Phil Castle, The Business Times

Scott Moses contends a proposed acquisition that would combine Kroger and Albertsons constitutes a response to non-traditional grocers that have wrested market share away from more conventional supermarkets.

“This is one way supermarket grocers can get strong and compete,” said Moses, a partner and head of the grocery, pharmacy and restaurants advisory group at Solomon Partners based in New York.

Moses was hired to advise on the proposed acquisition by Kroger Co. of Albertsons, a $24.6 billion deal that would combine the two largest supermarket chains into a 4,500-store operation.

Kroger Co. recently certified to the Federal Trade Commission the deal substantially complies with antitrust rules. That triggered a 30-day timeline in which the FTC must accept the deal or sue to block it, although a final decision could be delayed by continued negotiations.

Critics have questioned whether the deal would result in higher prices, and plans to close stories would limit access to food in some communities. Moreover, they’ve raised concerns about the effects of the deal on farmers, small businesses and other suppliers that rely on a competitive market.

Colorado Secretary of State Jena Griswold joined with her counterparts in six other states to submit a letter to the chairwoman of the FTC opposing the deal.

Kroger countered the acquisition would enhance competition, lowering prices for customers, improving access to fresh food and securing the long-term future of union jobs.

In a Zoom call with Colorado reporters, Moses said traditional supermarket grocers like Kroger and Albertsons are “under siege” from national non-traditional grocers, including mass merchants, warehouse clubs and the proliferation of discount stores.

Moses said the grocery landscape has changed. While 10 of the top 15 U.S. grocers were supermarket grocers 20 years ago, they’re only five of the top 15 today.

Kroger ranked second among U.S. grocers and Albertsons third in 2003 in terms of sales behind only Walmart, Moses said.

Today, Kroger, Albertsons and Walmart still occupy three of the top five positions, but the ranks of the top 15 also includes Costco at third, Amazon at fifth, Target at sixth and Dollar General at ninth.

Between 2003 and 2023, Walmart increased its share of the grocery market by 12 percent, Amazon by 5 percent and Costco by 4 percent, Moses said. During the same period, Kroger’s market share dropped 1 percent and Albertsons’ share fell 7 percent.

National discount groceries account for about $685 billion in grocery sales, while supermarket grocers account for about $410 billion, Moses said. Walmart accounts for $314 billion in sales, nearly three times that of Kroger and almost five times that of Albertsons, he said.

Meanwhile, Dollar General has grown from 6,113 stores in 2003 to almost 20,000 stores in 2023 and is projected to expand further to 34,000 stores, he said.

Aldi, the third largest global grocer, has enlarged its U.S. operation with 2,800 stores and $121 billion in sales.

What was 20 years ago a 50-50 split between union and non-union jobs at U.S. grocers is now 15 percent union and 85 percent non-union, Moses said.

Online grocery sales increased by a factor of four between 2018 and 2022 with Amazon, Walmart, Target and Costco becoming the most dominant outlets, he said. Amazon and Walmart are positioned to handle the logistics with a total of nearly 630 fulfillment centers across the United States.

While gross margins increased over the past 20 years for Amazon, Walmart and Dollar General, they declined 2 percent for Albertsons and 5 percent for Kroger, he said.

The acquisition by Kroger of Albertsons offers a way to respond to market trends as well as benefit consumers and employees, Moses said.

Kroger remains committed to no store closures or job losses as well as increasing purchasing from local suppliers, he said.

Kroger plans to preserve competition by selling at least 413 stores to C&S Wholesale Grocers, a $30 billion company Moses said has the capital and experience to manage those stores.

Given market trends, Moses said supermarket grocers must respond to non-traditional grocers to compete. “If supermarkets struggle, stores close.”

For more information about the proposed acquisition by Kroger of Albertsons, including Scott Moses’ analysis of the grocery industry, visit the website at www.krogeralbertsons.com.