"...executives for both supermarket chains have conceded that Kroger’s acquisition of Albertsons is anticompetitive, with one executive reacting candidly to the proposed deal: “you are basically creating a monopoly in grocery with the merger.”
IOW - These businesses are not awash in cash and profits. A slight increase in costs (wages, etc) would wipe out their profits or put them in the red. A slight decrease in costs or increase in prices would help their business quite a lot.
Also, the grocery business overall is very fragmented and local, despite some large chains. And grocers most certainly do not have any ability whatsoever to control market prices or market wages. They are "price takers" in both cases.
Their combined market share would be only ~12%, putting them in second place behind Walmart at ~18%
https://www.foodnavigator-usa.com/Article/2022/10/14/kroger-...
There is a long, thick (hold your jokes) tail of grocery stores getting the remaining 3/4 of the market. This is not even remotely a monopoly situation.
Regardless of your financials provided, the consolidation (once combined) increases their power against suppliers, workers, and consumers. The business must be kept in tension as a defense against well worn maliciousness of corporate actors.
If their costs go up (labor, food suppliers), their prices will go up (and perhaps some margin impact). Combined, they will do the same as landlords, chicken processors, pharma, and so on if allowed to do so: use their power to entrench, collude, and extract. Being in business should not be comfortable. Competition and limited corporate power is the desired end state, work backwards to implementation details.
>IOW - These businesses are not awash in cash and profits.
$2 Billion is nothing to sneeze at. Not "we make 39 billion a quarter" good but how is this not a healthy business that is unable to compete on their own? Grocery isn't a fast changing iterative business like software, for example
As you identify in your post, the grocery business is highly localized. The FTC identified a ton of cities where their merger would significantly reduce competitive grocery store options. In my city, there are already regions where it's basically a food desert besides the local Kroger and Albertson's chain. If they merge, probably one of the two shuts down, but even if not, the lack of competition means the entire community is at the whims of the regional manager in terms of prices, employment, and overall store quality.
Good. These are already two giant grocery store corporations, there's little reason to support this and a lot of reasons to oppose.
We need more competition, not less. Really wish we could get Aldi or Lidl up in the PacNW. Yeah, there's Trader Joe's as a pseudo-Aldi owned by Aldi, but I'd love the real thing too.
Oh, there's more than that where I live, if you count all the different grocers.
But it's nowhere close to how competitive grocers in Germany felt to me, when I recently lived in Munich. Where I'm at, the only nearby discount grocer is Grocery Outlet; in Munich, there was Aldi, Lidl, Netto, and Penny, all in less than a 10 minute trip by bike.
Good. Two of the closest grocery stores to me are Fred Meyer and Safeway. They'd probably close the Safeway if this merger goes through. I'm happy enough with FM most of the time but I like having Safeway as an alternative, because they have options FM does not.
I'm not so sure. They like to give consumers the illusion of choice. I live in California and there's lots of Vons right next to Albertsons, and the same company owns both.
I have the same options and personally I'd be perfectly happy to let one or the other go. Ideally it'd make room in the market for something new, since these are almost exactly the same and scarcely a mile apart. There are also plenty of other grocery stores in precisely the same area: both Town and Country Market and Trader Joes, as well as the Ballard farmer's market.
It's strange to me the way that people talk about these stores as if they were their personal property, and theirs to decide whether or not they shut down, without even a mention about the very practical reasons these stores might have to merge or shut down (which may end up happening anyway, even if the merger fails).
if you don't drive, your options are significantly more limited.
Ballard has an unusually high amount of grocery stores for the Seattle area and it's expensive, so it's not like people can just move to Ballard to find competition
Sanity prevailed. It’s not like we need to be gouged even harder for the trash they mostly sell. If folks are still going to “American” grocery stores, go to a local Korean grocery store to see what groceries should look like. Large assortment of fairly inexpensive fresh produce, good meats, some even attractively priced, lots of fresh (even live!) fish and seafood. What prevents Kroger from not giving everyone diabetes, IDK.
If the evidence coming out now is any indicator, I think we will continue to be gouged. The failure of this merger does not suddenly eliminate all of the anti-competitive intent in the executives.
If anything this underscores the fact that this (and many other market segments) are dominated by cartels that actively collude in ways that harm consumers. And the government won't do a damn thing about it.
It's bizarre at my local Wal-Mart. Cursory selection of rotting, fly-covered (no exaggeration) produce, and then 50 shelves of packaged food. Of the shelves - there is exactly a quarter aisle for canned vegetables and another 1 3/4 just for Nabisco products
And also, no plastic bags, but most of the stuff being sold is wrapped into 1-3 layers of thick, non-biodegradable plastic. Even cucumbers. Makes no sense whatsoever.
Kroger-Albertsons together would have less than half the marketshare of Walmart. It's closer to a third if you include Sam's Club. In practice it would be even less than this, because they're planning to spin off a quarter of the stores.
The decision to set the precedent that union shops can't buy each other is also odd. If non-union stores are allowed to expand but union chains are not, that is invariably setting grocery store unions on a path to shrink even further.
Why is collective bargaining power a concern of the FTC? I would have thought that bargaining power would have increased with a merger (despite being smaller overall with layoffs).
As the article points out there are metros where Kroger and albertsons are close to a duopoly. We dont have walmart in my area, only option other than kroger or albertsons is target or aldi, neither of which are really competing with the traditional grocery store business kroger/albertson run.
I despise Kroger. I moved from Texas with fantastic HEB, and virginia with Publix to Colorado and we already had absolutely trash grocery stores, but now Kroger owns all of the major ones here. King soopers, etc. Absolutely trash stores.
Cannot believe they keep letting them take over grocers.
Maybe build a new Kroger in all of our food deserts instead of turning a halfway decent store into a dumpster? I live downtown and my nearest real grocery store is a 20 minute DRIVE away. I shop at 711 more than a grocery store outside of instacart.
It's tough for a business to operate in lower volume areas. The fact that you have a real grocery store a drive away probably indicates that there's enough volume at that location to keep prices low. While the added at the sticker overhead of keeping a smaller branch stocked near you might be enough to poison the well of customers by sending some on that drive to save money overall.
A solution to the density problem is different from the lack of competition in dense areas, which is part of what blocking chain mergers is about.
A stranger to your situation, I can only speculate generally. Proper city / urban planning is unpopular with voters. No one likes restrictions. No one likes being told that some little town they live in isn't economically viable and should be wound down and closed up. Or that maybe a local food co-op or other more socialist method such as the government running a wholesale outlet for essentials might be a solution to the market not working for an area. In any event, a government of the people and for the people should ensure fair markets exist, and that where markets don't make sense (usually natural monopolies and also things that are required but don't work economically) a public utility ensures everyone has access to services.
> The fact that you have a real grocery store a drive away probably indicates that there's enough volume at that location to keep prices low.
I'm not sure if I'd consider this the same situation. I'm not in a low volume area, I'm in one of the the densest neighborhoods in the city and unfortunately as nice as a 20 minute drive sounds to some that's absolutely abhorrent when you live downtown in an area like this. Most of my neighbors and friends don't own cars so that's an hour one way bus ride. I only drive my car to go to the pharmacy once a month and that's a 30 minute 4 mile one -way drive. Gotta sign my name for my adhd meds every month for 30 years straight no matter how difficult to get them it is.
Kroger is buying all of these ancient derelict looking grocery stores that have been here for ages. I don't know the last time I saw a grocery store get built in my entire life, and especially not the 4 years I've been in Denver where the (metro) populations gone from (according to google) 2,656,000 to 2,963,000 since 2016.
Of course like you've said well, I really have no idea what goes into the logistics of where or why to put a grocery store so maybe it really just is that low volume to them.
I'm in the "Harlem of the West" neighborhood which is a food desert more by design by 1950s anti-civil rights planners than corporate profits unfortunately, although it may not be that reason any longer.
Not saying that you don't know any of this it's just a topic I'm pretty passionate about and that a lot of people are less familiar with, so maybe some HN'ers will be interested. I wasn't aware of food deserts and how difficult they make peoples lives until I experienced living in one.
There are really great coops that build therapy/education centers with farms that always need donations of time or farm work if anyone is looking for something to volunteer on.
And THIS! From our wonderful Kyle Clark, Supermarket merger could cause damage in food deserts -- There's a huge potential that these mergers will just cause them to close stores.
Readit News
https://www.ftc.gov/news-events/news/press-releases/2024/02/...
Albertson's was a bit better, earning $2B in profit against $77B in expenses: https://finance.yahoo.com/quote/ACI/financials/
(Look at cost of revenue + Operating expenses)
IOW - These businesses are not awash in cash and profits. A slight increase in costs (wages, etc) would wipe out their profits or put them in the red. A slight decrease in costs or increase in prices would help their business quite a lot.
Also, the grocery business overall is very fragmented and local, despite some large chains. And grocers most certainly do not have any ability whatsoever to control market prices or market wages. They are "price takers" in both cases.
Their combined market share would be only ~12%, putting them in second place behind Walmart at ~18% https://www.foodnavigator-usa.com/Article/2022/10/14/kroger-... There is a long, thick (hold your jokes) tail of grocery stores getting the remaining 3/4 of the market. This is not even remotely a monopoly situation.
If their costs go up (labor, food suppliers), their prices will go up (and perhaps some margin impact). Combined, they will do the same as landlords, chicken processors, pharma, and so on if allowed to do so: use their power to entrench, collude, and extract. Being in business should not be comfortable. Competition and limited corporate power is the desired end state, work backwards to implementation details.
https://www.spglobal.com/marketintelligence/en/news-insights...
https://www.politico.com/news/magazine/2023/04/21/matt-stoll...
“Fundamentally, my view is that authoritarianism is coming from the private sector.” -- Matt Stoller (this post's author)
$2 Billion is nothing to sneeze at. Not "we make 39 billion a quarter" good but how is this not a healthy business that is unable to compete on their own? Grocery isn't a fast changing iterative business like software, for example
No, these are not particularly "healthy" businesses. They are getting by, no more. A small misstep or exogenous event could be a catastrophe.
We need more competition, not less. Really wish we could get Aldi or Lidl up in the PacNW. Yeah, there's Trader Joe's as a pseudo-Aldi owned by Aldi, but I'd love the real thing too.
But it's nowhere close to how competitive grocers in Germany felt to me, when I recently lived in Munich. Where I'm at, the only nearby discount grocer is Grocery Outlet; in Munich, there was Aldi, Lidl, Netto, and Penny, all in less than a 10 minute trip by bike.
Numbeo stats seem to bear this out, with grocery prices in Germany being ~20% lower than the US (and a quick googling indicates even starker differences according to other sites): https://www.numbeo.com/cost-of-living/compare_countries_resu...
It's strange to me the way that people talk about these stores as if they were their personal property, and theirs to decide whether or not they shut down, without even a mention about the very practical reasons these stores might have to merge or shut down (which may end up happening anyway, even if the merger fails).
Ballard has an unusually high amount of grocery stores for the Seattle area and it's expensive, so it's not like people can just move to Ballard to find competition
If anything this underscores the fact that this (and many other market segments) are dominated by cartels that actively collude in ways that harm consumers. And the government won't do a damn thing about it.
Deleted Comment
Kroger-Albertsons together would have less than half the marketshare of Walmart. It's closer to a third if you include Sam's Club. In practice it would be even less than this, because they're planning to spin off a quarter of the stores.
The decision to set the precedent that union shops can't buy each other is also odd. If non-union stores are allowed to expand but union chains are not, that is invariably setting grocery store unions on a path to shrink even further.
Cannot believe they keep letting them take over grocers.
Maybe build a new Kroger in all of our food deserts instead of turning a halfway decent store into a dumpster? I live downtown and my nearest real grocery store is a 20 minute DRIVE away. I shop at 711 more than a grocery store outside of instacart.
A solution to the density problem is different from the lack of competition in dense areas, which is part of what blocking chain mergers is about.
A stranger to your situation, I can only speculate generally. Proper city / urban planning is unpopular with voters. No one likes restrictions. No one likes being told that some little town they live in isn't economically viable and should be wound down and closed up. Or that maybe a local food co-op or other more socialist method such as the government running a wholesale outlet for essentials might be a solution to the market not working for an area. In any event, a government of the people and for the people should ensure fair markets exist, and that where markets don't make sense (usually natural monopolies and also things that are required but don't work economically) a public utility ensures everyone has access to services.
I'm not sure if I'd consider this the same situation. I'm not in a low volume area, I'm in one of the the densest neighborhoods in the city and unfortunately as nice as a 20 minute drive sounds to some that's absolutely abhorrent when you live downtown in an area like this. Most of my neighbors and friends don't own cars so that's an hour one way bus ride. I only drive my car to go to the pharmacy once a month and that's a 30 minute 4 mile one -way drive. Gotta sign my name for my adhd meds every month for 30 years straight no matter how difficult to get them it is.
Kroger is buying all of these ancient derelict looking grocery stores that have been here for ages. I don't know the last time I saw a grocery store get built in my entire life, and especially not the 4 years I've been in Denver where the (metro) populations gone from (according to google) 2,656,000 to 2,963,000 since 2016.
Of course like you've said well, I really have no idea what goes into the logistics of where or why to put a grocery store so maybe it really just is that low volume to them.
I'm in the "Harlem of the West" neighborhood which is a food desert more by design by 1950s anti-civil rights planners than corporate profits unfortunately, although it may not be that reason any longer.
Not saying that you don't know any of this it's just a topic I'm pretty passionate about and that a lot of people are less familiar with, so maybe some HN'ers will be interested. I wasn't aware of food deserts and how difficult they make peoples lives until I experienced living in one.
There are really great coops that build therapy/education centers with farms that always need donations of time or farm work if anyone is looking for something to volunteer on.
https://www.arcgis.com/apps/Viewer/index.html?appid=96ae7380...
https://www.cpr.org/show-episode/food-deserts-what-are-they-...
And THIS! From our wonderful Kyle Clark, Supermarket merger could cause damage in food deserts -- There's a huge potential that these mergers will just cause them to close stores.
https://www.9news.com/article/news/local/next/next-with-kyle...