On September 5, the Federal Trade Commission’s (FTC) lawsuit aimed at blocking the Kroger-Albertsons merger unfolded in an Oregon courtroom. The case centered on the divestiture package and its impact on competition in an already consolidated grocery market. Kroger is arguing that its plan to divest a significant number of stores to C&S Wholesale Grocers effectively addresses the competitive risks raised by the FTC.
The proposed $24.6 billion merger, if allowed, will see Kroger and Albertsons combine their operations, with Kroger maintaining it has mitigated any potential anti-competitive effects through a strategic divestiture deal with C&S, labeled the largest grocery wholesale distributor nationwide. In June, Kroger unveiled a comprehensive list of assets intended for divestiture, comprising approximately 579 stores alongside various distribution centers and plant locations.
C&S, currently operating 25 supermarkets and franchising an additional 165, is well-positioned for this acquisition. Susan Morris, who has been appointed to lead C&S’s new retail division, expressed her confidence before the federal judge, stating, “I don’t want to run another mini-Kroger or mini-Albertsons. This is a chance to run something distinct.” Her background as the Chief Operating Officer at Albertsons equips her with extensive experience in store management, particularly during periods of brand transitions.
Preparing for a significant rebranding effort, C&S will need to change the names of 286 of the acquired stores within a two-year timeframe, allowing for a smoother transition. Morris emphasized that while “the names matter,” the operation of the stores holds more significant importance: “What matters more is how you run the store.”
The manner in which Kroger positions the divestiture to C&S is critical. Kroger insists that this move will preserve competitive dynamics in the grocery market, which the FTC contends the merger threatens. The company highlights that C&S has a strong existing distribution framework, allowing for an assertive expansion into the grocery retail sector. Should the merger proceed, C&S is projected to become the eighth-largest grocery retailer in the U.S., surpassing competitors like H-E-B and Trader Joe’s.
Kroger’s commitment to enhancing competition through this divestiture is anchored in a precedent. In 2021, the FTC approved C&S as a buyer for retail grocery stores following an acquisition from Piggly Wiggly Midwest that further positioned C&S for retail expansion. Today, C&S remains active in operating the majority of stores it gained through those previous acquisitions.
Data supports Kroger’s position, as the grocery sector continues to intertwine more closely with digital advancements. The Cincinnati-based retailer serves over 11 million customers daily through various shopping avenues, merging digital and in-store experiences under numerous brand names, thus maintaining a competitive edge in the market.
As of June 15, Albertsons operates 2,269 retail locations along with pharmacies and fuel centers, making it a significant player in the grocery landscape. With more than 20 banner names, Albertsons remains entrenched in grocery retailing alongside Kroger, which currently ranks fourth on Progressive Grocer’s 2024 list of the top food and consumables retailers.
This merger—and the accompanying divestiture to C&S—raises broader questions about the future landscape of grocery retail in the United States. Should the FTC’s lawsuit be unsuccessful, the merged entity could bring about competitive price adjustments and transformation in consumer offerings across the market, particularly amid growing competition from larger multinational retailers.
The ongoing refusal from the FTC to greenlight the merger underscores the heightened scrutiny surrounding corporate consolidations in a time when the grocery sector is under pressure from both growth in e-commerce and shifting consumer preferences. As the trial continues, the outcome will not only affect Kroger, Albertsons, and C&S but will serve as a critical precedent for similar future mergers in the grocery industry.
The results of this trial stabilize not just the companies involved but also set the stage for how regulatory bodies will govern future mergers in a constantly evolving industry. With many eyes on this trial, it will be interesting to see whether Kroger’s strategies can satisfy the FTC’s concerns over competition while also shaping an innovative grocery shopping future.
