Albertsons may have to cut jobs and close stores if Kroger takeover is aborted, CEO says

The CEOs of Albertsons and Kroger took the stand to testify in the federal court case challenging Kroger’s proposed acquisition of Boise’s Albertsons. The CEO of Albertsons said layoffs and store closures could result if Kroger’s takeover is blocked.

CEO Vivek Sankaran testified that without the merger, “I would have to consider” job cuts, closures and abandoning some markets if the supermarket chain cannot find other ways to lower costs, The Associated Press reported. “It’s a dramatically different picture with the merger than without it,” Sankaran said. 

Without Kroger, Albertsons may need to find another buyer within two to three years, Sankaran said, according to The Wall Street Journal.

Cincinnati-based Kroger, the nation’s largest traditional grocery company, wants to buy Albertsons, the second-largest, in a merger that would create a supermarket colossus under Kroger’s control. The two companies said their merger would help them compete more effectively with Walmart, Amazon, Costco and other retailers. 

But the Federal Trade Commission and attorneys general from multiple states say a merger would reduce competition, bringing higher prices and fewer choices for customers. 

The FTC and the states went to court to block the merger on antitrust grounds. A hearing on their request began Aug. 26 before U.S. District Judge Adrienne Nelson in Portland, the home of Kroger’s Fred Meyer chain.

FTC lawyers questioned Sankaran on Wednesday about why he worried about Albertsons’ future despite saying previously that Albertsons was doing well financially, Law360 reported. Sankaran said conditions have changed. 

The “grocery business is a zero sum game in America,” he said, the Journal reported. Among brick-and-mortar grocers, Walmart has been gaining market share by dollars spent and now has nearly 24%, according to a report by Numerator, a data analytics company, cited in Supermarket News. Kroger’s has fallen to 10% and Albertsons’ to just over 6%. Combined, Kroger and Albertsons would still be outsold by Walmart. 

One reason the two companies cite for uniting is to gain more leverage over suppliers to lower costs. Albertsons has said that it must pay more for some products wholesale than Walmart charges at retail. 

Kroger’s CEO, Rodney McMullen, in testimony Wednesday, reiterated his pledge to cut grocery prices $1 billion if the merger goes through, CBS News reported. And he said that many of the cuts will be made at Albertsons’ stores to help retain customers, because Albertson’s prices are 10% to 12% higher than Kroger’s, The Cincinnati Enquirer reported.

FTC lawyers also questioned Albertsons executives about missing text messages, according to The Oregonian / Oregon Live.

 As the Idaho Statesman and other outlets previously reported, four Albertsons executives, including Sankaran, failed to produce messages that were sought as evidence for the hearing in Nelson’s court.