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UFCW: Study concludes Kroger-Albertsons merger would sap labor power
Kroger cites workforce investments, union commitments and growth of non-union grocery retailers. Kroger points to workforce investments, union commitments and growth of non-union grocery retailers.
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The University of Utah study contends greater employer concentration would lead to less labor bargaining leverage, negatively impacting jobs, pay, and working hours and conditions. / Photos: Shutterstock
Six United Food and Commercial Workers (UFCW) union locals have endorsed a University of Utah study concluding that the Kroger-Albertsons mega-merger, if approved by regulators, would dilute labor power in the grocery retail industry.
UFCW Locals 5, 7, 324, 400, 770 and 3000 said Thursday that the new report by university economist Marshall Steinbaum, titled “Evaluating the Competitive Effect of the Proposed Kroger-Albertsons Merger in Labor Markets,” raises key issues regarding the $24.6 billion merger deal and “delves into the proposed mega-merger of Kroger and Albertsons in ways that have not been fully looked at over the past year.”
Announced over a year ago, the Kroger-Albertsons merger—in which Cincinnati-based Kroger plans to acquire Boise, Idaho-based Albertsons—would form a company with annual revenue of about $210 billion and 4,996 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies, 2,015 fuel centers and 710,000 workers in 48 states and the District of Columbia. The deal would combine the nation’s two largest conventional supermarket retailers and mark the largest-ever U.S. supermarket merger.
The UFCW locals noted that according to Steinbaum’s research paper—which evaluated large database of posted job offers—a merger of Kroger and Albertsons would sap the bargaining power of both unions and individual workers. Specifically, they said, the study demonstrated that greater employer concentration negatively impacts employee earnings and work hours. Conversely, union workers garner higher pay when a given labor market has two bargaining counterparties versus just one, according to the report.
“Our ability to raise wages and standards in general depends on our ability to pit these companies against one another at the bargaining table—threaten to strike one while directing customers to the other,” the presidents of UFCW Locals 5, 7, 324, 400, 770 and 3000 said in a joint statement, in alignment with the “Stop the Merger” campaign. “If these two companies were to become just one company, that power would go away, and that harms workers as well as customers.”
Steinbaum concluded in his analysis that the Kroger-Albertsons merger would lower pay and job quality due to increased labor-market concentration, as well as reduce the flow of job offers to low-wage workers. Perhaps more important, the study said, union leverage at the bargaining table would decrease since workers would be negotiating with a much bigger employer.
“All three theories centrally concern the exercise of labor market power resulting directly from the merger,” Steinbaum wrote. “We conclude that the merger is likely to harm labor market competition and thus reduce worker welfare via all three channels, and hence any and all of them constitute a valid theory of competitive harm in labor markets arising from the merger.”
Kroger cites industry competition and worker support
In an email on Thursday to Winsight Grocery Business, The Kroger Co. countered the conclusions of the union-backed research.
“Kroger’s merger with Albertsons will mean workers gain from $1 billion in higher wages, expanded benefits, long-term job security and a strong unionized workforce for associates,” Kroger said in a statement.
The company also pointed to the growing strength of mass merchants and online retailers in the grocery arena.
“If the merger is blocked, the non-union retailers like Walmart and Amazon will become even more powerful and unaccountable—and that’s bad for everyone,” Kroger stated. “The growth of non-union retailers led to fewer stores and the loss of more than 200,000 union jobs over the last 20 years. Kroger has bucked that trend, expanding access to affordable food and growing union jobs by more than 100,000 over the same time period.”
Kroger has frequently reiterated its case for the Albertsons acquisition. Post-merger, the company plans significant investments in pricing, stores, local suppliers and employees, and it has said no layoffs would result from the merger. Kroger also has said union contracts will be honored.
Kroger has noted that its workforce investments and union commitments contrast the company from non-union retailers such as mass merchants and discount grocery chains. / Photo: Shutterstock
On the labor front, Kroger said it expects to invest $1 billion to boost associate wages and benefits after the merger transaction closes. In March, the retailer announced plans to invest over $770 million in associates for 2023, including to raise average hourly wages, improve health care options, and create new training and development opportunities. The company said it raised average hourly rates by over 6% in 2022 and has now invested an incremental $1.9 billion in associate wages since 2018.
A brief released in July by the International Center for Law & Economics noted that about two-thirds of Kroger employees and a majority of Albertsons employees are represented by the United Food and Commercial Workers union.
In an exclusive interview with WGB in August, Kroger Chairman and CEO Rodney McMullen said his company stands by its statements that no stores will be closed or jobs eliminated with the merger. He also emphasized 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,” McMullen told WGB. “Both of us coming together allows us to create more security for those long-term union jobs.”
A week ago, when reporting third-quarter results, McMullen said the early 2024 timetable for closing the merger remains intact. Kroger had received a second request for information from the FTC on the proposed merger with Albertsons in last December. But in an earnings call late last week, McMullen reported that Kroger has essentially met the additional information request.
“As of Nov. 15, 2023, Kroger certified substantial compliance with the second request issued by the FTC. We continue to work cooperate live with the FTC and its review of the transaction. This step keeps us on track to close our proposed merger with Albertsons in early 2024,” McMullen told analysts in the Nov. 30 conference call. “We are confident that we have fulfilled all the commitments we set out in the original merger agreement, including the comprehensive divestiture plan announced with C&S Wholesale Grocers.” (Call transcript provided by AlphaSense.)
Under a $1.9 billion deal unveiled in early September, Kroger-Albertsons plans to sell 413 stores, eight distribution centers and two regional offices in 17 states and the District of Columbia to Keene, New Hampshire-based C&S. The pact, too, might require C&S—which also committed to honor union contracts—to acquire another 237 stores based on Kroger and Albertsons securing FTC and other regulatory approval for their merger.
“C&S is a well-qualified buyer who meets all the criteria necessary to complete our transaction and will ensure no stores will close as a result of the merger. Frontline associates will remain employed, and existing collective bargaining agreements will continue,” McMullen said in the call.
Workers concerned about bargaining leverage
In voicing their support of the University of Utah study findings, UFCW Locals 5, 7, 324, 400, 770 and 3000 also cited union member comments about the Kroger-Albertsons merger deal.
“Our unionized workplaces have competitive wages and benefits because workers have fought for and won them,” Benjamin Blum, a night crew employee at Ralphs (Kroger Co.) store in Thousand Oaks, California, said in a statement. “If the proposed mega-merger were approved, workers will lose leverage and be more vulnerable to a single massive employer.”
Another Ralphs employee, Rachel Fournier, who works at a store in Los Angeles, also noted the importance of bargaining power in her union’s latest contract talks. “We were able to leverage one company’s fear of losing market share to their competitor, and we used that to get improvements in our contract that they wouldn’t have agreed to otherwise,” she explained. “That helped us get historic raises that would never happen if there were just one company.”
Likewise, Sam Dancy, a front-end manager at a QFC (Kroger Co.) store in West Seattle, stated, “We need to increase staffing, improve our schedules and increase our leverage as unionized grocery store workers, not go the other way.”
Similar concerns were raised by Judy Wood, a cake decorator at an Albertsons store in Orange, California. “The power we have when we bargain collectively leads to improvements in stores for both workers and customers,” she said in a statement. “Workers have higher wages and stores are safer now because we have the power to fix hazards that we won through our last contract-bargaining session. If this merger goes through, we will lose some of that power, putting the public in a worse position.”
United Food and Commercial Workers International, the nation’s largest grocery retail union, announced its official opposition to the Kroger-Albertsons merger back in May. The The International Brotherhood of Teamsters followed suit a month later. More recently, a national tour of “listening sessions” by FTC Chair Lina Khan—including one on Nov. 1 in Denver hosted by UFCW Local 7—also has spotlighted worker and public uncertainty about the potential impact of the merger.
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