Alaska shares the concern about Kroger-Albertsons merger

Concern about the Kroger-Albertsons merger even extends far to the north.

Through its representative in Congress, Alaska has become one of the latest states joining the opposition to the Kroger-Albertsons merger.

Alaska Rep. Mary Peltola (D.) this week sent a letter to the Federal Trade Commission that asks the agency to block the $24.6 billion deal, currently under antitrust review. She argues that the merger would sap competition by worsening an already consolidated grocery retail market in the state, in which The Kroger Co.’s Fred Meyer and Albertsons Cos.’ Safeway and Carrs stores are among the leading players.

According to the chains’ websites, there are currently 11 Fred Meyer, 12 Safeway and 11 Carrs stores in Alaska, which would give the combined Kroger-Albertsons a presence of 34 locations in the state.

“Alaska already has an incredibly concentrated grocery store market, and potential divestments of stores resulting from the merger would threaten both competition and basic food security in many communities across the state,” Peltola wrote in the letter. “The five largest jurisdictions by population in Alaska are Anchorage, the Matanuska-Susitna Borough, Fairbanks, Juneau and Kenai-Soldotna. In each of these communities, Fred Meyer (Kroger) and Carrs (Albertsons) are the primary competitors selling groceries and household goods.”

Related:Kroger-Albertsons: The pharmacy question

Currently, Kroger operates 11 Fred Meyer multi-department stores in Alaska. / Photo: Shutterstock

Indeed, Fred Meyer and Safeway-Carrs now have stores in Anchorage, Fairbanks, Juneau, Wasilla, Eagle River, Palmer, Soldotna, Kenai, Unalaska, Homer, Ketchikan, Seward, Valdez, Kodiak and North Pole (not literally the North Pole, but a mid-Alaska community).

“If the proposed merger goes through, store closures and reduced competition could result in a significantly reduced competition, or even a near-monopolistic landscape in a state that already has some of the highest costs of living in the United States,” she noted.

A key point Peltola raises in her argument against the Kroger-Albertsons combination is that it would be “similar in size to Walmart and Amazon.” But that’s really what’s behind the merger: Even supermarket giants like Kroger and Albertsons (with large unionized workforces) are feeling the competitive heat from (non-union) mass retailers, which are grabbing grocery market share on an omnichannel basis, including brick-and-mortar and online.

If the merger goes through, Kroger-Albertsons’ 34 stores in Alaska would be up against nine Walmart, four Costco and three Target stores in the state, not to mention Amazon.com’s nationwide reach and a plethora of independent grocers. (Sam’s Club closed its three Alaska stores in January 2018.)

Related:Kroger’s Rodney McMullen upbeat on Albertsons mega-merger’s potential

That certainly doesn’t appear to be a potential Kroger monopoly for Alaska’s retail grocery scene, unless the FTC only considers supermarkets—and excludes mass retailers—in sizing up the competition. And something to note: Fred Meyer isn’t a supermarket per se but a multi-department store retailer.

In Alaska, Albertsons has 23 supermarkets under the Safeway and Carrs retail banners. / Photo: Shutterstock

Peltola also included a quote from Joelle Hall, president of the Alaska AFL-CIO, in announcing the letter to the FTC.

“This mega-merger would hurt all Alaskans, but especially the workers at potentially impacted stores,” Hall stated. “A successful mega-merger would likely lead to store closures and hundreds—possibly thousands—of lost jobs, many of which come with family-sustaining wages, top-fo-the-line health insurance and a pension. Alaskans should be thankful Rep. Peltola is speaking up on this issue and defending Alaska consumers and workers from the harmful impacts of a corporate monopoly.”

In an interview earlier this month, Kroger Chairman and CEO Rodney McMullen told me that his company—which is acquiring Albertsons—stands by its statements that no stores will be closed or jobs eliminated with the merger, and the company will make investments to lower grocery prices, not raise them.

Related:Does Aldi-Southeastern Grocers deal augur more supermarket consolidation?

McMullen stressed that the merger would uphold a primarily unionized workforce. “Kroger has added over 100,000 union jobs since 2012. Albertsons has added a significant number of union jobs as well,” he said. “Both of us coming together allows us to create more security for those long-term union jobs.”

Kroger and Albertsons have estimated they would need to divest 100 to 375 stores to gain regulatory approval for the merger. Their agreement also includes a ceiling of 650 store divestitures, at which point they could reassess the transaction, currently expected to close in early 2024. Stores would be divested through direct sales to other operators and/or via a new spinoff company called SpinCo.

“We’ve committed that no frontline associates will lose their job because of the merger. And with store divestitures, one of the things that will we make sure of is that the companies that buy the divested stores will support the associates’ union contract. The only ones that would benefit if the transaction didn’t get approved are non-union players,” McMullen said, also noting that store buyers would need to be solid, financially sound retail operators.

The Kroger CEO said there has been strong interest among potential suitors for divested stores. Still, you’d have to wonder how big that field would be in Alaska if regulators require store divestitures in the state to green-light the merger.

Anchorage Democratic Reps. Zack Fields and Ivy Spohnholz had sent a letter to the FTC last October to express their concerns about the deal, saying the merger would have a “profound negative impact,” the Anchorage Daily News reported. Their letter also included map snapshots showing the proximity of Fred Meyer and Safeway-Carr stores in key communities, but not any nearby Walmart, Costco or Target locations).

I guess we’ll see how the FTC and state regulators sort this all out.