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Kroger, Albertsons Execs Defend Merger to Senate Committee, Say Consolidation is Needed to Compete with Walmart and Amazon

Kroger Co. Chairman and CEO Rodney McMullen testifies before Congress about the proposed merger with Albertsons.

Top executives from Kroger and Albertsons defended their proposed merger at a congressional hearing, saying the combined company would be in a better position to compete with grocery giants Walmart, Costco and Amazon. Critics of the nearly $25 million deal testified that it would worsen food deserts and lead to higher prices.

Since the merger was first announced in October it has faced steady pushback from consumer groups and legal entities, with opponents claiming that combining the two largest supermarket chains in the U.S. would be detrimental to both consumers and the companies’ employees.

The Nov. 29 hearing before the Senate Judiciary Subcommittee on Competition Policy, Antitrust and Consumer Rights was intended to review some of these concerns. Both Kroger Co. Chairman and CEO Rodney McMullen and Vivek Sankaran, President and CEO of Albertsons Companies, submitted prepared testimony and answered questions at the hearing, alongside consumer rights advocates and economic experts.

In his prepared testimony, Sumit Sharma, Senior Researcher of Technology Competition at Consumer Reports, pointed to the growing proliferation of “food deserts” in rural and marginalized urban areas, a problem he claimed has been “aggravated by over-concentration in grocery retail.” He also called out a number of supply chain incidents that have brought the “acute vulnerabilities of an over-concentrated” industry into stark relief, including the recent baby formula shortage and the shutdowns of meat packing plants during the COVID pandemic that put a strain on that sector.

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“We are concerned that the proposed merger between the two largest supermarket chains, by further increasing concentration and incentivizing consolidation up and down the food supply chain, will make a bad situation worse,” Sharma said. “The transaction will result in significant lessening of competition as Kroger and Albertsons are the two biggest U.S. supermarkets that compete directly with each other. The most likely outcome is increased prices, fewer choices for consumers and reduced supermarket access for some consumers.”

However, Kroger’s McMullen pointed to increasing competition in grocery as the primary reason for the merger, saying in his testimony that since 2010, online retailers have increased their share of grocery sales by more than 14% and that those increases often come at the expense of companies like Kroger. Kroger is currently ranked fourth in total revenue among U.S. grocery retailers, and according to McMullen, would remain fourth even after the merger with Albertsons, but would be better able to compete with the likes of Walmart, Amazon and Costco.

“As America’s grocer, we take seriously our responsibility to provide customers with fresh, affordable food, a commitment which is essential today considering the ways in which inflation is impacting our customers’ lives,” said McMullen in his testimony. “If we do not provide value and quality, customers will shop somewhere else. Together with Albertsons, we will be able to do even more for our customers.”

McMullen also highlighted a number of financial commitments his company had made as part of the merger agreement, including:

  • To invest $500 million to lower prices;
  • A $1.3 billion store investment to improve the associate and customer experience; and
  • $1 billion to continue raising associate wages and benefits.

“We will begin these investments on day one after the merger closes,” McMullen said.

Earlier in November, the attorneys general for four states filed lawsuits to block a $4 billion payout to Albertsons shareholders that was set to be distributed on Nov. 7, 2022, until the merger could be reviewed by antitrust authorities. The suits, which were ultimately successful, contended that the historically large dividend would jeopardize the chain’s workers by depleting Albertsons of ready cash. 

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