In light of the US economy’s downturn, grocers Albertsons and Kroger announced a merger. The firms have long been competitors in the market, but they have chosen to put aside their squabbles and work together to stay viable.
The world economy is in disarray, with experts and credible organizations anticipating a global recession in the coming months.
Kroger agreed to purchase Albertsons for $34.10 per share in the deal. Kroger could then acquire Albertson for a total of $24.6 billion. However, when word of the arrangement circulated, Albertson’s stock rose to $28.63.
Kroger and Albertson are two of the major groceries in the United States. Kroger is the second-largest grocer, trailing only Walmart, while Albertson is rated fourth, just below Costco.
The Kroger-Albertsons combination would put the firm on par with Walmart. According to a statement, the firms’ respective board members provided their permission to the merger.
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The challenges in the grocery industry
With market prices rising, the grocery business confronts a significant challenge. Many businesses are struggling to stay viable as the country’s inflation intensifies. In addition, OPEC+ announced a major oil output reduction, resulting in increased pricing for other commodities.
This will force US consumers to reduce their spending. As a result, customers’ purchasing habits have shifted, resulting in a drop in income for grocers.
Consequently, businesses have had to come up with new strategies to attract clients, especially now that the Christmas season is approaching.
Furthermore, the Bureau of Labor Statistics reported an 11.2% hike in food costs since last year due to inflation.
Therefore, companies must carefully evaluate the hazards associated with accepting and rejecting the general pricing of commodities in the supply chain.
Kroger and Albertsons
According to the corporate websites and FactSet, the following information is currently accessible about the companies:
2,800 stores in 35 states
25 banners, including Fred Meyer, Ralphs, King Soopers and namesake stores
$33.3 billion market capitalization
2,200 stores in 34 states and Washington, DC.
22 banners, including Safeway, Acme, Tom Thumb and namesake stores
$15.2 billion market capitalization
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Who is ahead of the grocer industry?
Customers flock to multiple grocers, making the grocery sector more competitive. The industry’s fragmentation makes it tough to generate considerable income, especially when purchasers want to decrease expenses. Regional grocers are also gaining customers.
For example, h-E-B in Texas and Public in Florida are big participants in their respective markets. New entrants to the market include Aldi and Lidl, as well as Amazon Fresh.
According to Numerator, Walmart is the #1 grocer in the United States based on consumer spending. Here are the rankings:
Amazon – 20.9%
Kroger – 9.9%
Costco – 7%
Albertsons – 5.7%
Ahold Delhaize – 5.6%
Public – 5.2%
Sam’s Club – 4.7%
Aldi – 3%
Target – 2.7$
HEB – 2.3%
Dollar General – 1.8%
Amazon.com – 1.6%
Whole Foods – 1.3%
Trader Joes – 1.2%
Wegmans – 1%
Dollar Tree – 1%
According to the data above, the Kroger-Albertsons acquisition brings them around 17% of the market.
“Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores,” said Kroger CEO Rodney McMullen.
Photo Credit: Coupon Lady