Could Kroger and Albertsons’ $24.6 Billion Grocery Merger Make Us All Go Broke?

We’ve got another session of court to talk about, but this time, it’s not Elon jetting off to Delaware to defend his pay package. Instead, Kroger and Albertsons are facing a roadblock as they attempt to merge into a grocery giant. And, much like that “Karen” HOA president who won’t let you have a pink flamingo in your front yard, the federal government is swooping in, ready to enforce the rules and keep these grocery giants in check.

So, why should you care about this merger? Well, if it goes through, we’re talking about the biggest grocery store merger in U.S. history—yes, history—with Kroger and Albertsons planning to create a $24.6 billion behemoth that would control roughly 13% of the country’s grocery sales. The idea here is simple: team up to take on the big dogs like Walmart, which currently gobbles up 22% of the market, or Costco, sitting pretty with 9%.

But the FTC and a bunch of state attorney generals aren’t exactly on board with this plan. They’re worried that if these two grocery giants join forces, it’ll cut down the competition and push already high grocery prices even higher. Plus, they’re concerned about what this could mean for the 710,000 people working for Kroger and Albertsons—fearing that jobs could take a hit with lower wages and crappier benefits.

This story actually started back in October 2022, when Kroger and Albertsons dropped the news that they wanted to team up. And let’s just say the FTC wasn’t thrilled—far from it. Instead of celebrating, they hit the brakes, which brings us to the current legal drama unfolding in a Portland, Oregon courtroom. The FTC’s got one thing on their mind: getting a judge to slam the brakes on this merger with a preliminary injunction while they dig deeper into what this deal could really mean. And if that happens, Kroger and Albertsons might have to rethink their whole game plan.

Kroger’s not exactly sitting back and twiddling their thumbs while they wait for the judge to make a move. Nope, they’ve gone on the offensive, suing the FTC and claiming the agency’s whole internal process is unconstitutional. They’d much rather have this showdown in federal court where things might move a little faster—because let’s be real, if this drags on in the FTC’s system, it could be game over for the whole deal.

In an attempt to please the regulators, Kroger and Albertsons have agreed to sell off 579 stores in areas where their presence overlaps. These stores would go to C&S Wholesale Grocers, a company that owns familiar names like Piggly Wiggly and Grand Union. Originally, they were only going to give up 413 stores, but the FTC wasn’t impressed, pushing them to up the number.

So, If the judge in Oregon sides with the FTC and grants the preliminary injunction, the merger would be put on hold. Kroger and Albertsons would likely appeal, setting up another legal showdown. If the judge sides with the grocery giants, the FTC could drop the case or keep fighting, but history suggests the FTC might back down.

The outcome of this case could totally shake up how we buy groceries in the U.S. And with the 2024 presidential election right around the corner, who knows how the political landscape might change? It could impact how hard the government pushes back on this merger. So, for now, Kroger, Albertsons, and all of us regular shoppers are stuck in a waiting game, hoping it somehow translates to fewer shocking moments in the checkout line.

Kroger’s stock is up over 12% over the last year. While Albertsons is down 8%. 

Stocks.News holds positions in Kroger, Albertsons, Costco, and Walmart.