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Kroger, Albertsons And Food Deserts: Yes, We Should Worry

Those of us who can afford grocery delivery should be grateful for it. Because the nation’s largest possible supermarket merger could otherwise force many Americans to travel miles, and pay more, for healthy food.

This is a likely outcome, experts predict, if federal regulators approve the pending alliance between retail giants Kroger
KR
and Albertsons
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. The combined companies would form a $24.6 billion megamarket chain of nearly 5,000 stores. But for many people in the U.S., it is feared, the stores will be “regulated” out of reach.

This is among many serious concerns the potential combination presents for consumers, including the likelihood it will result in job losses (due to store consolidations) and higher food prices (because fewer companies will control a lion’s share of the market).

But the real kick-in-the-pants is a combined Kroger-Albertsons is likely to worsen the presence of food deserts in poor urban areas, a major national challenge. And this risk alone should cause regulators to rethink such big alliances and cast a hairy eyeball on the promises merging companies make – about lower prices, economies of scale, promoting competition, etc.

Laying The Groundwork For A Desert

After all, a combined Kroger-Albertsons (Krolbertsons?) would control nearly one-fifth of the U.S. grocery market, The Guardian estimates. In markets where both chains operate stores, the numbers may be too high to pass muster with federal regulators who may require the chains to unload a number of locations.

Sure enough, as a pre-emptive sweetener, Kroger and Albertsons have said they plan to sell some stores to rivals, and would consider spinning off 100 to 375 stores into a separate company, according to The New York Times
NYT
.

Yet this, history shows, is one way food deserts start.

“Supermarket mergers drive out smaller, mom-and-pop grocers and regional chains,” Amanda Starbuck, policy analyst at Food & Water Watch, told The Guardian in 2021. “We have roughly one-third fewer grocery stores today than we did 25 years ago, according to the US census bureau.”

But what are food deserts? Food deserts are areas that are absent of con­ve­nient options for afford­able, healthy foods, including fresh fruits and veg­eta­bles. They tend to exist in poor communities and make it difficult for families, children in particular, to maintain good health and growth.

Among the health and safety concerns stemming from a diet without healthy options: People who live in food deserts are at a heightened risk for obesity, diabetes and cardiovascular disease, Science Daily reports. The cost of these health conditions trickles down to all Americans – obesity costs the U.S. health system $173 billion a year, the Centers for Disease Control and Prevention reports.

And near­ly 39.5 mil­lion peo­ple lived in low-access food areas in 2017, according to the USDA’s most recent food access research report.

Some History About Mergers And Food Deserts

Among the major supermarket mergers that have played a role in forming some of these food wastelands is one involving Albertsons, as documented in its buyout of Safeway in 2015.

To gain approval by federal regulators, Albertsons and Safeway had to divest 168 locations in the west. A small chain called Haggen Foods & Pharmacy purchased 146 of them.

However, Haggen was “woefully underequipped” for the task of ramping up so many stores, and filed for bankruptcy protection within a year, The American Prospect reports. In addition to the store closings related to that failure, Albertsons had closed at least 160 additional supermarkets nationwide, post-merger. This triggered major layoffs and hurt nearby businesses, states a report by the Colorado Trust.

It’s reasonable to expect that of the 100 to 375 stores Kroger and Albertsons offer to spin off, a good number may go dark for good.

As Stacy Mitchell, a co-executive director of the non-profit Institute for Local Self-Reliance, told the Guardian: “It’s highly likely if [this merger] goes through it will result in more communities not having a grocery store.”

It’s Time To Innovate For Tomorrow, Non-Food Retailers

Unless.

What if non-grocery merchants, from the dollar chains and convenience stores to consignment shops and the Salvation Army, stepped into these desert communities to provide the healthy foods (not junk foods) families need?

The Salvation Army did in fact do this, in Baltimore, Grocery Dive reports. And convenience store chains including 7-Eleven have been expanding their healthy options in select markets. Ditto for the dollar chains, such as Family Dollar and Dollar General
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, CNN has reported.

In addition to opening locations near colleges and up-and-coming areas, retailers can work with state and local officials to open accessible stores in food-challenged communities.

There are a few watch-outs, however:

  1. Land banking. In the 2015 Safeway deal, Albertsons held on to the lease of at least one closed property, preventing competition from entering a market, the Colorado Trust reports. Regulators should require the sale of properties to provide choice for shoppers. Kroger and Albertsons can further consider pop-up locations in vacated areas, to sell off ugly produce and overstocks, to reduce food waste. (Kroger donates fresh foods to local organizations now.)
  2. Loss of innovation. The merchants that enter markets vacated by Kroger-Albertsons should see the move as a first step toward a more evolved supermarket landscape. By being competitive, they will ensure big chains like Kroger and Albertsons continue to seek ways to improve the shopper experience, and not get fat, pricey and lazy.
  3. Loss of negotiating power. When one chain controls a large share of the grocery market, it can pressure its suppliers – from Procter & Gamble
    PG
    to family farms – to charge less for the goods they sell. These suppliers, in turn, will charge smaller and independent merchants more. And those merchants pass the cost on to shoppers. Shifting price increases from healthy foods to non-essentials, such as cosmetics, at least ensures families can afford to buy nutritious groceries.

If federal regulators approve it, the Kroger-Albertsons deal is expected to close in 2024. That gives retailers, regulators and communities less than two years to make the proposal work for everyone, including low-income families and retail workers.

We should speak up now for a deal that nourishes all, not just investors and corporate executives.