Clarkston Retail Industry Expert Speaks to Kroger-Albertsons Merger
March 4, 2024 | Clarkston’s David Patterson, associate partner and retail industry expert, shared opinions with Specialty Food on the Kroger-Albertsons merger. See a few of his quotes below, and read the full article here.
Retailers React to FTC Suit Against Kroger-Albertsons Merger
Revised Merger Plan Remains Possibility
David Patterson, associate partner, Clarkston Consulting, said the proposed merger is reminiscent of the attempted merger between restaurant distributors Sysco and U.S. Foods, which those companies abandoned in 2015 after the FTC challenged the agreement.
“The FTC arrived at a similar position that such a merger would stifle competition,” he said. “With the FTC arriving at this same conclusion on the Kroger-Albertsons deal, food manufacturers and wholesale distributors are likely breathing a sigh of relief. In a world where Kroger-Albertsons is second only to Walmart, this combined entity certainly would have been able to exert significant pressure on those groups through their sheer scale.”
Patterson said it’s possible that Kroger and Albertsons could go back to the FTC with plans for additional divestitures, while retaining enough locations to achieve the scale they are seeking. It’s also possible that the companies could attempt to delay or argue this decision in the hopes that a potential new administration in 2025 might bring a more merger-friendly environment.
In opposing the merger, the FTC noted that Kroger and Albertsons currently “compete to improve their stores in many ways, including offering fresher produce, higher quality products, improved private label offerings, a broader array of in-store services, flexible store and pharmacy hours, and curbside pickup services.” The two supermarket chains compete to a lesser degree against alternative formats such as club stores, dollar stores, organic and natural retailers, and limited-assortment retailers, the FTC said, because these types of retailers offer a different experience and attract different customers.
Patterson said that while traditional supermarkets compete locally to maximize market share, at a macro level they do face “competitive headwinds” from other players.
“Walmart and others have used their scale to bring innovations, like local home delivery, to the masses at prices that remain compelling,” he said. “While Kroger has made tremendous headway with similar consumer-facing conveniences, notably curbside pickup and a well-integrated loyalty program, adding Albertsons’ brick-and-mortar locations to their footprint would give them the local reach needed to compete against the likes of Walmart and Amazon specifically in terms of efficiency of distribution.”
Both Kroger and Albertsons issued statements following the FTC’s decision, claiming that blocking the merger actually would actually harm both consumers and workers. They also said they plan to fight the FTC’s decision in court.