CINCINNATI — The Kroger Co. could gain new inflation-fighting power if it acquires rival grocery chain Albertsons Companies Inc., but it is likely to face antitrust scrutiny before the agreement is reached, according to analysts reacting to media reports that a merger is close.
Bloomberg broke the story Thursday that Kroger and Albertson were in merger talks, with a deal that could be announced this week. The combined companies would operate more than 5,000 stores in the United States that generate more than $200 billion in annual revenue.
And that means more buying power for the Cincinnati-based grocery chain.
“Looking at the industry, Walmart has about 25% of the grocery market share in America. Kroger’s number two at around 9%, Albertsons at around 7%,” said Kevin Gade, chief operating officer of downtown-based fund management company Bahl & Gaynor. “If you think about the leverage that Walmart has over many manufacturers, whether it’s housewares, food manufacturers, the combination of Kroger and Albertsons should be able to have leverage. stronger at the table, especially at a time when inflation is so high. brought up as he is.
Morningstar analyst Zain Akbari agreed the deal could be an inflation fighter for Kroger – if it is ultimately approved.
“While we believe that a combination between the two largest pure-play grocers in the United States would create scale advantages (and associated cost and purchase leverage) that would help fend off the burgeoning omnichannel titans Walmart and Amazon, we suspect an overlap between the two chains’ footprints in many marketplaces may cause regulators to scrutinize a transaction,” Akbari wrote in a note to investors on Thursday.
Not everyone thinks lower prices will result from the merger.
Sarah Miller, executive director of the American Economic Liberties Project, told Reuters the deal would “squeeze consumers already struggling to afford food.”
“This merger is a pure and simple case of monopoly power, and enforcement officials should block it,” Miller said.
Gade said the regulatory review will make it difficult for Kroger to close the deal quickly. But ultimately, he expects the company’s greater buying power to translate into lower prices at the cash register.
“We wouldn’t expect tomorrow’s store prices to drop, unfortunately,” Gade said. “It will take time, the data we see on the purchasing power that we should be able to see from the two entities combined, which should hopefully ultimately help the consumer.”