National grocery merger creates local uncertainty

Community members are troubled by what might happen to union-shop Safeway if the merger goes through.

A proposed merger between the two largest grocery corporations in the country, Albertsons and Kroger, has called into question the future of Gunnison’s only two large milk-and-eggs retailers.  Last fall, Kroger, which owns City Market, announced plans to buy Albertsons, which owns Safeway, for a hefty $24.6 billion — earning the moniker, “mega-merger.” The deal is proposed during a prolonged period of national inflation, creating an uncertain future for valley grocery workers and consumers, who worry about closures and job security. 

According to Colorado Attorney General Phil Weiser’s office, there are 148 Kroger-operated stores in Colorado and 105 stores operated by Albertsons. In many parts of the state, like Gunnison, the two companies provide the largest, or perhaps only, grocery stores in the community.

If the merger passes federal and state antitrust tests, nearly 5,000 stores will be under a single banner and, according to consumer-sourced market research firm Numerator, Kroger will reach two out of three shoppers in the U.S. The two companies live in the top-five spots for standalone grocers, trailing only Walmart in total market share. Combined, the two companies could close the gap with Walmart.

Weiser’s office is involved in a multi-state investigation into the merger, to discern if the sale could harm Coloradoans through higher prices and lower wages for workers. In November, company leaders made their case to the Senate Judiciary Subcommittee on Competition Policy, Antitrust and Consumer Rights, arguing that the merger would allow companies to reduce prices and improve the customer experience. 

To decide if the merger violates antitrust laws, the Federal Trade Commission (FTC) will look primarily at market share, said Christopher J. (CJ) Clugston, assistant professor of business administration and law at Western Colorado University. The language in the statutes asks regulators to decide if a merger will “more likely than not” reduce competition and have a negative effect on market concentration.

“Underlying all that language, and what they're mainly concerned with, is are we going to give market power to a company and are they going to be able to raise prices for consumers by getting rid of the competition?” he said. 

The the FTC is considering two factors, Clugston said. The first is how to define the market, examining goods and services viewed as close substitutes. The other is how likely it is that the merger will leave sufficient space in the market for potential competition. In a public statement, the company stated it would look to divest between 100 and 375 stores.

Weiser said he doubts the ability of those divestitures to create true competition, citing a case nearly a decade ago when Albertsons bought Safeway, but the divested stores were ultimately reabsorbed by the company after a competitor, who bought the stores, went bankrupt.

A broader market definition, to include online retailer Amazon and superstores Walmart and Costco, will benefit Kroger’s case, as the merger would eat up less of that market share.

“They want a really broad definition of the market, so that this doesn't look like concentration of market, and it doesn't look like market power is being created,” Clugston said.

Making a case with community input

Weiser held a listening session at Western on Sunday, Jan. 29, to gather community feedback about the proposed merger. During his remarks, Weiser focused on a need for job security, resilience in rural food networks and said he’s not afraid to “take any monopoly on.” 

“Everyone is buying groceries and paying more now because of inflation — so now you have people's attention,” he said. “What is unique about the Kroger-Albertsons merger is that you all have expertise in this issue, you have lived experiences and you have stories to tell.”

Michelle Freitas, a 22-year veteran at Safeway and union steward for the United Food and Commercial Workers Union Local 7 (UFCW), said she’s worried a merger could put the hard-fought unionization of the store at risk. Over the years, the union has negotiated better health care and wages for workers.

Freitas said she’s worried that if Safeway was shuttered, grocery store workers would be left with the non-union option of City Market. 

“Some of us live paycheck-to-paycheck, we have a single mother there and what will she do?” Freitas said at the listening session. “How will she make the wages that the union has negotiated for us? How will she make the same wages in a town where there’s not a lot of jobs available?”

For years, Safeway has been the go-to stop for residents in Lake City and Saguache, shesaid. Store closures would put untenable demand on the City Market, which she said has “shelves that are not always stocked.”

Mathew Shechter, general counsel for the union, added that even if Kroger continues to honor pension requirements from former Safeway employees, job loss across the nation would cut into those payments because benefits are paid out by current employees. As the workforce shrinks, the pension fund could become insolvent.

Pension fallout could affect people like Mary Kay Fry, who worked at Safeway for 12 years, even serving as a union steward. She said the lack of clarity around what will happen to pensions is concerning.  

Gunnison Mayor Diego Plata highlighted the fact that City Market has one of two pharmacies in town, so a closure could send shockwaves through the community, limiting people’s ability to access essential medication. 

Longtime locals John Tarr, Steve Schechter and Bill Bennett brought up questions about how corporate expansion will play out in the valley. Gunnison residents may see prices drop initially so the companies can say “we were right” and then later prices will rise drastically, Bennett said. 

Potential closures may squeeze an already-volatile food supply even more, exacerbating shortages during tourism son, Schechter said. “We live at the end of the road.”

Community members can visit qrco.de/grocerymerger to share their thoughts about the proposed merger.

(Abby Harrison can be contacted at 970.641.1414 or abby@gunnisontimes.com.)