Potential Supermarket Megamerger Highlights Channel Blurring

Kroger and Albertsons continue to work on a $20 billion deal.

March 14, 2023

ALEXANDRIA, Va.—“When Kroger agreed to buy Albertsons for about $20 billion in October last year, it marked a milestone in the quest to invent the modern supermarket by rethinking what shoppers could buy while they pick up milk and meat for the week’s meals,” The Wall Street Journal reports.

“You used to make money selling a can of corn,” Rodney McMullen, Kroger’s chief executive, told the Journal. Now, he said, “You have to figure out other ways of creating value for the customer.”

The FTC has been investigating the effects of the proposed merger and is looking at how it might impact a variety of markets around the country, including online delivery, digital advertising and pharmacy operations.

Albertsons CEO Vivek Sankaran previously said the merger was the best way for the grocer to compete against Walmart and Amazon. In addition, dollar, convenience and drugstores are all competing for grocery customers.

Traditional grocers want to push back, redefining what it means to be a grocery store.

“Kroger executives have been open about seeing the company’s future beyond its grocery aisles,” the Journal reports. This includes, for example, operating ghost kitchens that allow customers to order restaurant meals and pick them up at the grocery store.

“Kroger’s digital advertising business is one of its fastest-growing areas, and Albertsons’ sales and gross profit rose during the pandemic partly because it administered COVID-19 vaccines at its stores,” according to the Journal.

Private label has represented a huge growth area for Kroger. It runs more than 30 plants and has doubled the number of products it sells under store brands since 2005. Not all of Kroger’s forays outside the traditional grocery retailing have worked. It dropped attempts to sell mortgages and car insurance, for example.

“What is a modern grocery store? We feed you. We clothe you. We help you manage all your prescriptions. We are the place you go to when you celebrate.” Suzy Monford, who previously led e-commerce and fresh food departments at Kroger, told the Journal.

In its October 2022 issue, NACS Magazine explored how c-stores are enhancing their fresh food offerings in “Pursuit of Healthiness.”