Kroger: Controversial Albertsons merger means lower prices and better stores

People enter an Albertsons location at the Desert Ridge Marketplace in Phoenix on March 7, 2023.

The Kroger Co. repeated its promises of potential benefits of its pending acquisition of Albertsons Cos., with the company pointing to past success in lowering prices and upgrading stores in two prior mergers. The planned combination, on track to be completed by August, will have profound effects on shoppers as well as employees in Arizona.

Kroger, the parent of Fry’s Food Stores and a handful of Smith’s locations in Arizona, cited its ability to lower prices, upgrade stores and improve customer experiences. The company cited similar results after its 2014 purchase of Harris Teeter, a supermarket chain with stores in the Southeast, and following the 2016 merger with Roundy’s, a chain centered in Wisconsin and Illinois.

“We believe the way to be America’s best grocer is to provide great value by consistently lowering prices and offering more choices. When we do this, more customers shop with us and buy more groceries, which allows us to reinvest in even lower prices, a better shopping experience, and higher wages,” said Rodney McMullen, chairman and CEO of Kroger, in a statement released Feb. 13.

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“We know this model works because we’ve been doing it successfully for many years, and this is exactly what this merger will bring customers — lower prices and more fresh, affordable choices.”

More enhancements planned

Kroger last month delayed its planned acquisition of Albertsons, which also owns Safeway stores, from early 2024 to sometime around or before mid-August, amid ongoing dialogue and even pushback from some regulators. The Federal Trade Commission hasn’t yet approved the deal, Washington state filed a lawsuit to block the merger and various politicians, including Arizona Secretary of State Adrian Fontes, have come out in opposition.

However, Kroger in its latest statement, repeated the expected benefits of the combination including lower prices, better product selection, store enhancements, more convenience, an upgraded customer experience and enhanced pay and benefits for employees. The company also reaffirmed that it wouldn’t lay off any “front-line” employees if the merger goes through. The front-line definition includes all in-store workers.

Kroger and Albertsons each count around 130 stores in Arizona, which would be one of the most affected states because of the broad presence of both companies here. C&S Wholesale Grocers has agreed to purchase 24 of those Albertsons stores in Arizona, presumably where a Frys is located nearby.

Kroger said its post-merger enhancement strategy has resulted in $5 billion in customer savings with more affordable products since 2003, including at the acquired Harris Teeter and Roundy’s locations. Kroger also said it has reduced its gross margin by 5% over the past 20 years, while various other competitors have increased theirs.

Chains facing stiff competition

Management teams at Kroger and Albertsons contend the merger is justified in an increasingly competitive grocery landscape. That competition includes giant nonunionized chains such as Walmart, Amazon, Costco and Target along with various regional supermarket chains, dollar stores and specialized food retailers including Whole Foods, Sprouts, Natural Grocers and Trader Joe’s/Aldi.

Kroger affirmed its commitment to invest $500 million to lower prices following completion of the Albertsons merger and $1.3 billion to improve the stores that it acquires. The combination could result in a supermarket giant with more than 700,000 employees.

Kroger has repeated that it won’t close stores following the merger though, as noted, it plans to spin off two dozen Arizona locations to C&S.

Kroger ranked as the fourth largest nongovernmental employer in Arizona with 20,200 workers and Albertsons ranked seventh with 14,500 as of last September’s Republic 100 report on largest statewide employers.

Kroger also has promised a $1 billion investment in wages and benefits including up to $21,000 in tuition reimbursement for associates, including part-time workers.

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This article originally appeared on Arizona Republic: Kroger: Controversial Albertsons merger means lower prices and better stores