Why Albertsons and Kroger's Spinoff Deal Won’t Work
One year after Kroger and Albertsons announced plans to merge, antitrust enforcers have yet to approve or challenge the deal. But that could be about to change. Last week, the California Attorney General Rob Bonta said his office is considering filing a suit against the merger. “Right now, there’s not a lot of reason not to sue,” he told reporters last Thursday.
Meanwhile, sources told both Supermarket News and Axios that the Federal Trade Commission is also seriously weighing a challenge. This is despite Kroger and Albertsons’s latest attempt to “litigate the fix” or preemptively resolve competition concerns by selling off over 400 stores to C&S Wholesale.
Enforcers should be skeptical of Albertsons and Kroger’s proposed spinoff. Divestiture remedies rely on the assumption that the new buyer, in this case C&S Wholesale, can successfully operate its new stores to maintain vigorous competition. But there’s a lot of reasons to doubt that C&S can pull this off. Wholesalers historically haven’t made the best retailers and C&S only recently started expanding into grocery stores after losing some big wholesale customers. It’s also not clear if C&S will acquire some of Albertsons and Kroger’s valuable customer data necessary to run the stores. The last time Albertsons sold off hundreds of stores to buy a big competitor, it allegedly withheld critical information from new managers and ransacked stores of valuable shelf-stable goods.
Even if the divested stores manage to stay open, a combined Kroger-Albertsons would still amass enough market power to squeeze suppliers. Further, Albertsons’s private equity owners, Cerberus, would be rewarded for bankrupting and rolling up another industry. Grocery workers would lose bargaining power to one larger employer and though C&S has promised to honor union contracts, it has a history of shifting its workload from union warehouses to its non-union shops.
For a full analysis of this dicey deal and more on private equity meddling in groceries and the flaws with sell-offs as a merger remedy, read Claire Kelloway and Maureen Tkacik’s article in The American Prospect.
What We’re Reading
Walmart will open a milk bottling plant in Lowndes County, Georgia in 2025 to provide private-label products for its Southeastern stores. When Walmart opened a similar plant in Fort Wayne, Indiana, competitor Dean Foods canceled over 100 milk contracts across eight states, and only a portion of those farmers landed new contracts with Walmart. (Grocery Dive)
The tumult over electing a new speaker of the house has set back passing a new Farm Bill, after the current bill expired last month. Leading candidate Jim Jordan has historically sought to cut SNAP benefits and never voted in favor of a Farm Bill, raising concerns that he’d hold the Farm Bill hostage as a bargaining chip to advance hardline conservative priorities, like immigration. House agriculture committee chair G. T. Thompson told reporters that Jordan is open to moving the Farm Bill along, but two other Republican aggies voted against Jordan in a roll call yesterday. (Roll Call, E&E News, Politico, Axios, New York Times)
The Supreme Court declined to hear a suit that could have revived North Carolina’s 2015 ag gag law. The state law would have allowed employers to sue former employees for recording unfavorable footage on company property. It targeted undercover activists documenting animal treatment on farms and research laboratories. A federal judge ruled that parts of the law were unconstitutional in 2020, but the state appealed that decision to the Supreme Court. (Farm Progress, Associated Press)