A MAJOR change at Kroger and Albertsons may damage your wallet as mass layoff fears have been sparked.
The proposed $24.6billion merger would give the combined company control of at least one-fifth of the US grocery market with nearly 5,000 stores across 48 states.
The deal would combine more than 2,700 Kroger and 2,200 Albertsons grocery stores across the United States.
While the two companies have touted the merger as an opportunity to provide millions of Americans with fresh and affordable food while enhancing technology and innovation, some retail experts believe it could have unintended consequences for shoppers.
With Kroger already operating as the largest grocery chain in the United States, Forbes Contributor Errol Schweizer warned that the merger could make it difficult for unions to negotiate for higher wages or better benefits and lead to potential layoffs in office jobs like marketing and digital sales.
Schweizer pointed to a 2004 grocery strike that ended after Kroger and Albertsons joined together against the employees.
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Additionally, the merger could cause issues throughout the supply chain.
“A merger would give the combined company tremendous purchasing power with suppliers,” Schweizer wrote.
“A 5,000 store chain in over 40 states could more easily set payment terms, negotiate shelf space and assortment, and extract better costs and greater trade allowances for promotions, couponing, ad placement and slotting fees.”
“Whether or not those savings get passed onto consumers is more of a function of how competitive the markets are. Most likely such revenue will pad the bottom line, lining the pockets of institutional investors and asset managers who own large swathes of the stock.”
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The consolidation of grocery stores in the United States has grown in the past ten years and is one of the contributing factors to price inflation, the Forbes contributor also noted.
Regional retailers will face even more competition to reduce their rates if the Kroger and Albertsons merger succeeds.
The merger has also received intense pushback from representatives in Washington DC.
Minnesota Democrat Amy Klobuchar suggested in a recent committee hearing that the merger would contribute to price hikes, according to the New York Times.
Republican Senator Mike Lee of Utah stated that the companies had failed to explain “why the merger is necessary in the first place.”
The two company CEOs, Rodney McMullen of Kroger and Vivek Sankaran of Albertsons, testified before senators on the Competition Policy, Antitrust and Consumer Rights subcommittee to defend their planned merger.
They claimed that the plan combining the companies, having Kroger buy Albertsons for $20 billion, would create more competition among retail grocers and big box stores, contrary to senators' concerns.
The newly combined company would reap significant economies of scale, they said, which would purportedly keep prices low.
In a letter, Congress said: "We urge the Federal Trade Commission to closely evaluate the likely competitive effect of this acquisition."
"This acquisition threatens to create competition-stifling concentration in markets across the country, hurting consumers, workers and small businesses," Congress warned.
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"Kroger’s proposed acquisition of Albertsons presents several anticompetitive concerns."
The companies are hoping to complete the merger by 2024.
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