CINCINNATI and BOISE, Idaho—Kroger is purchasing Albertsons Companies in a deal valued at $24.6 billion, the companies said. The acquisition is one of the biggest in the history of the U.S. grocery industry and will give Kroger a footprint in 48 states and the District of Columbia plus a combined 2,015 fuel centers.
Boise-Idaho-based Albertsons and Cincinnati-based Kroger have a combined workforce of more than 710,000 associates and operate a total of 4,996 stores, 66 distribution centers, 52 manufacturing plants and 3,972 pharmacies. The combined grocery company would generate around $812 billion in annual revenue, according to an estimate by market research firm IBISWorld.
As of June 18, Albertsons operated 2,273 retail food and drug stores with 1,720 pharmacies, 402 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities across 34 states and the District of Columbia.
The deal would take about four years to close, and the combined grocers would have a new name, but the companies’ current store names would stay the same.
“The combination creates a premier seamless ecosystem across 48 states and the District of Columbia, providing customers with a best-in-class shopping experience across both stores and digital channels,” said Kroger in a statement.
Kroger plans to invest in lowering prices for customers and expects to reinvest about half a billion dollars of cost savings from synergies to reduce prices for customers. An incremental $1.3 billion will also be invested into Albertsons stores to enhance the customer experience.
Kroger also plans to build on its recent investments in associate wages, training and benefits. Kroger has invested an incremental $1.2 billion in associate compensation and benefits since 2018. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close.
“It allows us to do things we are doing in an accelerated way,” Kroger Chief Executive Rodney McMullen, who will serve as CEO and chairman of the combined company, said in an interview with The Wall Street Journal.
The CEO said that Albertsons offers Kroger a “complementary footprint,” as there are Albertsons locations in the U.S. where Kroger does not have a presence, and the combined stores will lead to faster and more profitable growth. Together, the companies said, their stores would supply groceries for an estimated 85 million households.
Kroger says that the combined companies would offer about 34,000 total private-label products, and the entity would be “better positioned to relieve the inflationary pressures facing shoppers.”
“The combined company's innovation capabilities, increased manufacturing footprint and expanded national reach will drive improved quality and efficiency allowing its Our Brands portfolio to accelerate growth and profitability while remaining affordable and accessible to customers,” said Kroger.
The deal will face regulatory scrutiny, according to analysts, and the companies plan to sell overlapping stores in states where they both have locations to help win regulatory approval, including Southern California, Washington, Texas and Washington, D.C.
J.P. Morgan analysts say Kroger and Albertsons would have about 13% of the food-retail sales in the U.S. following divestitures for regulatory approval. Walmart’s share is 22%.
Albertsons’ brands include Albertsons Safeway, Vons, Jewel-Osco, Shaw's, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci's Food Lovers Market.
Kroger’s supermarket brands include Kroger, Ralphs, Dillons, Smith’s, King Soopers, Fry’s, QFC, City Market, Owen’s, Jay C, Pay Less, Baker’s, Gerbes, Harris Teeter, Pick ‘n Save, Metro Market and Mariano’s. Kroger also owns Fred Meyer, a department store, plus Dillons Marketplace, Fry’s Marketplace, King Soopers Marketplace, Kroger Marketplace, Smith’s Marketplace plus two warehouse stores, Food 4 Less and Foods Co.
Kroger has been operating fueling centers at supermarket sites since 1998.