Local
Kroger-Albertsons Merger Poised to Impact 124 Stores in Washington
Over 20% of the 579 stores that would be sold off in a Kroger-Albertsons merger are in Washington.
If the Federal Trade Commission is convinced to permit the Kroger and Albertsons merger to move forward, Washington will be the most impacted state in the country.
Last week, Kroger and Albertsons released a list of 579 stores that would be sold to C&S Grocery Wholesalers as part of their merger. One out of five stores in Washington – 124 total – are slated to be sold off. These are the locations in our immediate area,
Bellevue:
QFC — 10116 NE 8th St
QFC — 2636 Bellevue Way NE
QFC — 3550 Factoria Blvd SE
QFC — 15600 NE 8th St Ste K1
QFC — 1510 145th Pl SE
Bothell:
QFC — 18921 Bothell Way NE
QFC — 22833 Bothell Everett Hwy
Safeway — 20711 Bothell Hwy
Issaquah:
QFC — 1540 NW Gilman Blvd
Safeway — 735 NW Gilman Blvd Ste B
Safeway — 1451 Highlands Dr NE
Kirkland:
QFC — 11224 NE 124th St
QFC — 425 Urban Plaza Ste 100
Safeway — 12519 NE 85th St
Safeway — 10020 NE 137th St
Kenmore:
Safeway— 6850 NE Bothell Way
Redmond:
QFC — 15800 Redmond Way
QFC — 8867 161st Ave NE
QFC — 23475 NE Novelty Hill Rd
Safeway — 15000 NE 24th
Woodinville:
Haggen — 17641 Garden Way NE
Kroger, Albertsons, and C&S leaders claim that the merger and sell-off will not impact consumers or employees, and none of the existing locations will close.
On February 26, the FTC moved to block the merger. In a letter, the federal regulator warned that the plan to divest stores was inadequate and that not enough stores were being divested to maintain market competition.
They warned that C&S only operates 23 stores and has no experience as an owner/operator at this scale despite its 106-year history and an estimated $20 billion in gross revenue. The company also has a documented history of closures and liquidation after purchase, including BI-LO, Southern Family Markets, Nell’s, and Olean Wholesale Grocery.
Regulators also believe that because Kroger and Albertsons currently compete at the same level, the combined companies won’t have to try as hard to convince customers to shop at their stores, resulting in lower-quality produce and meat.
C&S Wholesale Grocers, owned by private equity and headquartered in Keene, New Hampshire, announced in 2023 that they agreed to purchase 413 locations, but the number may be as high as 579. The company keeps the list of investors confidential and held its most recent quarterly earnings call on May 14. According to the press release, the company has an undisclosed amount of unsecured debt due in 2028. The most recent publicly available gross revenue data is from 2017, estimated at $20 billion.
C&S is primarily a wholesaler that sells to over 7,500 independent grocery stores, institutional customers, and the U.S. military, stocking 100,000 items. It also owns the Grand Union Supermarkets and Piggly Wiggly brands. Three years ago, according to a 2021 press release, the company serviced more than 7,700 locations with an inventory of over 137,000 products.
In 2003, C&S acquired Fleming Companies, which owned the Piggly Wiggly brand, out of Chapter 11 bankruptcy. Fleming was forced into reorganization after years of SEC investigation into its business practices and creative accounting. Over the last 21 years, 23% of Piggly Wiggly locations have been shuttered.
Today, there are 12 Piggly Wiggly corporate stores and 491 independently run under a franchise model. Most stores are located in smaller communities in the so-called Bible Belt states, with almost one in four in Alabama. There are a handful of stores in New York, Ohio, West Virginia, and Virginia. A sub-brand, Piggly Wiggly Midwest, operates in Wisconsin and Illinois.
C&S acquired Grand Union Supermarkets in 2001 after the chain filed Chapter 7 bankruptcy and then closed most locations. In 2012, C&S sold the brand and remaining stores to Top Friendly Markets, better known as Top Foods. Top merged with Price Chopper Supermarkets in 2021 and was forced to sell off locations to gain regulatory approval. C&S bought back 12 Grand Union locations and resurrected the brand, and has since shut down one store. The 11 remaining stores are located in Vermont and upstate New York.
C&S also owns or licenses a portfolio of private brands, including Best Yet, That’s Smart, IGA (under license), TopCare, Simply Done, Full Circle, Craven, and the pet brands Paws and Pure Harmony.
A Warning from the Past
The merger goals and sell-off plan proposed by Kroger and Albertsons are eerily similar to those of the earlier Albertsons—Safeway merger.
In 2014, when Albertsons acquired Safeway, it created one the largest grocery retailers in the United States with $61 billion in sales at more than 2,200 locations. To approve the merger, the FTC required 168 stores to be sold off, and Washington was one of the most impacted states. In December 2014, Bellingham, Washington-based Haggen bought 146 Albertsons and Safeway stores for $300 million. Company leaders and the FTC hailed the agreement as a victory for workers and competition, creating a new super-regional grocery chain on the West Coast. Overnight, the boutique brand, with 18 locations, became a regional supermarket chain with 164 locations and 106 pharmacies in five states. The acquisition was a catastrophe, with Haggen closing 26 locations before the transition process was completed.
In September 2015, Haggen management filed a $1 billion lawsuit in the United States District Court for the District of Delaware, seeking triple damages against Albertsons, accusing the company of “coordinated and systematic efforts to eliminate competition and Haggen as a viable competitor in over 130 local grocery markets in five states,” and “made false representations to both Haggen and the FTC about Albertsons’ commitment to a seamless transformation of the stores into viable competitors under the Haggen banner.”
The lawsuit accused Albertsons of “malicious and unfair actions” during the transition, including:
- Using proprietary and confidential information to plan and execute aggressive marketing campaigns intended to undermine Haggen grand openings;
- Providing Haggen with false and misleading historic pricing data, causing Haggen stores to inflate prices unknowingly;
- Cutting off Haggen-acquired store advertising before the transfer, decreasing customer traffic;
- Timing the remodeling and rebranding of Albertsons and Safeway stores that prevented Haggen from entering into its acquired markets;
- Deliberately understocking inventory at the Haggen-acquired stores below industry levels just prior to conversion, resulting in shortages during grand openings;
- Deliberately overstocking perishable goods at Haggen-acquired stores above industry levels just prior to conversion, forcing Haggen to dispose of inventory that Haggen was forced to purchase;
- Removing store fixtures and inventory from Haggen-acquired stores that Haggen paid for;
- Diverting inventory allocated for Haggen to Albertsons stores; and
- Failing to perform routine maintenance on stores and equipment prior to the transfer.
On September 9, Haggen’s grand opening plans were destroyed. The company owed more than 5,000 creditors up to $100 million and was forced into Chapter 11 bankruptcy. Later, during the restructuring, the now-merged Safeway and Albertsons bought back 33 of the 146 locations for pennies on the dollar—mostly in the Southwestern United States, with some properties purchased for $1.
The federal lawsuit was settled in 2016. Albertson’s agreed to pay Haggen $5.75 million but admitted no wrongdoing. It then purchased the 29 remaining Haggen locations and brand for $106 million. As part of the purchase, 14 locations were closed.
35 Years of Consolidation has Weakened Competition
In 2023, the top ten grocery chains in the United States control approximately 60 cents of every grocery dollar. This list doesn’t consider total earnings but grocery-specific gross earnings from July 2022 to June 2023,
- Walmart – Walmart, Walmart Super Center, Sam’s Club
- The Kroger Company – QFC and Fred Meyer
- Costco Wholesale Corporation
- Albertsons – Safeway, Haggen, and Albertsons
- Ahold Delhaize USA – no presence in Washington
- Publix Super Markets – no presence in Washington
- H-E-B – no presence in Washington
- Amazon (online and physical stores combined – grocery and HBA)
- Target Corporation
- Meijer, Inc – no presence in Washington
According to the most recent data available, a 2019 USDA study found that the top 20 corporations in the grocery industry control almost 70% of the $717 billion Americans spend on groceries. In 1990, the top 20 controlled 35%. If the proposed merger is approved, the new company would be the second largest grocery retailer in the United States, behind Walmart.
Kroger and Albertsons Claim the Merger is a Matter of Survival
A central argument in support of the merger is that Kroger and Albertsons are on the brink of being unprofitable. Publicly available data shows that isn’t true. Margins in the grocery industry, as with most brick-and-mortar retail, have always been low compared to online shopping and other industries. A grocery store chain with a 2% net profit margin is considered extremely healthy. The business model is viable because consumers need to buy groceries.
Kroger’s profits have steadily increased since the beginning of 2022, with a net profit of $1.69 for every $100 spent in its stores, but it still has not recovered from the post-COVID dip.
Albertsons’ profit margins are also recovering. In the most recent quarter, the company earned a net profit of $1.63 for every $100 spent in its stores. That’s a 64% increase since mid-2021 and close to the 1.73% net profit the company was achieving after its 2014 merger with Safeway.
What can you Do
At this point, not much. While the FTC has challenged the merger and appears to be playing hardball, experts believe that, ultimately, the merger will be approved.
For our area? Based on the past history, expect higher prices, less choice, and longer lines coming soon to a Fred Meyer near you. Those stores would remain under the merged Kroger and Albertsons.
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