The Kroger-Albertsons supermarket deal is uglier than you might expect. The "special cash division" of $4 billion may be intended to get around antitrust enforcers.
As an aside, these voluntary divestitures as a market power conduct concession are always a complete joke. Basically, pick the 650 worst stores that they don't really want anyway, sell them to some other PE firm, extract every last dollar of value, then the PE firm sells them back to Kroger (or some other huge chain).
Anytime a company volunteers to divest assets like those, you can be sure they're shitty assets.
Here in Chicago we have Mariano's. Before they were bought by Kroger the store was amazing. Well stocked, high quality Roundy's generic products, and a great hot food bar for either an easy dinner or good lunch. It was higher end, but not Whole Foods level expensive.
Well, they got bought out by Kroger and everything immediately went to shit. Nothing stocked, ok generic Kroger products replaced the awesome Roundy's stuff, and all their hot food went down in quality. The attention to detail in the store also went down; they are dirtier, and their escalators (many have roof parking or are on the second floor) are famous for always being broken here in Chicago. Did the prices go down? Lol.
I know the FTC has been talking a big game lately, but if they fail to successfully block this clearly anti-competitive merger then I will have lost all faith in their ability to accomplish what they state their aims are. I hope they decide to prosecute this instead of navel-gazing and wasting time on, say, Meta's acquisition of some ridiculous metaverse exercise start-up (such a waste of resources). Seems fairly clear that as of October 2022 anyway, they are speaking loudly and carrying a tiny stick.
Oct 19, 2022·edited Oct 19, 2022Liked by Matt Stoller
I thought it was very interesting to hear a different perspective of this purchase by Kroger. I really had not even considered how that move would influence the grocery industry since I’m so focused on pharmacy when I see things like this. This purchase nearly doubled Kroger’s Medicare Part D population as a preferred network provider for over 30+ million patients.
I just want to bring up an issue that hits millions of people hard, and I suspect this merger will just make it worse. Kroger has been a leader in taxing the poor.
Supermarkets now are full of 2-for, 3-for, 4-for deals. They seem benign at first glance, and in decades past you might have gotten a little 15% advantage buy buying multiples of a product. Now, it's often an outrageous difference between the cost of one unit and multiples. An example I photographed this summer because it was particularly offensive: a Coke12-pack. Price 6.98. or FOUR for 12.98. I don't want to discuss the worthiness of soda drinking, because this tactic is now used on lots of other 'real' foods, this is just one I have noticed is particularly annoying in my life.
So, here's the result. A poor person with a small apartment, pantry, or small budget gets the one unit and pays 6.98. A soccer mom with a giant garage stocks up and buys ahead. She pays 2.99 a unit. Less than half. Why? Because she has more money and more room. She is rewarded for her wealth.
Pick another brand? Nope, they collude, the prices are either identical or feature the same 'pay a premium to get less'.
Bottled water is insane (again, I don't care if you are virtuous and use a stainless steel bottle with tap water, lots of working people need this convenience). You will see them priced at $2 a unit in a convenience store, or you will see them priced in 24-packs in groceries for as little as 2.99, while six packs are priced much higher. You are forced to buy way more than you want.
The whole goal seems to be: drive up unit sales, drive up total take (well, not on the water), force people to get more than they want, so you can make your quarterly numbers. While people are suffering and struggling to deal with inflation. Coercive 'marketing'. FORCE them to give you more money.
Let these morally bankrupt greedheads merge into one mega-grocery juggernaut? I don't think so.
If Albertsons is weakened with this “special dividend”, wouldn’t that be a good time to undo the Safeway merger since Safeway was a healthy company before it?
It's interesting that both private equity firms are named after mythological figures. Isn't Cerberus the dog from Hell? The shadowland, no there there, "corporations are people", hidden in plain sight horror, no one is ever responsible legend in its own mind, anti-human, go along to get along, dream murdering bubble land, is the poster child for irrational narcissism. Your glyphosate level isn't myth.
The attack on Dutch farmers (the second most productive in the world) by the WEF, that Bill Gates is the largest holder of productive farm land in the world (which he has taken out of production) and the ongoing efforts of world capital to gain control of water (the Bush family among them) should be a wake-up call for us all. IMF/WEF/CCP globalist puppets across Europe have announced a new austerity. Europeans have been told to expect rolling black outs, supply chain disruption and empty store shelves with no end in sight. Hell has at last frozen over.
One imagines this merger will be bad news for the folks cutting meat and bagging groceries in the merged company too, who are already feeling the squeeze from Kroger. Amid all the recent labor market upheavals, about 12,500 unionized Kroger employees here in Ohio just voted down a recent contract offer from the company and authorized a strike. The strike didn't actually happen, and they reached a deal with the company that improves starting wages to only $14.25 an hour, with a $2 an hour increase over the three-year life of the contract. For context: the median home sale price here in Columbus is ~$350k and rents for decent apartments are $1,200+. As a Kroger employee told the Dispatch: "Most everyone I talk to on a daily basis feel the union has sold us out because they did nothing but encourage people to vote yes by saying things like 'this is all Kroger has to give.'"
The biggest impediment to antitrust action agains the Kroger-Albertsons merger is the fact that post-merger they'll still just be the #2 player. The government will have a hard time explaining why they will prevent this merged company from forming when they are allowing a company that is even larger to exist.
All the post-merger "synergy" plans that Matt mentions to cut white collar redundancies, squeeze suppliers, etc have in fact already been executed on a much larger scale by their biggest competitor Walmart and Amazon who they see as an eventual rival. Why should Walmart and Amazon be able to leverage being big while Kroger-Albertsons cannot. Ironically, I think they will make the argument that this merger will actually bring more competition to the market by levelling the playing field with Walmart and Amazon.
I drive out of my way to shop at Safeway. I find many of their products superior to City Market/Kroger. I'll even pay a bit of a premium for some items.
But regulators cannot measure product quality on any tangable level. It doesn't fit on a spreadsheet no matter how many customer surveys you run. Most people aren't going to go around every store and comparison shop everything. They pick a store and that's it. If the quality goes down on even a few items they'll look elsewhere. They probably don't know that a product may be availalble at a competitor for a lower price, or that a store brand at the other store is actually better than name brand (or fits their tastes better), because they aren't going to shop there unless something radical happens.
So regulators believe the myth that consolidation brings on better buying power, wholesalers cut quality to meet price pressure and Walmart still gets the bulk of the business. Prices might drop a little but at the expense of quality. And Walmart gets blamed again.
For comparison, how has the Whole Foods purchase by Amazon turned out? I thought Whole Foods was still in decline, and would that purchase have been blocked by the agency today?
Here in Central Texas we have HEB, which is privately owned and highly liked by consumers. Curious about the differences in market share, financial success, community and customer satisfaction, between privately owned grocers and public/PE/financially owned grocers.
As an aside, these voluntary divestitures as a market power conduct concession are always a complete joke. Basically, pick the 650 worst stores that they don't really want anyway, sell them to some other PE firm, extract every last dollar of value, then the PE firm sells them back to Kroger (or some other huge chain).
Anytime a company volunteers to divest assets like those, you can be sure they're shitty assets.
Here in Chicago we have Mariano's. Before they were bought by Kroger the store was amazing. Well stocked, high quality Roundy's generic products, and a great hot food bar for either an easy dinner or good lunch. It was higher end, but not Whole Foods level expensive.
Well, they got bought out by Kroger and everything immediately went to shit. Nothing stocked, ok generic Kroger products replaced the awesome Roundy's stuff, and all their hot food went down in quality. The attention to detail in the store also went down; they are dirtier, and their escalators (many have roof parking or are on the second floor) are famous for always being broken here in Chicago. Did the prices go down? Lol.
So what is in it for us?
I know the FTC has been talking a big game lately, but if they fail to successfully block this clearly anti-competitive merger then I will have lost all faith in their ability to accomplish what they state their aims are. I hope they decide to prosecute this instead of navel-gazing and wasting time on, say, Meta's acquisition of some ridiculous metaverse exercise start-up (such a waste of resources). Seems fairly clear that as of October 2022 anyway, they are speaking loudly and carrying a tiny stick.
I thought it was very interesting to hear a different perspective of this purchase by Kroger. I really had not even considered how that move would influence the grocery industry since I’m so focused on pharmacy when I see things like this. This purchase nearly doubled Kroger’s Medicare Part D population as a preferred network provider for over 30+ million patients.
I just want to bring up an issue that hits millions of people hard, and I suspect this merger will just make it worse. Kroger has been a leader in taxing the poor.
Supermarkets now are full of 2-for, 3-for, 4-for deals. They seem benign at first glance, and in decades past you might have gotten a little 15% advantage buy buying multiples of a product. Now, it's often an outrageous difference between the cost of one unit and multiples. An example I photographed this summer because it was particularly offensive: a Coke12-pack. Price 6.98. or FOUR for 12.98. I don't want to discuss the worthiness of soda drinking, because this tactic is now used on lots of other 'real' foods, this is just one I have noticed is particularly annoying in my life.
So, here's the result. A poor person with a small apartment, pantry, or small budget gets the one unit and pays 6.98. A soccer mom with a giant garage stocks up and buys ahead. She pays 2.99 a unit. Less than half. Why? Because she has more money and more room. She is rewarded for her wealth.
Pick another brand? Nope, they collude, the prices are either identical or feature the same 'pay a premium to get less'.
Bottled water is insane (again, I don't care if you are virtuous and use a stainless steel bottle with tap water, lots of working people need this convenience). You will see them priced at $2 a unit in a convenience store, or you will see them priced in 24-packs in groceries for as little as 2.99, while six packs are priced much higher. You are forced to buy way more than you want.
The whole goal seems to be: drive up unit sales, drive up total take (well, not on the water), force people to get more than they want, so you can make your quarterly numbers. While people are suffering and struggling to deal with inflation. Coercive 'marketing'. FORCE them to give you more money.
Let these morally bankrupt greedheads merge into one mega-grocery juggernaut? I don't think so.
If Albertsons is weakened with this “special dividend”, wouldn’t that be a good time to undo the Safeway merger since Safeway was a healthy company before it?
Hi Matt, here’s another crazy monopoly: https://thehustle.co/how-nuns-got-squeezed-out-of-the-communion-wafer-business/
And you’ve probably seen this story: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent
The argument they will use is they need to compete with Walmart.It works almost every time.
It's interesting that both private equity firms are named after mythological figures. Isn't Cerberus the dog from Hell? The shadowland, no there there, "corporations are people", hidden in plain sight horror, no one is ever responsible legend in its own mind, anti-human, go along to get along, dream murdering bubble land, is the poster child for irrational narcissism. Your glyphosate level isn't myth.
The attack on Dutch farmers (the second most productive in the world) by the WEF, that Bill Gates is the largest holder of productive farm land in the world (which he has taken out of production) and the ongoing efforts of world capital to gain control of water (the Bush family among them) should be a wake-up call for us all. IMF/WEF/CCP globalist puppets across Europe have announced a new austerity. Europeans have been told to expect rolling black outs, supply chain disruption and empty store shelves with no end in sight. Hell has at last frozen over.
One imagines this merger will be bad news for the folks cutting meat and bagging groceries in the merged company too, who are already feeling the squeeze from Kroger. Amid all the recent labor market upheavals, about 12,500 unionized Kroger employees here in Ohio just voted down a recent contract offer from the company and authorized a strike. The strike didn't actually happen, and they reached a deal with the company that improves starting wages to only $14.25 an hour, with a $2 an hour increase over the three-year life of the contract. For context: the median home sale price here in Columbus is ~$350k and rents for decent apartments are $1,200+. As a Kroger employee told the Dispatch: "Most everyone I talk to on a daily basis feel the union has sold us out because they did nothing but encourage people to vote yes by saying things like 'this is all Kroger has to give.'"
https://www.dispatch.com/story/business/2022/10/07/kroger-union-workers-ratify-contract-offer-avoiding-strike/69546533007/
The biggest impediment to antitrust action agains the Kroger-Albertsons merger is the fact that post-merger they'll still just be the #2 player. The government will have a hard time explaining why they will prevent this merged company from forming when they are allowing a company that is even larger to exist.
All the post-merger "synergy" plans that Matt mentions to cut white collar redundancies, squeeze suppliers, etc have in fact already been executed on a much larger scale by their biggest competitor Walmart and Amazon who they see as an eventual rival. Why should Walmart and Amazon be able to leverage being big while Kroger-Albertsons cannot. Ironically, I think they will make the argument that this merger will actually bring more competition to the market by levelling the playing field with Walmart and Amazon.
I hope the people who can make a difference in this case read your analysis.
Mr. Buffet is likely involved in this deal. Helikes firms with a moat i.e. little competition.
I drive out of my way to shop at Safeway. I find many of their products superior to City Market/Kroger. I'll even pay a bit of a premium for some items.
But regulators cannot measure product quality on any tangable level. It doesn't fit on a spreadsheet no matter how many customer surveys you run. Most people aren't going to go around every store and comparison shop everything. They pick a store and that's it. If the quality goes down on even a few items they'll look elsewhere. They probably don't know that a product may be availalble at a competitor for a lower price, or that a store brand at the other store is actually better than name brand (or fits their tastes better), because they aren't going to shop there unless something radical happens.
So regulators believe the myth that consolidation brings on better buying power, wholesalers cut quality to meet price pressure and Walmart still gets the bulk of the business. Prices might drop a little but at the expense of quality. And Walmart gets blamed again.
I agree...this should not be happening...
For comparison, how has the Whole Foods purchase by Amazon turned out? I thought Whole Foods was still in decline, and would that purchase have been blocked by the agency today?
Here in Central Texas we have HEB, which is privately owned and highly liked by consumers. Curious about the differences in market share, financial success, community and customer satisfaction, between privately owned grocers and public/PE/financially owned grocers.