Written by Samantha Cave.
The looming possibility of a merger combining the two largest grocery chains in the US – Kroger and Albertsons – poses an important question about our willingness to fight corporate consolidation. The proposed $24.6 billion deal would further tighten the chains’ hold on the grocery industry, threatening competition in an industry already difficult for independent stores to survive in, while limiting consumer choice and further shrinking farmers’ share of the food dollar.
Grocery stores have a notoriously tight margin – between one to three percent for most products – but large chains can hedge against profit losses through pure volume of sales in hundreds or thousands of stores, while small, independent retailers cannot. Large grocery chains also reap profit directly from inflation by passing along rising costs to consumers. The closure of independent grocery stores is most damaging to rural, low-income, and Black communities – with limited grocery choice comes higher rates of food insecurity.
Family-scale producers are frequently squeezed out of markets by large agribusinesses, and more farmers are forced out of business every year. The competitive nature of retail shelf space is a major barrier to entry for small farmers and food businesses. Grocery chains like Kroger and Albertsons rely on their immense buyer power to fill their shelves. Slotting fees, which producers and food manufacturers pay to get their products on the shelf, can reach millions of dollars, a price tag far too high for all but the largest food businesses. This merger has the potential to further tighten competition with higher barriers to entry for small producers and businesses, shrink the food supply chain, and reduce the number of stores leading to massive layoffs.
Together, Kroger and Albertsons operate nearly 5,000 stores across 48 states, including subsidiaries Fred Meyer, Ralphs, King Soopers, Safeway, Shaw’s, and dozens more. If the deal goes through, it will allow the chains to control close to one-fifth of the total US grocery market. In certain states and cities, alarming market domination would occur with market control upwards of 70%.
Consumer advocates, antitrust watchdog groups, and farm and food groups (including NFFC) have taken notice and quickly sounded the alarm. The Attorneys General for Washington, D.C, California, and Illinois filed a federal lawsuit in 2022 to block Albertsons from paying out $4 billion in special dividends to its shareholders, arguing that the large payment would impact its ability to compete with other grocers. Last month, 25 consumers in various states filed the first private lawsuit challenging the proposed deal, which they stated “will be used to increase prices for groceries, decrease the quality of food, eliminate jobs, close stores and offer less choice for consumers.”
This familiar story represents the last thing the US food system needs—more corporate control. The merging of corporate mega-giants creates wider profit margins while hurting local communities. It’s happened in meatpacking, where only four meat companies control 80% of the market, and in dairy, with 76% of dairy farms shuttering since 1997 while one-third of milk sales come from a handful of megadairies with thousands of cows.
Global markets aren’t exempt from increasing consolidation, either – 51% of the entire world’s supply of seeds, for example, are controlled by four multinational companies (these same companies also account for 62% of global agrochemical sales)! When a market is so deeply monopolized, fair competition simply isn’t possible and family-scale food and farm businesses suffer for it.
An op-ed from December by Family Farm Defenders Vice-President Anthony Pahnke and NFFC Board President Jim Goodman further emphasizes why our government should resist further consolidation of our food system. NFFC is proud to join the Stop the Merger coalition, calling on the Biden administration and the Federal Trade Commission to keep their promises, and stop the Kroger-Albertsons merger as one step towards keeping markets fair and open.