Kroger CEO: Fuel, credit card fees, other expenses have raised grocery costs, not gouging

Rising costs on everything from the price of fuel to credit card swipe fees has driven the skyrocketing cost of food in grocery stores, Kroger CEO Rodney McMullen said in court on Wednesday in the Kroger, Albertsons antitrust merger trial in Portland, Ore. 

McMullen took the stand in the case brought by the Federal Trade Commission and nine attorneys general that aims to block Kroger’s $24.6 billion acquisition of Albertsons. The trial began on Aug. 26 and is expected to end on Sept. 13. 

Reuters reported that McMullen said Kroger would “absolutely not” raise prices if the merger is approved. “We believe over time, value will be increasingly important and you can’t price your items above the market,” McMullen said in court, according to the Reuters story. 

Rising costs has been the counter argument to the FTC’s accusations that Kroger, the country’s largest pure-play grocer, gouged consumers on items like eggs and milk. 

In the first week of the trial, the FTC produced an email from Andy Groff, Kroger’s senior director for pricing, showing that the grocery chain raised the prices of both eggs and milk “significantly higher than the cost of inflation.”

That cost increase is due in part to an outbreak of highly pathogenic avian influenza (HPAI) that has killed tens of millions of birds since it began in 2022. The U.S. Department of Agriculture reported in its August 2024 forecast that a new outbreak discovered in November 2023 drove egg prices up in late 2023 and early 2024. 

“Egg prices in July 2024 were 19.1% higher than those in July 2023 but still well below peak prices in January 2023. Egg prices are predicted to increase 2.4% in 2024, with a prediction interval of -2.8 to 8.5%. This wide prediction interval reflects the volatility in retail egg prices,” according to the USDA report. 

Kroger said in an email statement to Supermarket News on Aug. 30 that the Groff email was misleading. “This cherry-picked email covers a specific period and does not reflect Kroger’s decades-long business model to lower prices for customers by reducing its margins,” a Kroger spokesperson said. 

Kroger attorney Matthew Wolf, a partner with the law firm Arnold & Porter, made similar arguments during opening statements on Aug.26, calling it common sense. 

“If you sell more stuff, your hourly wages go up, your costs go up, your costs of your employees goes up,” he said, citing other expenses such as warehouse fees, cleaning product and transportation costs. “All of those are real costs that really decrease your profits.” 

FTC Deputy Chief Trial Counsel Susan Musser argued in opening statements that head-to-head competition between Kroger and Albertsons will keep prices low, calling Kroger’s guarantees to lower prices “unenforceable promises.”

“These promises need to be weighed against the competition that is already happening between these two companies,” she said.