The nation’s two largest grocery store chains announced a $1.9 billion divestiture plan on Friday that includes the sale of 14 Albertsons-owned stores in Alaska to a New Hampshire-based grocery supplier and retailer.
Kroger, the parent company of Fred Meyer, and Albertsons, parent of Carrs Safeway, said they plan to sell 413 stores across several states to C&S Wholesale Grocers. The proposed sale is designed to help their $24.6 billion merger win approval from the Federal Trade Commission, experts say.
C&S, established in 1918 and based in New Hampshire, is the largest wholesale grocery supplier in the U.S., with more than 7,500 stores and military bases as clients, according to Forbes. It’s one of the nation’s largest privately held companies, with $33 billion in revenues, Forbes said. It also operates Grand Union and Piggly Wiggly grocery stores in the Midwest and the Carolinas.
The announcement by Kroger and Albertsons did not disclose the specific locations of the stores proposed for sale, including those in Alaska, but said Carrs-brand stores were part of the sale.
“Because we are still in the regulatory process, we are not in a position at this time to share the specific locations that will be divested to continue serving the community under a different owner,” a Kroger spokesman said in an emailed statement. “We anticipate being able to share these details closer to closing.”
Experts have said the sale will likely includes Carrs Safeway stores that operate near Fred Meyer stores, such as in Anchorage.
Unions in Alaska said they’re trying to determine exactly which stores are planned for the sale.
The grocery chain giants announced plans to merge last year.
The merger deal in Alaska would combine the two primary grocery stores in many areas of the state. Their Alaska operations consist of 12 Fred Meyers and 35 Carrs Safeways, state officials have 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 cause store closures and higher food prices, increase risks to a fragile supply chain, and threaten the livelihoods of hundreds of workers. Unions representing workers at the stores, along with Democratic Rep. Mary Peltola and some state lawmakers, have called on the federal agency to block the deal.
[Previous coverage: What the proposed Albertsons-Kroger merger could mean in Alaska]
The statement from Kroger and Albertsons said the planned sale ensures that the merger will not lead to store closures. All frontline associates will remain employed and all existing collective bargaining agreements will continue, the statement said.
“Following the announcement of our proposed merger with Albertsons Cos., we embarked on a robust and thoughtful process to identify a well-capitalized buyer who will operate as a fierce competitor and ensure divested stores and their associates will continue serving their communities in the ways they do today,” said Rodney McMullen, chief executive of The Kroger Co. “C&S achieves all these objectives. C&S is led by an experienced management team with an extensive background in food retail and distribution and has the financial strength to continue investing in associates and the business for the long run. Importantly in our agreement, C&S commits to honoring all collective bargaining agreements which include industry-leading benefits, retaining frontline associates and further investing for growth.”
Officials with C&S and Albertsons could not be reached for comment Friday.
Sale may pass FTC muster
Doug Ross, an antitrust expert with the University of Washington School of Law, said the Federal Trade Commission will take a close look at the potential impacts of the divestiture in every region, including Alaska.
Ross said it’s a plus that C&S is a large company with deep experience as a large grocery supplier, though its experience operating stores is more limited.
“It appears Kroger has come with what appears to be a very plausible proposal,” Ross said. “But FTC will kick the tires and find out.”
Brian Albrecht, an economist with the International Center for Law and Economics, a think tank in Portland, Oregon, said the stores that are likely to be part of the divestiture are those in larger cities, such as where Fred Meyer and Carrs Safeway compete within close distance of each other.
That’s because the divestiture is likely designed to reduce anti-competitive concerns among federal regulators, he said.
One such situation is the Fred Meyer and Carrs Safeway stores in Midtown Anchorage that are a hop across the Seward Highway from each other.
Albrecht said Alaska is on deck to see a large proportion of stores sold for its small population, compared to other states.
The choice of C&S appears to be a good move by Kroger and Albertsons, Albrecht said.
C&S has enough money to operate stores that can compete with a newly merged company. But they’re not so big that their proposed acquisition of more than 400 stores would create its own antitrust issues, he said.
“I think the FTC would be in a really hard spot if they don’t take this very seriously as a solution,” he said.
C&S has created a retail holding company, 1918 Winter Street Partners, anticipating the completion of the divestiture plan, the announcement from Kroger and Albertsons said.
The merger remains on track to close in early 2024, assuming it receives regulatory approval, the statement said. To win regulatory clearance, Kroger said it may require C&S 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 nation’s largest grocery chain, followed by Albertsons. They own 5,000 stores nationally serving more than two-thirds of U.S. households. They employ 700,000 workers.
Skeptics point to past takeover
Rep. Zack Fields, D-Anchorage, who helped author a letter to the Federal Trade Commission last year opposing the merger, said the divestiture proposal and merger will result in fewer stores in Alaska.
He pointed to pointed to Safeway’s takeover of the Alaska-based Carrs chain for $330 million in 1999 as a precedent. The state of Alaska required that seven stores be sold to a competitor as part of the deal.
Alaska Marketplace acquired six of those stores, but they closed in little more than a year. Critics asserted that the state erred by allowing Safeway to sell off lower-performing stores.
“The merger is terrible for Alaska, although a few people on Wall Street will cash in on it,” Fields said on Friday.
Graham Downey, consumer advocate with Alaska Public Interest Research Group, said the group remains opposed to the merger. The companies can make well-meaning promises such as protecting workers, but they can break those promises once the deal goes through, he said.
“Ameliorations won’t adequately prevent the harms to farmers, consumers and worker that corporate consolidation brings,” Downey said.
Downey also pointed to the failures of the past divestiture involving Alaska Marketplace to illustrate the problems a new company in Alaska will face.
“Alaska supply chains are hard,” he said. “There’s a reason there aren’t more grocery stores operating up here. The decision to offload 14 Albertsons’ stores in Alaska may be an indicator of that.”
Alex Baker, 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 local represents 2,500 workers in the state, including many grocery store employees.
Baker said the union plans to meet soon with the United Food and Commercial Workers International Union, the largest union of grocery workers in the U.S., to discuss impacts from the proposed sale. The Alaska local and international union have taken positions opposing the merger.
Patrick FitzGerald, the political coordinator for Alaska Teamsters Union Local 959, said the union has questions about exactly which Albertsons stores will be closing. The union represents about 60 workers at the Carrs Safeway warehouse distribution center in Anchorage and 14 delivery drivers.
The union is uncertain if the sale will include the distribution center in Anchorage, he said. If the warehouse closes in favor of a model that moves groceries directly from the Port of Alaska to stores, instead of housing them at the warehouse, that could eliminate a facility that houses several weeks’ worth of food and products. Those items could prove essential during an unplanned emergency in Alaska, say if the ship-based supply chain is ever severely disrupted in the future.
FitzGerald said the union is paying close attention to statements by Kroger and Albertsons to honor union contracts.
“It’s great to see that attitude, and we hope they follow through with that,” he said.