The nation’s two largest grocery chains on Friday announced a $1.9 billion divestiture plan that would see the sale of 14 Albertsons-owned Alaskan stores to a New Hampshire-based grocery supplier and retailer.
Kroger, the parent company of Fred Meyer, and Albertsons, parent company of Carrs Safeway, said they plan to sell 413 multi-state stores to C&S Wholesale Grocers. The proposed sale should help the $24.6 billion merger get Federal Trade Commission approval, experts say.
C&S was founded in 1918 and is based in New Hampshire. According to Forbes, the company is the largest grocery wholesaler in the United States, with more than 7,500 stores and military bases among its customers. According to Forbes, it is one of the largest private companies in the country with $33 billion in revenue. It also operates Grand Union and Piggly Wiggly grocery stores in the Midwest and the Carolinas.
The Kroger and Albertsons announcement did not reveal the exact locations of stores proposed for sale, including those in Alaska, but said Carrs-branded stores were part of the sale.
“As we are still in the regulatory process, we are unable at this time to share the specific sites that will be divested to continue serving the community under another owner,” a Kroger spokesman said in an emailed statement Explanation. “We expect to be able to share these details closer to completion.”
Experts have said the sale will likely include Carr’s Safeway stores, which operate near Fred Meyer stores, such as in Anchorage.
Unions in Alaska said they were trying to determine exactly which stores were slated for sale.
The grocery chain giants announced plans to merge last year.
The Alaska merger deal would combine the two main grocery stores in many parts of the state. Its Alaska locations consist of 12 Fred Meyers and 35 Carrs Safeways, state officials said. The brands compete in the state’s urban areas, from Fairbanks to Anchorage to the Kenai Peninsula and Juneau.
The deal has raised concerns in Alaska that it would result in store closures and higher food prices, increasing risks to a fragile supply chain and threatening the livelihoods of hundreds of workers. Unions representing workers at the stores, along with Democratic Rep. Mary Peltola and some state legislators, have urged the federal agency to block the deal.
[Previous coverage: What the proposed Albertsons-Kroger merger could mean in Alaska]
Kroger and Albertsons’ statement said the proposed sale ensures the merger will not result in store closures. All frontline staff will remain employed and all existing collective bargaining agreements will remain in place, the statement said.
“Following the announcement of our proposed merger with Albertsons Cos. “We have initiated a robust and thoughtful process to identify a well-capitalized buyer who will act as a strong competitor and ensure that the divested stores and their partners continue to serve their communities in the way they do today,” said Rodney McMullen, Managing Director from The Kroger Co. “C&S achieves all of these goals. C&S is led by an experienced management team with extensive experience in food retail and distribution and has the financial strength to continue to invest in employees and the business over the long term. What is important in our agreement is that C&S is committed to honoring all collective bargaining agreements that include industry-leading benefits, retaining frontline employees and continuing to invest in growth.”
[Alaska unions urge Biden administration to block Albertsons-Kroger merger]
Officials from C&S and Albertsons could not be reached for comment Friday.
The sale can pass the FTC requirement
Doug Ross, an antitrust expert at the University of Washington School of Law, said the Federal Trade Commission will closely review the potential impact of the divestiture in all regions, including Alaska
Ross said it’s a plus that C&S is a large company with extensive experience as a large food supplier, although its experience running stores is rather limited.
“It appears that Kroger has put forward a very plausible proposal,” Ross said. “But the FTC will be put to the test and find out.”
Brian Albrecht, an economist at the International Center for Law and Economics, a Portland, Oregon think tank, said the deals likely to be part of the divestiture are deals in larger cities, roughly where Fred Meyer and Carr’s Safeway compete closely distance from each other.
That’s because the divestment is likely aimed at easing anti-competitive concerns among federal regulators, he said.
One such situation is the Fred Meyer and Carrs Safeway stores in Midtown Anchorage, located just a stone’s throw from each other across Seward Highway.
Albrecht said Alaska will sell a large portion of its business to its small population compared to other states.
He said the choice of C&S seemed to be a good move by Kroger and Albertsons, Albrecht said.
C&S has enough money to operate businesses that can compete with a newly merged company. But they are not so large that the proposed acquisition of more than 400 stores would create its own antitrust problems, he said.
“I think the FTC would be in a really difficult position if they didn’t take this very seriously as a solution,” he said.
C&S has formed a retail holding company, 1918 Winter Street Partners, and expects to complete the divestiture plan, Kroger and Albertsons said in the announcement.
The merger remains on track to close in early 2024, assuming it receives regulatory approval, the statement said. To receive regulatory approval, Kroger said C&S may need to purchase up to 237 additional stores in certain areas of the U.S., but did not provide specific locations for those stores.
Kroger is the largest grocery chain in the country, followed by Albertsons. They own 5,000 stores nationwide, serving more than two-thirds of U.S. households. They employ 700,000 workers.
Skeptics point to a past takeover
Rep. Zack Fields, D-Anchorage, who helped write a letter to the Federal Trade Commission opposing the merger last year, said the divestiture proposal and merger would result in less business in Alaska.
He pointed to Safeway’s 1999 acquisition of the Alaska-based Carrs chain for $330 million as a precedent. The state of Alaska required the sale of seven stores to a competitor as part of the deal.
Alaska Marketplace acquired six of these stores, but they closed after just over a year. Critics claimed the state made a mistake in allowing Safeway to sell underperforming stores.
“The merger is terrible for Alaska, although some people on Wall Street will benefit from it,” Fields said Friday.
Graham Downey, consumer advocate for the Alaska Public Interest Research Group, said the group remains opposed to the merger. The companies could make well-intentioned promises, such as protecting workers, but they could break those promises once the deal goes through, he said.
“Improvements will not adequately prevent the harm that corporate consolidation brings to farmers, consumers and workers,” Downey said.
Downey also pointed to the failures of Alaska Marketplace’s past divestiture to illustrate the problems a new business in Alaska will face.
“Supply chains in Alaska are tough,” he said. “There’s a reason there aren’t more grocery stores up here. The decision to divest 14 Albertsons stores in Alaska could be an indicator of that.”
Alex Baker, The vice president of the United Food and Commercial Worker’s Union Local 1496 said he could not comment on the divestment announcement. He said the Alaska chapter represents 2,500 workers in the state, including many grocery store workers.
Baker said the union plans to meet soon with the United Food and Commercial Workers International Union, the largest food workers union in the U.S., to discuss the impact of the proposed sale. Alaska local and international unions have opposed the merger.
Patrick FitzGerald, political coordinator for Alaska Teamsters Union Local 959, said the union has questions about exactly which Albertsons stores will close. The union represents about 60 workers at Carrs Safeway warehouse distribution center in Anchorage and 14 delivery drivers.
The union is unsure whether the sale will include the Anchorage distribution center, he said. Closing the warehouse in favor of a model that transports food directly from the Alaska port to stores rather than storing it in the warehouse could result in the elimination of a facility that stores several weeks’ worth of food and products . These items could prove vital in the event of an unplanned emergency in Alaska, such as if the ship-based supply chain is ever seriously disrupted in the future.
FitzGerald said the union is closely monitoring statements by Kroger and Albertsons to honor union contracts.
“It’s great to see that attitude and we hope they keep that attitude,” he said.