February 07, 2023

Opinion

Farmers’ concern about proposed large grocer mergers

A farmer works on his cotton field near Cotton Center, Texas.

There has been another proposed merger in the food industry recently.

In October Kroger and Albertsons announced their potential partnership. Kroger’s family of stores in Illinois includes Mariano’s, Food 4 Less, Pay-Less Super Markets and Pick ‘n Save. Albertsons includes Jewel-Osco.

The logic for this merger is to be large enough to compete with America’s two top grocers, Walmart and Amazon.

Bruce Shultz, Vice President National Farmers Organization

The CEO of Kroger, Rodney McMullen, was quoted as saying the merger would save the combined companies over $1 billion in administration and distribution costs, and allow technology sharing. While that may sound good if you are an investor, what does this mean to the rest of us?

For consumers, this is a no-win situation. Right now, the two combined chains have just over 5,000 stores in 35 states, along with several overlapping markets. Not new to a large grocery merger, Albertsons acquired Buttrey Food and Drug, a Montana family-owned chain in 1998. But in this case, all that will happen is the new Kroger-Albertsons group will keep the newest and better-performing stores and sell the underperforming stores. A setback for anyone who wishes to compete with Kroger-Albertsons, there are also jobs lost locally when a merger happens. Albertsons closed a Buttrey distribution center, so those warehouse and trucking jobs were lost.

Kroger-Albertsons leaders says they want to compete with the big boys, but let’s get something straight; these two are already the big boys. According to FoodIndustry.com, Kroger is the fourth largest retail grocer with sales in 2021 of $137 billion and Albertsons is fifth at $71 billion. If they combine, they would control 15% of the grocery marketplace in America.

McMullen, the Kroger CEO, said the company wants to more effectively compete with the top two supermarket chains, and this merger will give them greater power in the marketplace in order to do that. This means they will be able to lower the prices they are paying distributors because of the bonus of selling more products to a single, and now larger, retailer. While it sounds good for less expensive food, this has the potential for lowering of food prices and negatively impact farmers.

Agricultural producers have been dealing with constant consolidation in input costs and markets for our products. Right now, three companies control 62% of the export market in grains. We know about the big four meat packers and their control of more than 80% of the market. We just had Beyer and Monsanto merge along with DuPont and Dow. Ask a farmer if these two mergers have decreased farmers’ costs or made products more readily available. The answer you will hear is that consolidation in the ag inputs sector only takes away more profits from farmers.

My hope is that the Federal Trade Commission denies this merger. Five state Attorneys General plus the District of Columbia are currently suing to stop the corporate partnership. U.S. Sen. Amy Klobuchar, Democrat-Minnesota, and U.S. Sen. Mike Lee, Republican-Utah, the chairwoman and ranking member, respectively, of the U.S. Senate Judiciary Subcommittee on Competition Policy, Antitrust and Consumer Rights, said in a statement they have serious concerns about the proposed transaction.

I know it seems like not much gets agreed upon in Washington, D.C., lately, but when both parties are thinking the same thing about a merger of this size, I would have to side with caution and due diligence moving forward.

Bruce Shultz is the vice president of the National Farmers Organization.