The top management of the nation’s two largest grocery companies insisted that the planned $25 billion merger between Kroger and Albertsons Boise would benefit, not hurt, consumers.
At a congressional hearing on Tuesday, Kroger CEO Rodney McMullen said no stores, distribution centers or manufacturing facilities would close and no “frontline” workers would be laid off if the deal is approved by the Federal Trade Commission.
“This merger will allow us to compete even more,” said McMullen, who said he grew up in a union family and began his career stocking shelves at a Kroger store in Kentucky.
Lawmakers at a hearing before the Senate Judiciary Subcommittee on Competition, Antitrust and Consumer Rights expressed bipartisan opposition to the companies’ proposal, questioning how further consolidation in the supermarket industry could lower prices and improve service.
Democratic Sen. Amy Klobuchar of Minnesota said that if two stores are run by the same owner, there is less incentive to compete for customers. Klobuchar criticized Kroger, whose stores include Fred Meyer, for passing on inflationary price increases to customers.
Republican Sen. Mike Lee of Utah rebuked McMullen for comments he made in June 2021 during an earnings call with analysts. In accordance with CNN BusinessMcMullen said “a little inflation is always good for our business.”
“Inflation is destroying our entire economy, to say the least,” Lee said during the hearing. “But not in the grocery industry, it seems.”
Companies income from core business increased from $2.8 billion in 2020 to $3.5 billion in 2021, an increase of about 25%.
“These cost savings are unlikely to be passed on to consumers,” Sumit Sharma, a senior researcher at Consumer Reports, told the hearing. “Why would these savings be shared with consumers if competition doesn’t incentivize these companies to do so? At the end of the day, these are profit-maximizing corporations.”
Sharma testified that Kroger’s 2021 fact book lists Albertsons as one of its top competitors.
Albertsons CEO Vivek Sankaran defended the company’s decision in October to pay $4 billion in special dividends to shareholders. He said the company has not returned money to shareholders since its 2015 merger with rival Safeway.
“This $4 billion is a return of cash to those shareholders who have supported us throughout this decade,” Sankaran said. “It has nothing to do with the merger itself.”
But the company has not yet been able to make the payments, thanks to a signature on temporary stay provided to Washington State Attorney General Bob Ferguson. Earlier this month, Ferguson sued Albertsons and Kroger, seeking to bar the grocery retailer from sending payments until state and federal antitrust regulators can review the merger.
As part of the proposed acquisition, Kroger has announced commitments to spend $500 million to cut prices, $1.3 billion to renovate stores and $1 billion to raise employee wages. The commitments, totaling $2.8 billion, are not legally binding, but McMullen said they are part of the company’s business plan.
He said the investment is expected to start on “day one” after the merger closes and be rolled out over four to five years.
“This merger will allow us to deliver on these commitments to our customers, our partners and our communities well into the future,” McMullen said.
This story was originally published November 29, 2022 at 4:54 p.m.
