Supermarket chain Kroger Co. is poised to cut grocery prices by $1 billion upon finalizing its proposed $25 billion merger with Albertsons Cos., according to a report from Bloomberg. This planned reduction is double the $500 million cut initially announced when the merger was first disclosed in 2022. Additionally, Kroger and Albertsons plan to allocate $1 billion towards increasing worker wages and benefits, and another $1.3 billion for upgrading Albertsons stores.
This initiative to lower grocery prices comes at a time when the United States is grappling with its highest inflation rates in years. Recently, U.S. Vice President Kamala Harris has advocated for a federal ban on food and grocery price gouging.
Kroger, which owns several chains including Ralphs and Dillons, agreed to acquire the smaller Albertsons in October 2022 to better compete against market giants like Amazon.com Inc. and Walmart Inc. The merger is expected to enhance Kroger's market strategy by positioning the combined entity as a premier omnichannel food retailer, serving around 85 million households. According to the merger statement, the combined company will employ over 710,000 people and operate 4,996 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies, and 2,015 fuel centers across 48 states and the District of Columbia, generating more than $200 billion in annual sales.
To meet regulatory requirements and finalize the deal, Kroger and Albertsons had also agreed to make hundreds of store divestitures. The transaction is projected to close in early 2024, pending the necessary regulatory approvals and other customary closing conditions.
Since announcing the merger, the companies have faced various obstacles, including opposition from politicians and unions who have filed lawsuits claiming that the deal would lead to higher grocery prices, reduced store options, decreased wages, and reduced competition. In January, Washington Attorney General Bob Ferguson filed a lawsuit to block what would be the largest retail grocery merger in U.S. history, arguing that it would raise prices and harm consumers and workers in the state.
As reported by Reuters in late July, the proposed merger has been delayed pending the outcome of a lawsuit, with the trial set to begin on September 30 in a Colorado District Court.
In January this year, Kroger and Albertsons confirmed they were in active discussions with the Federal Trade Commission and individual state Attorneys General regarding the proposed merger and divestiture plan, maintaining their expectation to finalize the deal in the first half of 2024.
It's worth noting that Kroger has a history of using acquisitions to lower prices. After acquiring Roundy's in 2015, Kroger invested more than $100 million to reduce the prices of thousands of products and similarly spent $125 million to lower prices following its purchase of Harris Teeter.
