Kroger and Albertsons Backlash: Colossal Deal Under Attack by Politicians and Consumers

The Kroger and Albertsons mega-deal took the grocery industry by surprise and now it is attracting the wrong kind of attention. The initial shock of the announcement has elapsed and now concern and anger have taken its place. The reported deal is not expected to close until the beginning of 2024 due to regulatory review; however, this could be more difficult than first imagined.

The attorney general of Washington, D.C., Karl Racine, along with the attorneys general of California and Illinois have filed a lawsuit against Kroger and Albertsons. The lawsuit seeks to block the dividend payment that Albertsons proposed to their shareholders following the announcement of the sale. A separate charge has also been filed in Washington State. The attorneys general believe that the dividend payment will violate antitrust law by depleting Albertsons’ cash reserves and leaving them unable to compete against rival grocers. Albertsons has responded that the dividend payment was decided independently of the sale and Kroger has claimed that they had no input in the decision.

In addition to the already filed cases, Kroger is facing pushback from several U.S. senators who wrote a joint letter to Federal Trade Commission chairwoman, Lina Khan, opposing the proposed sale. The senators believe that the consolidation of two of the country’s largest grocery chains would further increase skyrocketing grocery prices and hurt employees. A sale of this magnitude was bound to face regulatory hurdles, yet the pushback has been swift and it is only just beginning.

There is also resistance from consumers who will feel the fallout from this deal. Grocery prices are already high and have the potential to go further once these two competitors become one entity. The two chains overlap in 20 U.S. states and it is unclear what will happen to locations that appear in the same neighborhoods. Additionally, Kroger has said that some brands will be spun-off into their own entities; however, it’s unknown which brands will be part of this. Communities could lose grocery stores and the jobs that go with them. The retailer has also committed to investing $1.5 billion in cost saving measures for customers and into employee wages in an effort to counteract these fears.

Despite the attempts to waylay the sale, it would take a historic decision to prevent purchase of Albertsons. Once completed there will be a significant shift in the grocery market share and Kroger will have a foothold in 46 of the 50 states. They will be a juggernaut and the concerns raised by customers, employees, and even politicians are valid and could come to pass. It is worth noting, however, that Kroger will still trail rival Walmart in both size and revenue. There is significant competition in the grocery industry, even though the trend of consolidation is one to watch.

CSG will be closely monitoring the Kroger and Albertsons sale as more information becomes available. Our data and expertise can keep your business informed and be used to predict what this will mean for the future of the industry.