Thursday, July 18, 2024

Critics claim ‘disconnect’ with grocery market in lawsuits against supermarket merger

by BIZ Magazine

(The Center Square) – As lawsuits filed by the state of Washington and the Federal Trade Commission proceed against a proposed merger of Kroger and Albertsons, advocates for the transaction continue to stress its necessity in a changing world for grocers.

Scott Moses is the head Of Grocery, Pharmacy & Restaurants for the financial advisory firm Solomon Partners; he advised Albertsons on the proposed merger with Kroger. In a recent media interview, he argued that the merger reflects the changes that have occurred in the market, particularly since the 1980s when supermarkets composed 80% of grocers compared to around 30% now.

In the 2000s, supermarkets made up 10 of the top 15 grocers in the nation, compared to just five today.

“That time has long since passed, and that’s the disconnect with this transaction,” Moses said, adding that the industry is “far more diverse and competitive than 1980s grocery market described by the FTC and some of these other complaints.”

“Whether it’s various attorney generals [sic] or other politicians or other constituents, a lot of what has been said about Kroger, about this transaction, about C&S is just demonstrably false,” he said.

Kroger owns Quality Food Center and Fred Meyer, while Albertsons owns Safeway and Haggen. One of the arguments made in favor of the merger is that it’s necessary for supermarkets like Albertsons and Kroger to compete with the rise of national discount chains, along with online shopping through Walmart, Target, Costco and Amazon.

“They borrow cheaper than most countries,” Moses said.

It’s a similar challenge faced by brick-and-mortar department stores, whose fate Moses said they want to avoid.

“They’ve been marginalized by the same forces,” he said. “We’ve all seen [that] over the last 20-30 years.”

While the FTC claims in its lawsuit that the merger would constitute a monopoly, Moses said that even if the merger were to occur, the combined supermarkets would still rank eighth in terms of total annual retail and wholesale grocer sales, at $43 billion compared to top ranking Walmart’s $321 billion. Additionally, the merger would have Kroger selling 104 Washington-based stores to C&S Wholesale Grocers.

However, the Washington Attorney General’s Office argued in its January lawsuit in King County Superior Court that the store sale “is woefully inadequate to restore the competition lost through the Proposed Transaction,” asserting that C&S “is not a sufficiently established and sophisticated competitor.”

“Washington consumers and workers should not be forced to take a gamble on another risky supermarket divestiture,” the lawsuit states further.

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