US grocer Kroger in talks to merge with rival Albertsons

Oct 13 (Reuters) – US grocer Kroger (KR.N) In talks to merge with smaller rival Albertsons Companies Inc (ACI.N) People familiar with this said in an engagement that would create a giant supermarket.

The merger of the country’s No. 1 and 2 independent grocers, if reached, could provide retailers the advantage of advancing negotiations with consumer product makers such as Procter & Gamble (PG.N) and unilever (ULVR.L) At a time of sharp price hikes.

The sources, who asked not to be identified, said the talks may be announced as soon as this week if the talks do not collapse.

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Major consumer products companies worldwide have announced plans to increase prices at a faster pace as they also seek to limit the impact of rising raw material costs on their margins.

Some critics note that the merger would reduce competition among US grocery chains and potentially lead to higher prices for American shoppers. The deal will create a combined company with a market value of approximately $47 billion, representing one of the largest mergers in recent years in the retail space.

Neither Krueger nor Albertsons immediately responded to requests for comment. The news was first reported by Bloomberg.

Merger talks between the two largest supermarket chains in the United States come at a time when Walmart (WMT.N) She focused on expanding her grocery business. Grocery now makes up roughly 55% of Walmart’s annual sales. Walmart has traditionally used its leverage to demand the lowest possible prices from food and beverage suppliers, leaving competing supermarkets at a disadvantage in their negotiations with suppliers.

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But Chancellor Bert Fleckinger, who owns shares of both Kroger and Albertsons, said the merger would give supermarket operators more purchasing power, making it easier for them to compete with Walmart.

Competitive strength

Nearly 25% of all dollars spent on groceries in the United States are spent at Walmart, according to data provided by Euromonitor. Kroger and Albertson own roughly 8% and 5% of the US grocery market, respectively, according to Euromonitor.

The ultra-thin margins of independent supermarket chains in the United States have been squeezed by rising costs and supply chain disruptions after a boom at the height of the pandemic. Grocers told Reuters that major manufacturers of packaged food and consumer goods are still not supplying many grocery stores with products to fill their shelves.

Albertsons stock prices are up 11% Thursday afternoon, while Kroger stock is down 1.4%. Shares in a British online supermarket and technology group Ocado Group Plc (OCDO.L) It rose over 10% in the late London trade. Kroger is Ocado’s largest customer.

Kroger, which also includes supermarket chains such as Fred Meyer, Ralphs and King Soopers, tracks Walmart, the largest grocery in the United States. Albertsons in Boise, Idaho includes a Safeway sign.

The deal “will put pressure on consumers who are already struggling to buy food,” said Sarah Miller, executive director of the American Economic Freedoms Project, an anti-trust nonprofit.

“This merger is a parched and dry state of monopoly power, and law enforcement must prevent it,” Miller said.

Bloomberg reported that an agreement could be reached as soon as this week, adding that no final decision has been made and that talks could be delayed or faltered.

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Additional reporting by Anirban Sen and Abigail Somerville in New York Additional reporting by Siddharth Caval, Jessica Dinapoli and Ariana McLemore in New York and Aishwarya Venugopal in Bengaluru Editing by Sriraj Kalovila and Matthew Lewis

Our criteria: Thomson Reuters Trust Principles.

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