Two of the biggest grocery companies in the country, both of which operate supermarkets in Northwest Indiana, plan to merge in a deal that will shake up the grocery landscape.
Federal regulators are likely to require the divestiture of some Albertsons-owned Jewel-Osco and Kroger-owned Mariano's stores across greater Chicagoland before approving Kroger's $24.6 billion acquisition of Albertsons. While some Jewel and Mariano stores sit just down the street from each other in Chicago, the Albertsons and Kroger footprints are more spaced out in the Region.
Jewel-Osco has supermarkets in Munster, Dyer, Crown Point and Chesterton. Cincinnati-based Kroger operates a store in LaPorte, a Ruler Foods in Merrillville and a Food 4 Less in Hammond.
"The Albertsons-Kroger merger will certainly change the landscape of grocery stores in Chicago, but the effects on Northwest Indiana will be more limited. There are currently only a handful of grocery stores in Northwest Indiana owned by Albertsons and after the merger it’s likely these will see significant changes in their products and operations," Indiana University associate professor of economics Micah Pollak said. "However, Northwest Indiana has a strong independent grocery chain in Strack & Van Til, and this competition will likely mean consumers will not see a significant increase in prices, which might otherwise come from consolidation in market power."
The effects of the merger will still be felt by consumers in Northwest Indiana and across the nation. Kroger would end up as the only other retailer after Walmart with a double-digit market share in consumer packaged goods and have a more national presence with an increased footprint in New England and western states.
Numerator estimates Kroger will reach two out of three shoppers in the United States, going from a customer base of 65 million shoppers to more than 86 million households. It will gain more urban and ethnic shoppers, including 14% Hispanic customers and 13% Asian consumers.
Kroger customers will be 25% more likely to live in a city and more likely to pay a premium for more sustainable products.
"The merger will elevate the combined grocers to be at par with Walmart in terms of the number of stores and the goods and serves they can provide together," Purdue University Northwest professor Anthony Sindone said. "It looks like their strategy will be to serve the grocery market segment that stands between the Whole Foods and Dollar General segments. The grocery market is extremely competitive and both Kroger and Albertsons might have sensed a squeeze between the opposite ends of the grocery market segments. Albertsons would be seen as an appropriate complement to Kroger’s market share. Albertsons often has locations that Kroger does not."
Customers across Chicagoland could end up with more choices in the grocery aisles and fewer shortages that have plagued the sector since the onset of the coronavirus pandemic, Sindone said.
"This complementary merger might provide customers with more choice within each store," he said. "Perhaps they will both be able to take advantage of supply chain synergies, meaning combine distribution sources and channels to bring fresher foods faster to the markets they both serve."
A larger Kroger will end up with more buying power, which would result in savings and efficiencies in scale.
"For nationwide impact, some might argue that further concentration in this industry will raise prices for consumers due to the perceived larger market power these combined companies might possess," Sindone said. "I would say that there is plenty of competition in this industry that any upward pressure on prices would be curtailed by the very competitive nature of the grocery industry. Thus the positive impact of greater choice, lower supply chain costs, and more locations would more than offset any market power that might result from combining these companies."
Some fear Kroger would pocket price drops from its strengthened negotiating power rather than pass them on to consumers.
"Even before this potential merger, the oligopoly of U.S. grocery giants has been needlessly nickel and diming working families — marking up prices over and over despite reporting huge profits,” said Accountable.US spokesperson Liz Zelnick. “The industry chose to enrich a small group of investors with generous handouts rather than keep prices stable on everything from bread to baby formula. Even less competition under this proposed deal will only lead to more unfettered corporate greed at the expense of millions of consumers — and that’s why it deserves serious scrutiny from Congress.”
The nonprofit group that resists corporate power and unchecked special interests worries that putting 5,000 grocery stores in the hands of one company could hurt the 42 million Americans who say they cannot afford enough food. It is concerned that 60% of grocery sales are already concentrated among just five food corporations.
“Big-name corporations, especially in the food sector, have continually used the pandemic as an excuse to mark up prices for consumers well beyond the cost of doing business,” Zelnick said. “Why should these grocery giants be taken at their word that this merger will result in more responsible behavior? When faced with the option of passing their success onto working families in the form of lower prices, Big Food has chosen again and again to pad their profits instead.”
The United Food and Commercial Workers Union, which represents workers at both companies, fears what it would mean for employees who have voiced concerns about being overworked, understaffed and inadequately paid.
“The proposed merger between Kroger and Albertsons has serious implications for hundreds of thousands of our UFCW members and America’s families who are more concerned than ever about inflation’s impact on the price of their food and groceries, prescription drugs, and gas. As America’s largest union of essential workers, protecting the livelihoods of this nation’s grocery workers, union and non-union, is our highest priority," UFCW International President Marc Perrone said. “Given the national impact such a merger would have, the UFCW and our Local Unions are discussing this and will stand together to prioritize the best interests of our members, their families, and the communities they proudly serve. To be clear, the UFCW will oppose any merger that threatens the jobs of America’s essential workers, union and non-union, and undermines our communities.”
The merger's impact on Northwest Indiana could be even greater if the Central Grocers bankruptcy that wiped the longstanding Ultra Food brand off the map and ended Strack & Van Til's longtime footprint in Illinois had played out differently, Pollak said. The Strack family successfully bought back the company in a public auction, fending off a bid from rival Jewel-Osco's parent company.
"Back in 2017, had Albertsons successfully purchased the majority of Strack & Van Til stores, they would now have something close to a grocery store monopoly in Northwest Indiana and the Region would be in a dramatically different, and likely worse, position," Pollak said. "As it is, we should be thankful to the Strack and Van Til families and other investors who repurchased these stores and will hopefully continue to provide robust competition, which ultimately benefits consumers."