The announcement of a merger between Albertsons and Kroger was made in the midst of the US economy’s gloom. The businesses have long been competitors in the market, but they have now concluded that it would be best to put their differences aside and cooperate to survive.
Unfortunately, the state of the world economy is not good right now, and credible organizations and experts are anticipating a worldwide recession shortly.
According to the terms of the agreement, Kroger would pay $34.10 per share to acquire Albertsons. Ultimately, this would allow Kroger to purchase Albertson for a total of $24.6 billion. However, Albertson’s stake increased to $28.63 once news of the deal circulated.
Kroger and Albertson are among the biggest supermarket chains in the US market. The second-largest grocery chain, Kroger, is trailing Walmart in terms of sales, and Albertson is in fourth place, just below Costco.
With the merging of Kroger and Albertsons, the business would now be nearly on pace with Walmart. Essentially, the businesses stated that each board member had given their support.
Grocer industry’s challenges
The grocery business is facing significant challenges due to the market’s rising pricing. As the country’s inflation rate grows, many businesses find it difficult to stay afloat. A recent announcement by OPEC+ to significantly reduce oil output increased pricing for other commodities.
Consequently, US consumers will be forced to reduce spending. As a result, customers have changed how they shop, which has caused a decline in grocery stores’ income.
As a reaction, businesses must come up with fresh strategies to draw clients, particularly given that the vacation is rapidly approaching.
Additionally, according to the Bureau of Labor Statistics, food costs have increased by 11.2% since last year due to inflation.
Therefore, companies must carefully assess the risks associated with adopting and rejecting the supply chain’s average prices for items.
Kroger and Albertsons
The most recent information on the firms is available below, according to FactSet and the corporate websites:
2,800 stores in 35 states
25 banners, including Fred Meyer, Ralphs, King Soopers and namesake stores
$33.3 billion market capitalization
2,200 stores in 34 states and Washington, DC.
22 banners, including Safeway, Acme, Tom Thumb and namesake stores
$15.2 billion market capitalization
US grocers in numbers
Customers frequent various grocery stores since the grocery market is so fiercely competitive. Further, it is challenging to generate a sizable quantity of money because of the industry’s fragmentation, particularly when customers are looking to make savings.
In addition, local supermarkets are also consistently gaining patrons.
For instance, essential companies in their respective markets are H-E-B in Texas and Public in Florida. The market has also seen the entry of new firms, including Aldi, Lidl, and Amazon Fresh.
Depending on the amount of money consumers spend, Walmart is ranked as the #1 grocery store in the US by Numerator. The results are as follows:
Amazon – 20.9%
Kroger – 9.9%
Costco – 7%
Albertsons – 5.7%
Ahold Delhaize – 5.6%
Public – 5.2%
Sam’s Club – 4.7%
Aldi – 3%
Target – 2.7$
HEB – 2.3%
Dollar General – 1.8%
Amazon.com – 1.6%
Whole Foods – 1.3%
Trader Joes – 1.2%
Wegmans – 1%
Dollar Tree – 1%
According to the numbers above, the Kroger-Albertsons combination will give them around 17% of the market.
“Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores,” said Kroger CEO Rodney McMullen.