What Could The Grocery Store Merger Mean for Alaskans?
By Rachel Lord
Advocacy and Policy Director, AFPC
What do we mean when we talk about a healthy and secure food system for all of Alaska, and how do potential grocery store mergers fit into that vision? It’s easy to get lost in both details and rhetoric, and coming up for air we have to ask - what are our expectations of a functioning and resilient grocery store sector in Alaska? We know that doing business in Alaska is not for the faint of heart. Our current grocery sector includes not only Kroger and Albertsons stores, but other large retailers (Walmart, Target), medium-size retailers (AC Stores, Three Bears, and others), wholesalers (Costco), online (Amazon and others), and dozens of independent and Tribal stores throughout rural Alaska.
The potential merger in the news involves two of our large retailers - Kroger and Albertsons. According to their respective websites, Kroger (i.e. Fred Meyer), operates 11 stores in Alaska while Carrs/Safeway operates 23 stores under their names in addition to many others operating under a different name (i.e. Crow Creek Mercantile in Girdwood). Seven communities have stores from both companies: Anchorage, Eagle River, Palmer, Wasilla, Fairbanks, Juneau, and Soldotna. Part of the merger deal includes selling 14 Alaska stores to a nationwide company called C&S Wholesale Grocer, with assurances from Kroger that this divestiture will protect consumers from a large grocery monopoly.
Pulling back from this particular deal-in-the-making, we wanted to ask a few broader questions. We know that retail grocery stores are critical partners in a functional food system. What attributes make a successful grocery sector in Alaska?
A few things are easy to pick out:
Reliability - an ability to get food on the shelves so that when we go to the store to feed our families, we know we can get fresh, healthy foods.
Strong player in complex supply chain logistics, able and willing to meet the demands and rise to the challenges of the vulnerabilities that come with having a single port of entry for most of our food and limited large partners in the Alaskan supply chain.
Quality employers offering living wages to secure a strong workforce.
A commitment to selling Alaska Grown/Alaska Made
Cost Control - it’s imperative that Alaskan businesses are savvy and develop frameworks that allow them to control costs as much as possible to keep down the inflation of food costs for Alaskans. In support of mergers, it’s argued that joining forces can lead to an improved economy of scale, thus potentially helping to reduce prices. Alongside that reality, publicly traded companies have to hold competing interests with their increased market power - pass savings onto consumers by lowering prices, or increasing the bottom line and profitability for shareholders.
Local/Community Integration - Partnering with the Food Bank of Alaska and our local food banks and pantries around the state should be a community expectation of our large grocers. Helping to nourish those in need through donations and gleaning, and reduce overall food waste, is a win all around and one we want to encourage and support throughout the private sector. Doing business in Alaska is also challenging with our geographic size, complex logistics, and low population density. Pure market forces can be difficult to rely on to keep stores open in small towns.
When we come back to the merger currently on the table, some concerns arise around what a company says, or promises, and what actually comes to pass when deals are done. Some past references that support these concerns include the 2015 Albertsons-Safeway merger, where Haggen was the third company in the divestiture plan. Within a year, Haggen filed for bankruptcy and Albertsons reacquired nearly a quarter of those divested stores. An earlier history perhaps foreshadowed that experience, with the less-than-one-year-later closure of Alaska Marketplace grocery stores divested as part of the 1999 Safeway-Carrs merger.
While C&S is a large company with likely the capacity and resources to run these 14 divested stores, the Alaska market is complex and challenging and will likely not be very strong within its nationwide portfolio. If the operating agreement with the Federal Trade Commission (FTC, one of two federal agencies that enforce U.S. antitrust laws - learn more here) includes C&S holding onto and running the divested stores for, say, three years, one risk to Alaska is that they sell off their 14 Alaska stores at three years and one day and likely to a smaller entity that will struggle to compete with neighboring Kroger stores. The potential eventual shuttering of these 14 stores will then result in a substantially increased market dominance by Kroger in Alaska’s population centers.
Additionally, following a merger the newly formed parent company will be responsible for running a variety of small, complex, and expensive stores in communities like Unalaska, Nome, Homer, and Girdwood, to name a few. Will these stores fit the overall business model of a larger and stronger Kroger? As businesses grow larger and more consolidated, they have greater advantages to improve their bottom line and fewer ties that bind them to serve people in more challenging markets. A second risk to smaller communities in Alaska is closing or reducing service capacities at the smaller grocery stores that Albertsons currently operates, which would fall under Kroger following this merger.
But will these things come to pass? If the merger goes through, we certainly hope not. And while we know there are unique circumstances around every story, we also know that history has a sneaky way of repeating itself, and the complexity of business in Alaska cannot be denied.
A few things we believe could help protect Alaskans reliant on these stores through this merger process:
The FTC should consider an operating agreement with C&S Wholesale that requires them to operate their divested stores in Alaska for at least ten years.
C&S should take the opportunity to embrace the Alaska market and the Alaska brand and begin planning for its long-term success here in Alaska
Kroger should be committed to not devaluing the divested C&S stores and setting them up for failure prior to the divestiture.
Kroger should proactively assert a commitment to its small store portfolio in Alaska, operating them not as an afterthought but as an integral part of the food system for Alaskans.
Kroger and C&S should both make and hold commitments to purchasing and selling Alaska Grown/Alaska Made products in their Alaska stores.
Looking ahead, we can be curious and ask a lot of questions from our collective experiences and expertise. Do you have thoughts about the potential merger, our grocery store sector, and ways that it impacts and influences our food system? What are your unanswered questions? Together we can maintain a conversation and a strong network to support and promote a more robust, vibrant, and resilient food system across Alaska.
We are listening! What are your thoughts on the Kroger/ Albertsons grocery merger?
Please follow this link to provide your input>>
Originally planned for December 2023, the Federal Trade Commission has delayed a decision on this merger until January 17, 2024. See ADN article>>
