Kroger CEO Claims Albertsons Merger Will Slash Grocery Costs for Consumers

In a pivotal moment of the ongoing hearings about the Federal Trade Commission’s (FTC) efforts to halt the merger between grocery giants Kroger and Albertsons, both companies’ CEOs presented their cases on Wednesday in an Oregon federal court. This high-stakes session is part of a three-week process evaluating the proposed $24.6 billion merger.

Kroger CEO Rodney McMullen expressed confidence in potential benefits for consumers, stating, “The day that we merge is the day that we will begin lowering prices.” He highlighted that Albertsons currently has prices between 10-12% higher than those of Kroger, emphasizing that merging the two could substantially reduce costs for shoppers. Additionally, McMullen committed to a significant $1 billion investment aimed at lowering Albertsons’ prices.

The FTC’s challenge originated from concerns raised about the merger’s impact on market competition. Filed in February, the lawsuit cites collaboration among several states, including Arizona, California, and Illinois, to block the deal. These states argue that the merger could diminish competitive pricing in areas where both companies operate simultaneously.

Part of the proposed agreement includes divesting 579 stores to C&S Wholesale Grocers, aimed at addressing regulatory concerns. McMullen stated the merger would better position the companies against formidable rivals like Costco and Amazon. He dismissed claims that Kroger’s pricing would remain unchanged should Albertsons fail to survive in the market. “If Albertsons were to go out of business, there would be no change to Kroger’s prices,” he asserted.

During cross-examination, FTC attorney Susan Musser probed McMullen about Kroger’s own assessments listing Albertsons as a crucial market competitor. Kroger has consistently identified Walmart as its principal competitor, a point McMullen reiterated in his testimony. Albertsons CEO Vivek Sankaram acknowledged Kroger’s competitive status but emphasized Walmart’s significant market presence as unparalleled.

The hearing also revealed internal cost analyses from Albertsons that referenced Kroger stores as benchmarks for pricing strategies, signaling the competitive dynamics at play. Sankaram labeled the merger as the “most consequential decision” of his career and mentioned the potential for store closures and layoffs if the deal does not proceed.

An FTC argument presented earlier highlighted potential negative repercussions for unionized labor in the event of a merger, illustrating how negotiations at one store could influence others. However, McMullen reassured that Kroger would respect existing labor contracts, noting that the combined workforce would total approximately 710,000 employees.

Kroger’s Chief Marketing Officer, Stuart Aitken, also testified about the merger’s promise of immediate price reductions. While questioned about his previous comments regarding the company’s inflationary pressures, Aitken noted it was a response to not aligning with rising market costs.

As the hearings progress, a preliminary injunction from U.S. District Judge Adrienne Nelson could lead to an in-house FTC administrative hearing scheduled for October 1.