Merging grocery giants threaten Americans’ food security

Why are we talking about grocery store mergers?
 

Last October, Kroger and Albertsons announced a planned merger that would create a single entity that could control 22 percent of the US grocery market—second only to Walmart’s 25 percent share of US grocery purchases. It’s the largest proposed grocery merger in history, but it isn’t the first. Over recent years, grocery retail consolidation has seen a rapid uptick. 

Big expansion, shrinking options

The store chains affected by the proposed Kroger-Albertsons merger include Ralphs, Dillons, Smith’s, King Soopers, Fry’s, QFC, City Market, Owen’s, Jay C, Pay Less, Baker’s, Gerbes, Harris Teeter, Pick N’ Save, Metro Market, Mariano’s, Fred Meyer, Food 4 Less and Foods Co.—all controlled by Kroger—and Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci’s Food Lovers Market—all controlled by Albertsons. 

That’s a long list. And the outlook for grocery consumers—that is to say, all Americans who shop for food—is not great. Writing for the Los Angeles Times in 2018, David Lazarus’s column (bearing the headline “When companies say a merger will result in lower prices, try laughing in their face”) summed up how corporate anticompetitive and anticonsumer maneuvers affect all of us:

“We’ve seen it again and again — in the phone industry, the cable industry, the drug industry, the insurance industry, the banking industry, the oil industry. Companies merge, prices go up, service declines.”

Since 2018, grocery and food deliverymergers and acquisitions have been forging ahead at full speed. High-dollar and high-stakes deals between Instacart and Walmart, Misfits Market and Imperfect Foods, Uber and Drizly, and a suite of regional chain mergers have been overshadowed by the Kroger-Albertsons announcement—at $24.6 billion, the largest grocery merger in history—but each of these moves matters: Consolidation in the grocery market, including from mergers and acquisitions, has been associated with increased grocery prices in highly concentrated markets. Mergers inevitably close stores, and citing the most recent data from the U.S. Department of Agriculture, NPR reported in April 2023 that “76 counties nationwide are without a single grocery store, and 34 of those counties are in the Midwest and Great Plains.” Fewer stores can’t fix either of those problems.

What grocery store mergers mean for shoppers

Everyone needs food, so grocery store decisions like mergers and acquisitions create real changes in people’s everyday lives. Here’s what to expect if grocery store giants continue to buy each other up.

Higher food prices

Grocery prices have increased 20.4 percent since 2018. Meanwhile, household incomes have not kept pace; the Atlanta Regional Commission reported in January 2022 that “since 2018, real wages nationally have grown modestly–by about 3.1%.”

When grocery store chains merge, they reduce competition. And when grocery chains don’t have adequate competition, they can raise prices without losing customers. 

Already historically high food prices are keeping Americans from accessing enough food and healthy food. An increase in the price of groceries driven by mergers and acquisitions is likely to make accessing healthy, affordable foods even harder.  

Fewer grocery stores

Following major acquisitions, chain stores that don’t perform well tend to close within months. In deals like the one between Kroger and Albertsons, regulators may require the companies to sell some stores to avoid the new megacompany from owning all of the stores within a particular location. And both options are bad for our pocketbooks. 

“Corporate consolidation can drive up food prices and reduce access to food,” Amanda Starbuck, policy analyst at Food & Water Watch, told The Guardian. “Supermarket mergers drive out smaller, mom-and-pop grocers and regional chains. We have roughly one-third fewer grocery stores today than we did 25 years ago, according to the US census bureau.”

In communities with few options, the closure of a single store can create a monopoly for the single surviving store—and an opportunity to gouge consumers at the checkout. That’s bad news for everyone, but it’s especially bad news for consumers with fixed or limited incomes. For SNAP participants, seniors on a fixed income, people receiving disability, and others, rising prices means decreased purchasing power, thereby reducing the actual value of their assistance. Many of these same consumers, for health or financial reasons, are unable to travel farther to purchase food, further limiting their options and making them vulnerable to price gouging. Combined with long-stagnant wages, the outlook for American food shoppers is grim.

We know that living far away from a full-service grocery store makes it harder to access a nutritious diet, especially for people experiencing poverty. Almost forty million Americans already live in areas that have low incomes and low food access. As grocery chains have merged and competition has decreased, there has been a marked decrease in the number of grocery stores. Black and Latine communities already have less access to healthy food retailers, and the proposed merger is likely to have a greater impact in areas where food access is already limited, potentially worsening inequities. 

Speaking to The Guardian, Stacy Mitchell, a co-executive director of the Institute for Local Self-Reliance, a non-profit that helps communities attract grocery stores and other services said, “This merger is incredibly dangerous. It’s highly likely if it goes through it will result in more communities not having a grocery store.”

Grocery chain consolidation and workers

Grocery store workers face deep uncertainty with grocery retail acquisitions and mergers on two fronts. Their grocery budgets will have to expand to meet rising prices, along with everyone else, and they face potential job losses that could eliminate their food budgets entirely. 

Safeway employee Kelly Kick, a unit member of United Food and Commercial Workers Local 5 in Concord, California, is worried for her future and those of her coworkers, customers, and community if the Kroger-Albertsons merger is approved by the FTC.

“This merger could have devastating consequences—my co-workers and I would be out of a job if they wanted to close stores,” Kick said in a statement with Stop the Merger, “and my customers would struggle to get fresh food. My store is in one of the poorer areas of the community and so many of my customers are already on food assistance. There are not a lot of grocery store options, so I don't know what people will do if my store closes, or if they raise prices on products because of the merger.” 

Kick is not alone. Testimonials from grocery workers across the US, collected by the Stop the Merger coalition, indicate concerns from employees who worry their stores will be closed as the grocery landscape shifts to feed more megacorporations instead of people. They’ve seen this happen before, when Albertsons acquired Safeway in 2015. A small competitor, Haggen Foods & Pharmacy, purchased more than 100 stores the FTC required Safeway and Albertsons to divest. Nine months later, Haggen was bankrupt and many of those stores were closed—along with another 100 or so closed by Albertsons. 

Lawanna Archer, a Vons employee in Gardena, California, remembers that time clearly. “The deal between Albertsons and Haggen in 2015 was really bad for workers,” Archer recalled in a statement during an FTC open commission meeting. “I saw massive layoffs, cars being repossessed, foreclosures, and loss of benefits. I am a single mother and I provide for my daughter and myself. The Kroger and Albertsons merger could possibly impact us in the most harmful way ever.”

Grocery mergers impact farmers, too

It’s easy to forget where our food comes from as we’re perusing the aisles. But with consolidation, grocery companies gain more buying power, undercutting small stores’ and small suppliers’ ability to compete. For farmers and small suppliers, fewer buyers means they have less ability to negotiate with grocery chains. This can mean lower prices (to the grocery chains, not the consumers). 

Shad Dasher, a third-generation farmer in Glennville, Georgia, explains: “It used to be that a small to medium-sized farmer could carry his produce to a mom-and-pop grocery store chain and bicker with the produce manager, and you’d have your fresh produce sold within 20 miles of the farm.” But that’s not the case anymore. “The circle is getting smaller and smaller to sell to,” Dasher says. 

That means the prices farms are paid for their produce, meat, dairy, and other food products go down, too.

“As a general matter, the larger size of the combined retailers will increase their purchasing power, granting them the ability to force down prices paid to members of their upstream supply chain, including producers and farmers,” said Gregory Gundlach, marketing and logistics professor at the University of North Florida and treasurer of the American Antitrust Institute. 

How CSPI is working to help

To avoid worsening the food access crisis in America, further grocery price hikes, and job losses for grocery workers, CSPI has called on FTC to block the proposed merger of Kroger and Albertsons.

“Food prices are higher than ever before, and forty million Americans live in areas with low incomes and limited access to healthy, affordable food,” said CSPI president Dr. Peter G. Lurie. “The proposed merger of Kroger and Albertsons will likely mean higher prices, fewer stores, and less competition. It might be a good move for executives and shareholders, but the merger would be an economic blow to Americans, especially those whose jobs would be lost post-merger.” 

In addition to outlining our concerns about the Kroger-Albertson’s merger, we have joined the Stop the Merger coalition led by local chapters of the United Food and Commercial Workers and other labor and economic justice organizations concerned with job losses, higher food prices, and negative impacts on farmers and suppliers resulting from the merger.

What you can do to help

Giant grocery mergers are bad business for everyone but grocery retail stakeholders. Join us and let the FTC know that profits and dividends should not outweigh the health of our families and communities.

Check out Stop the Merger's resources, and share explainers like this article or the video below. This merger affects everyone, but there's good news: The Kroger-Albertsons merger is not yet approved by FTC. There is time to put the brakes on this rampant consolidation of food retailers—and the harm it will do to everyday Americans, who ultimately just want to be able to eat safe, nutritious food without going broke or travelling to another county to shop.