Kroger-Albertsons Merger: It's Not A Crime If You Loot *Yourself*

When corporations do it, they 'find' $4 billion.

Inflation may be easing a bit in the USA, although many prices are likely to remain high for a while. And in a lot of places, the price of groceries in the coming year may be artificially inflated if the merger of two giant grocery chains is allowed to go through. Kroger, the country's biggest grocery chain, wants to buy Albertsons, which just a few years ago snapped up Safeway. And when competition is reduced by consolidation of grocery store chains, food prices go up, because that's just the free market eating itself like God and robber barons want.

As Judd Legum notes at Popular Information, Kroger has been doing OK lately, particularly since it's done such a great job of buying out competing grocery chains. At Kroger, higher prices are just the beginning!

Higher prices have fueled record profits for Kroger, the nation's largest grocery store chain. Kroger recorded a $3.5 billion profit in 2021and projects an even larger haul, $4.9 billion , in 2022. Kroger itself has fueled the consolidation, acquiring a slew of competing chains, including Harris Teeter and Fred Meyer. Kroger, which operates 2700 stores under a variety of brand names, has been able to pass on large price increases without losing businesses to competitors.

Because what competitors? Now, if the Federal Trade Commission approves Kroger's $20 billion bid to buy Albertsons, the resulting chain would comprise almost 5,000 stores nationwide, and would cover about 22 percent of the US grocery market, just behind Walmart, which had the advantage of having already stomped out local competition before expanding into groceries.

It's an interesting, fairly depressing read, with all sorts of fun details to give you reasons to contact the FTC and your congresspersons to oppose the deal. F'rinstance: "14% of Kroger workers say they are currently homeless or have been homeless in the past year. Another 36% worried about being evicted from their homes. At least Kroger workers get 10% off groceries — produce not included, because why would low-income workers' families need fresh fruits and vegetables?"

But here's the very bestest part: If the acquisition goes through, Kroger will be snapping up an Albertsons company that's already being looted by its owners, private equity firms Apollo Capital Management and Cerberus Capital Management, which have a 75 percent share of the company:

Along with the merger, Albertsons announced a plan for a " special dividend " of $4 billion. The dividend represents about one-third of the total market capitalization of Albertsons. The dividend will not come from "surplus profits, but rather out of critical operating margins it needs to stay afloat over the next twelve months." Albertsons will use $2.5 billion of cash on hand and finance the remaining $1.5 billion through loans. The special dividend would reduce Albertsons' available cash on hand by 75%. And Albertson's already has $6.55 billion in existing debt .

It's a compelling pitch to regulators: "Better let us merge or we'll DIE."

Kroger has been claiming that the merger would be a bargain for consumers, because it would reduce prices, but honestly, there's little reason to think that would happen, and as Legum points out, the research on grocery store mergers suggests that reduced competition where stores have merged tends to result in higher prices instead.

 In a hearing last week, Kroger CEO Rodney McMullen tried to assure members of the antitrust subcommittee of the Senate Judiciary Committee that even though Albertsons and Kroger stores are frequently located near each other, the merger wouldn't reduce competition, golly no, because lots of people shop at different stores for different stuff these days: "I just don’t see less competition going forward,” he said. “It’s easy for customers to take a left turn or a right turn."

The man does have a point. I think I'll be doing more of my shopping at Winco, the employee-owned grocery chain in Boise, even if it's a little more of a drive than either Albertsons or the Kroger-owned Fred Meyer. Screw the grocery oligarchs!

[ Popular Information / AP / WaPo (gift link)]

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