Kroger-Albertsons merger raises fears of store closures; This is where the chains compete in Oregon

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That 2002 Grocery store Fred Meyer closed Serving Rockwood was a blow to the Gresham neighborhood, leaving a hole in its middle and one less option for groceries.

The next hit came in 2015 when a merger between the Albertsons and Safeway brands resulted in the closure of a nearby Safeway store. This left an Albertsons store as the last supermarket chain in the area.

Well, a suggestion from Kroger Co. To buy Albertsons, residents are wondering if that store could also close. If Albertsons were to close in Rockwood as a result of the merger, it would “make a dent in the community,” said Neighborhood Association president Catherine Nicewood, though it’s one of the most expensive remaining options.

“Rockwood is known as a food desert, and we’ve tried to create places where people can easily access healthier foods at an affordable price,” Nicewood said. Losing the Albertsons would be another setback.

The $24.6 billion sale would bring Albertsons, Safeway, Fred Meyer and QFC together under one roof, leaving the chains with dozens of Oregon stores that might now be considered redundant.

The Oregonian/OregonLive identified approximately 33 Kroger and Albertsons-owned stores statewide that are within one mile of each other, including 20 in the greater Portland area. More than 100 are less than two miles apart.

Many are within sight of a neighboring shop. For example, in Oregon City, Fred Meyer, Safeway and Albertsons are only a few blocks from each other.

Albertsons and Kroger in Oregon

Dozens of Oregon grocery stores owned by Kroger Co. (Fred Meyer and QFC) and Albertsons Cos. (Albertsons and Safeway) are located near other stores and may be considered redundant if the chains merge. Shops are shown here with a 1 mile buffer.

Kroger and Albertsons are two of the largest grocery chains in the state, with 171 stores.

According to retail analysts and consumer advocates, Kroger and Albertsons would likely have to divest hundreds of stores nationwide to address anticompetitive concerns from regulators, including the Federal Trade Commission.

In anticipation of this, Kroger and Albertsons said in one Notice last week that they are willing to divest between 100 and 375 locations by spinning them off into a separate company – called SpinCo in the filing – controlled by Albertson shareholders.

In Oregon, Kroger and Albertsons are two of the largest grocery chains, with a combined market share even larger than Walmart.

Kroger did not address possible store closures in its filing with the Securities Exchange Commission, but according to retail analysts, it’s common for stores to close during a major retail merger. Outsourcing the redundant stores is also not a safe solution.

Subsequent to 2015 Merger of Albertsons and Safewayregulators required the chains to find a buyer for about 20 Oregon stores to keep the market competitive.

Haggen, a small Washington state grocery chain, agreed to the purchase and rebrand 146 West Coast Safeway and Albertsons locations after merging with Safeway. But within months, the overwhelmed Haggen filed for bankruptcy and sold several of these stores back to Albertsons for a much cheaper price. Others have closed forever.

Kroger and Albertsons executives expect the deal to close in early 2024, at which point the two companies will begin making decisions about which businesses will stay or go and what banner they will operate under.

Kevin Coupe, retail analyst and author of The Grocery Blog Morning news beatbelieves that the companies’ proposal to divest up to 375 stores may not satisfy regulators.

“I think they’re going to have to divest about a thousand stores,” said Coupe. “This is a much tougher FTC than you may be used to and we are in a period of rising consumer prices.”

The proposed combined company would have annual sales of $209 billion and operate 4,996 stores nationwide, according to Kroger. It would rival Walmart and trail the retail giant by just $10 billion in annual sales.

Safeway Albertsons

A Safeway-Albertsons delivery center on the Beaverton Hillsdale Highway in southwest Portland.

Meanwhile, the deal is being rejected by consumer advocates, unions and politicians as companies seek to consolidate their businesses amid skyrocketing food prices.

Jagjit Nagra, executive director of the nonprofit Oregon Consumer Justice, said the proposed deal would be bad for consumers because less competition could leave food prices unchecked. He said the potential merger could also result in more desserts likely to be found in lower-income areas.

“They will not close their largest and brightest stars in their quiver,” he said. “They’re probably going to go out to underperforming stores, maybe stores that are adjacent to, say, rougher neighborhoods, or in areas with more crime, or maybe areas that are just more rural.”

Kelley Fuller, a resident of Depoe Bay on Oregon’s central coast, said Fred Meyer and Safeway are closest across the street in Newport.

“If Kroger and Albertson are allowed to merge, we would almost certainly lose that Safeway,” Fuller said, “which would mean losing not just a grocery store, but the dispensary in it.”

She said Lincoln City lost a pharmacy back then Bi-Mart retired from the pharmacy businessand that competing pharmacies became noticeably “more crowded and chaotic” thereafter.

And she said it was important to have two supermarkets as the pandemic has ravaged the supply chain.

“When Fred Meyer ran out of foundations, sometimes Safeway still had them,” she said. “It would have been worse for the local communities if we didn’t also have Safeway to shop with.”

Nagra, along with a state consumer advocacy group, said the merger of Kroger and Albertson’s territories, which are already food deserts, leaves even fewer choices.

“Not only would they take away people’s choice, but they would directly affect people’s health now,” he said. “Because if you don’t have access to quality food, I think it’s fair to assume that your health consequences might not be as severe.”

He said the deal could “do greater harm and pressure consumers who are already struggling to afford groceries.”

But Kroger leaders said in an opinion It will reinvest $500 million to “lower prices for customers” and $1 billion to increase employee wages and benefits.

Earlier this week, US Sens. Amy Klobuchar of Minnesota and Mike Lee of Utah said in a statement that the Senate Judiciary Subcommittee on Competition Policy, Antitrust and Consumer Rights “will hold a hearing focused on this proposed merger and the consequences consumers may face if this agreement goes ahead.”

The committee has “serious concerns” about the merger and would like a grocery market that “remains competitive so that American families can afford to put food on the table,” Klobuchar and Lee said.

–Christine de Leon, kdeleon@oregonian.com503-221-8506

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