Krogers CEO says customers will see lower prices after chain merges with Albertsons

The two companies proposed combining forces in October 2022 after Kroger agreed to buy Albertsons. The Federal Trade Commission sued earlier this year to block the deal, saying the merger would eliminate competition and raise grocery prices at a time of already high food inflation.

McMullen responded to that argument by saying that Albertsons’ prices are 10 to 12 percent higher than Krogers’ and that the combined company would try to narrow that gap as part of a strategy to retain customers. Walmart currently controls about 22 percent of U.S. grocery sales. Combined, Kroger and Albertsons would control about 13 percent.

“We know prices will continue to decline,” McMullen said.

His statements and the upcoming testimony of Albertsons CEO Vivek Sankaran were expected to be key elements of a three-week hearing that is now halfway through. What the two say under oath about prices, potential store closures and the impact on workers will likely be scrutinized for years to come if the merger goes through.

Cincinnati-based Kroger operates 2,800 stores in 35 states, including brands such as Ralphs, Smith’s and Harris Teeter. Boise, Idaho-based Albertsons operates 2,273 stores in 34 states, including brands such as Safeway, Jewel Osco and Shaw’s. Combined, the companies employ about 710,000 people.

In the U.S. District Court case, FTC lawyers argued that in the 22 states where the two companies currently compete, they are similar in price, quality, private-label products and services such as in-store pickup. Customers benefit from that competition and would lose if the merger were allowed, they said.

The FTC and union leaders also say worker wages and benefits would fall if Kroger and Albertsons stopped competing. They also expressed concerns that potential store closures could create so-called food and pharmacy “deserts” for consumers.

Albertsons argues the deal could actually expand the number of unionized jobs because many of its companies, as well as Kroger’s competitors like Walmart, have few unionized workers.

Under the agreement, Kroger and Albertsons will sell 579 stores in the overlapping locations to C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets that also owns the Grand Union and Piggly Wiggly retail brands.

Speaking before the U.S. Senate Subcommittee on Competition Policy, Antitrust, and Consumer Rights in 2022, the Albertsons CEO said his company’s acquisition of brands like Safeway over the past decade has allowed it to grow its store count from 192 to 2,300.

“The intention is not to close stores. The intention is to get rid of stores,” Sankaran said at the time.

The FTC says C&S is not prepared to take on the stores. Laura Hall, senior counsel for the FTC, cited internal documents that indicated C&S executives were skeptical about the quality of the stores they would receive and may want the option to sell or close them.

C&S CEO Eric Winn testified last week in Portland that he believes his company can succeed in the endeavor.

The FTC is seeking a preliminary injunction blocking the merger while its lawsuit challenging the deal goes to an administrative judge. U.S. District Judge Adrienne Nelson was expected to hear from about 40 witnesses before deciding whether to issue an injunction.

If it decides to temporarily block the merger, the FTC plans to hold internal hearings starting Oct. 1. However, Kroger sued the FTC last month, arguing that the agency’s internal proceedings are unconstitutional and wants the merger’s validity to be decided in federal court.

Attorneys general for Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon, and Wyoming joined the FTC’s lawsuit on the commission’s side. Washington and Colorado filed separate cases in state courts seeking to block the merger.