Phil Castle, The Business Times

A proposed acquisition that would combine Kroger and Albertsons constitutes a response to an increasingly competitive marketplace that also would result in lower prices for consumers and higher wages for employees, according to an industry consultant hired to advise on the deal.

What’s more, C&S Wholesale Grocers offers a strong buyer of 579 stores that would be sold under the new terms of a divestiture plan, said Scott Moses, a partner and head of the grocery, pharmacy and restaurants advisory group with Solomon Partners based in New York.

Moses discussed the merger during a Zoom media call with Colorado reporters.

Kroger announced in 2022 the proposed acquisition of Albertsons in a $24.6 billion deal that would combine the two largest supermarket chains into a 4,500-store operation.

In February, the U.S. Federal Trade Commission sued to block the merger, claiming a lack of competition would lead to higher grocery prices and lower wages for workers. The FTC also said the initial plan to divest 413 stores to C&S was inadequate.

Moses said the merger is necessary for traditional supermarket grocers like Kroger and Albertsons to compete with nontraditional groceries that include mass merchants, warehouse clubs and a proliferation of discount stores.

While 10 of the top 15 U.S. grocers were supermarket grocers 20 years ago, they’re only five of the top 15 today, he said. Kroger ranked second in 2023 in terms of sales behind Walmart. Albertsons ranked fourth behind third-place Costco.

Walmart has three times more annual sales than Kroger and five times more than Albertsons, he said. Walmart has two times more sales than Kroger and Albertsons combined.

Dollar General and Dollar Tree Family Dollar have grown from a total of 12,992 stores in 2003 to 36,796 stores in 2023.

In Colorado, the combined share of the grocery store market for Kroger and Albertsons decreased from 51 percent in 2012 to 37 percent in 2022. Walmart and Sam’s Club commanded a 32 percent share, while Costco had a 10 percent share.

Moses countered the FTC’s claims the merger of Kroger and Albertsons would lead to higher grocery prices and lower wages. He said Kroger remains committed to offering lower prices and higher wages as well as no store closures or job losses.

Kroger plans to invest $500 million to lower prices following the merger, adding to $5 billion invested to lower prices since 2003, he said.

Kroger also is committed to investing $1 billion to raise wages and benefits, adding to the $2.4 billion invested to improve wages and benefits since 2018.

The merger also offers a way to secure union jobs, Moses said.

Under the initial divestiture plan, Kroger and Albertsons planned to sell 413 stores in markets where they overlap to C&S Wholesale Grocers. In response to FTC concerns, Kroger and Albertsons now plan to sell 579 stores to C&S for $2.9 billion. That would include 91 Albertsons stores in Colorado.

Under the updated plan, Kroger would sell its Haggen banner to C&S. In addition, C&S would license the Albertsons banner in California and Wyoming and the Safeway banner in Colorado and Arizona. The plan also would require C&S to keep all of the stores open and honor any labor agreements.

Moses said C&S is one of the largest grocery businesses in the United States with more than $20 billion in annual sales and runs one of the largest wholesale operations in supplying more than 7,500 grocery stores.

Moreover, the family owned company has a more than century long track record in the grocery industry as well as expertise in acquiring and integrating acquisitions.

If the merger and divestiture plans go through, C&S would become the eighth largest grocery with a total of $40 billion in annual wholesale and retail grocery sales.