That’s it for us today! You can always reach our team at podcasts at axios dot com or you can text me at (202) 918-4893.
I’m Niala Boodhoo - thanks for listening - stay safe and we’ll see you back here tomorrow morning.
NIALA: Kai Wright grew up in the Black church. And his favorite part was the hugs, the winks, the check-ins with people. Join him to gather, process, and figure out where this country is going, together. Find Notes From America wherever you get podcasts.