Stop & Shop Store Closures - A Sign of Potential Impact of the FTC Blocking Albertson's Kroger Merger
I appreciate the ongoing discussion about the Kroger and Albertsons merger and its implications. It's a critical issue that requires a nuanced understanding of the grocery market dynamics.
As the Federal Trade Commission (FTC) sues to block this merger, I believe it's crucial to consider the broader competitive landscape. The FTC's stance, which primarily focuses on direct competition between Kroger and Albertsons, overlooks significant competitors like Walmart, Target, Costco, and Amazon. These retail giants also play a vital role in shaping the grocery market and significantly impact pricing, consumer choice, and market competition (FTC, "FTC Challenges Kroger’s Acquisition of Albertsons"; POLITICO, "FTC, states challenge Kroger's $25 billion grocery merger with Albertsons").
The FTC argues that the merger would reduce competition, leading to higher prices and worse service for consumers, while also negatively affecting workers through potential wage suppression and job losses. However, this perspective seems to ignore the reality of the current retail environment (Supermarket News, "Colorado lawsuit to block Kroger, Albertsons deal to proceed"; WVXU, "FTC and 9 states sue to block Kroger-Albertsons supermarket merger").
For instance, Walmart and Target offer extensive grocery selections, often at competitive prices, due to their vast supply chains and economies of scale. Costco operates on a membership model but still competes vigorously in the grocery sector. Amazon, with its acquisition of Whole Foods and expanding grocery delivery services, continues to disrupt traditional grocery models (WVXU).
Blocking the merger could inadvertently strengthen these larger multi-channel retailers, which already dominate significant portions of the market. When traditional grocers like Kroger and Albertsons are prevented from merging, they may be unable to achieve the scale necessary to compete effectively. This could lead to store closures and reduced options for consumers, particularly in areas where grocery stores are already sparse (POLITICO; WVXU).
Moreover, Kroger and Albertsons have proposed selling off hundreds of stores in overlapping markets to mitigate competitive concerns. Yet, the FTC has expressed skepticism about this plan, citing past instances where divestitures failed to maintain competition (WVXU). While these concerns are valid, dismissing the merger outright might not be the best solution.
When we see conventional grocers reacting this way, closing stores, and removing options to remain competitive, it only hurts these legacy retailers, their workers, and local shoppers. Instead of blocking the merger, a more balanced approach that includes stringent conditions and oversight might better serve the interests of consumers and workers alike.
We need to question the current stance the FTC is taking against the Kroger and Albertsons merger. A broader view of the competitive landscape is necessary, one that includes the significant influence of Walmart, Target, Costco, and Amazon. By doing so, we can ensure a fair and competitive market that benefits consumers and workers.
When Stop & Shop’s leaders list these stores as “underperforming” - what does that mean? I think it is safe to say competitive pressures would contribute to a stores closure, and a merger of their two biggest grocery rivals would certainly not benefit them. I don’t think it would be in their best interest to list the competitors the FTC is not considering in it’s antitrust lawsuit against Kroger, in their statement for closing the stores. I did a quick competitive proximity analysis - pulling publicly available data on Stop and Shop Stores and core competitors that challenge it’s value proposition (Costco, Target, Walmart and Aldi). The quick insights from the analysis indicate that Stop & Shop is at risk from physical proximity to these retailers, and if you layered in their loyalty programs and alternative channels there is likely more at play.
82% of Stop and Shop Stores have at least one of these competitors within the same county
14 of the 32 stores that are closing have one or more of these competitors within the same county, 13 have more than one
Works Cited
Federal Trade Commission. "FTC Challenges Kroger’s Acquisition of Albertsons." FTC.gov, 26 Feb. 2024, www.ftc.gov/news-events/news/press-releases/2024/02/ftc-challenges-krogers-acquisition-albertsons.
"FTC and 9 states sue to block Kroger-Albertsons supermarket merger." WVXU, 2024, www.wvxu.org/business/2024/07/02/ftc-block-kroger-albertsons-supermarket-merger.
"FTC, states challenge Kroger's $25 billion grocery merger with Albertsons." POLITICO, 2024, www.politico.com/news/2024/02/26/ftc-kroger-albertsons-merger-00008756.
"Colorado lawsuit to block Kroger, Albertsons deal to proceed." Supermarket News, 2 Jul. 2024, www.supermarketnews.com/issues-trends/colorado-lawsuit-block-kroger-albertsons-deal-proceed.
