Cleanup on Aisle 1990

Is this the end of a grocery merger era that began with 385 grocery mergers from 1996-1999 alone? As news about the impending Federal Trade Commission decision to approve or deny the Kroger/Albertsons merger looms large, ILSR’s Ron Knox delves into the dominance of major grocery chains and explores the potential consequences of the proposed merger. In the second half of the episode, ILSR’s Kennedy Smith introduces her new “Community Wins” series, which highlights stories of communities establishing grocery stores that adopt innovative approaches to ownership, access, and governance. The burgeoning trend of community-driven grocery models is fueling a broader revolution of local initiatives across the country, fostering local economic resilience in the face of expanding corporate power.

Reggie Rucker: Hello, and welcome back to another episode of Building Local Power. I am your co-host, Reggie Rucker, and I am so excited. You’re in for a real treat today with this episode because we have, not one, but two ILSR mates joining us to talk grocery stores, the good, the bad, and the consolidated. Keeping with this season’s theme, How to Get Away With Merger, we take a specific look at the Kroger-Albertson’s attempted merger, talk about why we hope it fails and what exists on the other side of a less consolidated grocery industry. To get into it, I’m going to toss it over to my co-host, who never fails to amaze me. Sometimes it’s a good amazement. Sometimes it’s bewilderment. Usually it’s the former. But in any case, Luke Gannon. What’s up, Luke?
Luke Gannon: Aw, thank you, Reggie. I’m definitely glad to provide bewildering amazement too. But that was really a perfect introduction. I think you captured it all. So without further ado, we’re going to jump right into the interview.
We have the pleasure of welcoming back a very familiar voice, Ron Knox. He’s a senior researcher and writer on the independent business team at the Institute for Local Self-Reliance, and he is very well-versed in the grocery industry. So in October of 2022, Kroger and Albertsons announced that they planned to merge. Since then, they’ve received significant opposition from advocacy organizations and the public. We will hear news from our regulatory agencies as soon as even a couple weeks, but definitely in early 2024, about whether this merger will be approved. So today, Ron is going to walk us through how our grocery sector has become so consolidated and the harms of an ever-increasing consolidated grocery sector on citizens, grocers and farmers. So thanks so much for joining us on the show today, Ron.
Ron Knox: Great to be here. Thank you.
Luke Gannon: All right. So Ron, to start us off, can you tell us a little bit about what the grocery industry looks like in the US right now? Who are the big players? And how much of the market do they control?
Ron Knox: Sure. So the grocery industry is one of the more consolidated industries in America, to be honest, and I think it’s one of those industries where if you’re just a regular person, you just have to shop at the supermarket for the stuff that fills up your fridge and you’re covered, you’re definitely going to feel the effects of that consolidation. So the industry right now is pretty much dominated by four or five different mega chains, like supermarkets or superstores that kind of dominate a lot of our cities and towns across the country. Number one by a good margin is Walmart. Of course, Walmart’s a kind of multi retailer superstore type model, but they are the number one grocer in America. And then Kroger, Albertsons, Publix, and then a few others. And if this merger goes through, this Kroger-Albertsons merger that we’re discussing, if it were to go through, then the top four supermarket chains would control 55%, more than half of all supermarket sales in America. So super concentrated.
And that’s been the product of a series of mergers that have been permitted over the last 30 years or so. There was certainly a time in America in the mid-century and beyond, through the 70s and 80s where there were many, many supermarket chains, lots of regional chains, lots of local independent stores that served neighborhoods and communities, towns and cities around the country. That all began to change in the 80s, as there was a significant revamp of the enforcement of our antitrust laws that really put a lot of emphasis on so-called efficiencies, this kind of bigger is better type of attitude, both among regulatory agencies and policymakers, and the result of that was a lot of consolidation was permitted. And so you end up with these kind of mega mergers that have happened throughout the years where now you have this ultra-concentrated sector that is threatening to become even more concentrated to a very dangerous level if this Kroger-Albertsons deal is allowed to go through.
Reggie Rucker: Ron, actually, I want to do one quick followup, which is I’m here in DC, and I live right across the street from the Harris Teeter. And so as I hear you lay out the three, four or five big players in the industry, I don’t hear you say Harris Teeter, so I’m like, oh, I’m good. I don’t got to worry about. It’s not going to affect me. Can you talk a little bit about how these large sort of mega grocers and their brands sort of own these other brands so that it will actually affect me, even though it doesn’t sound like it when you first name off these grocers?
Ron Knox: Yeah. For a lot of shoppers around the country, you say Kroger, you say Albertsons, maybe some of those are familiar names to some people in some parts of the country, but I think for most folks, it’s hard to imagine that those are two of the largest grocery chains in the US because those names don’t really ring a bell. But in a lot of places you don’t think you have a Kroger, but do you have a Harris Teeter? Yes. You might not think you have Albertsons, but do you have a Safeway? Yes. So between those two like mega chains, you have Fred Meyer, Dillons, Tom Thumb, King Soopers, Vons, Jewel-Osco, ACME. The list goes on and on. I’m probably forgetting some, but through, again, the decades of consolidation, those two mega chains have come to own all of these brands, all of these various supermarket chains that probably touch every single listener wherever they are in the US.
Reggie Rucker: At some point, Kroger-Albertsons, they’re going to have to go before… or they’ve already submitted sort of the application. So they have to make a case beyond the, “Hey, we’re just trying to make more money. That’s why we want to merge.” They’re trying to sell to the FTC, and then likely they’re going to have to try to sell to some judge why they’re doing this, why this is good for not just them. Can you talk a little bit about what their argument is, or what you think their argument’s going to be should it get that far? What are they saying to try to make the case why this should happen?
Ron Knox: The companies say what a lot of merging companies say when they propose these kinds of mega mergers, right? Kroger and Albertsons have both promised millions of dollars in “cost savings” due to the merger and that these cost savings are going to allow them to do things that sound good and sound pro-competitive, like lower prices for consumers and offer better product selection and do all of those kinds of things. The truth is that those cost savings… And you can just look at the history of supermarket mergers, and you can easily see this… those cost savings, what that really means is closed stores, laid-off workers, weakened supply chains, and then those savings are routinely never passed on to customers. Those cost savings simply show up as increased profits, and those increased profits allow the companies to do things like buy back their own shares from stockholders and offer these dividends, things that increase their stock prices and make shareholders happy, but that have no real reflection of the benefits to you and me and regular shoppers around the country.
Luke Gannon: And then, Ron, can you just dive into that a little more? When this news was released, there has been a lot of public opposition, including from ILSR. So what has this looked like? If this merger was approved, what really are the consequences that people suspect are going to happen?
Ron Knox: Well, I mean, it’s funny because the consequences are also what the companies allege are the benefits, right? Now these companies say, “Look, we have to do this merger because there’s no other way for us to compete with the Walmarts of the world. We have to get bigger because they’re bigger, and only through this bigness can we survive.” A, that’s pretty obviously untrue. If you just look at the amount of money these companies make, the amount of shareholder buybacks and of dividends they already offer, they’re doing fine. So that’s not really true. But I think what is true is that they do want to be as big as Walmart. And what does that mean? Well, that means that they have the power to bully everybody else in the supply chain, everybody else in the economy. And sure, I absolutely 100% believe that they want that. They want to be able to tell their suppliers, “Sorry, we’re going to pay you what we want to pay you,” and they’re going to be able to look at small businesses who maybe supply them with produce or other dry goods that end up on the shelves of these supermarkets, and they’re going to say, “Look, you’re either going to give us the price we want, or you can take a hike because we’re dealing with the biggest suppliers, the biggest food producers on earth, and that’s who we’re going to do business with.”
So it’s this bigness begets bigness, this kind of conspiracy between the really big suppliers and the really big supermarket chains. And that’s what Kroger-Albertsons wants. They want that power, but that power comes at the detriment and creates harm for everybody else in the economy, particularly small businesses and of course, particularly consumers, because the bigger a supermarket chain is, let’s be honest, the easier it is for them to raise prices, because they don’t have a lot of competition to keep those prices down. So that affects all of us.
Luke Gannon: Ron, can you just give us a timeline for our listeners of the three possible scenarios that the Federal Trade Commission is expected to make in this decision?
Ron Knox: Sure. So the FTC could basically do one of three things here. The first is they could say yes to this merger as it was originally proposed, one company buying the other company, lock, stock and barrel. So that’s one thing that could happen. The other thing that could happen is that the FTC could say yes, but with conditions, and those conditions include the companies they’ve proposed to sell off, I think more than 400 stores in places where there’s a lot of head-to-head competition, and they say that’s going to solve the problem. And the FTC could agree with them and could say yes to the merger based on those conditions. What I think is much more likely to happen is the third thing, and that’s the FTC looks at the deal, looks at all the competition problems and all the various ways that that competition exists and say, “No, there’s no fix, and so we are going to say no to this merger, and we’re going to file a lawsuit in federal court to enjoin the merger.” That’s the legalese for that.
And then at that point, the federal court will go through its regular civil litigation process, sped up a little bit. It’ll probably take somewhere like nine months or a year or so to get through it, but it’ll have all of the hallmarks of a civil litigation with discovery and various motions filed by both sides and then eventually a trial to decide whether or not this deal is going to go through. But I think that is the most likely thing to happen. And indeed, if the FTC does sue these companies to block the merger, I think they’re right to do so. I mean, again, there are lots of reasons for that, right? The supermarket industry is one that touches all of our lives every single day, right? I don’t care if you’re rich or poor, you’re going to the supermarket, and you’re buying the stuff on the shelves, and the prices that you find on those shelves have an effect. What we are saying, what we’re pushing for is for the FTC to simply say no to this deal.
And that’s something that, I mean, to be honest, in the world of antitrust merger regulation, it’s something that just hasn’t happened in like 30, 40 years. You just never saw an agency that, by the way, whose job it is to protect the public from this kind of consolidated corporate power, from these price increases, from the ability for these big companies to bully workers and suppliers and everybody else… These agencies that are charged with doing that simply didn’t do the job for about 30 or 40 years. And they said yes to all these deals. Maybe they had a few conditions, some strings attached maybe, maybe they didn’t, but they said yes, and they said yes consistently. And the American public has been dealing with the harms of that. So what we’re telling the FTC to do, or we’re hoping that the FTC indeed does, is to simply say no. And we believe that there is honestly no way to fix this merger to where it’s not going to inflict significant harms on communities, workers and small businesses around the country.
Luke Gannon: Sort of close us out here, I’m curious, what does the future of the grocery industry look like in both scenarios if the Kroger-Albertsons merger is approved and if it is denied?
Ron Knox: Let’s say that the deal gets approved. So what happens then? If the deal gets approved as the companies are proposing, the companies say, “Well, look, we’re going to sell off like 400 stores in all these cities and towns on the West Coast and elsewhere where there’s a lot of competitive overlap, basically where Kroger and Albertsons compete head to head.” They say, “We’re going to sell off a bunch of these stores to a new third party, and they’re going to run them, and everything’s going to be peachy keen. There’s just not going to be a problem at all,” right? What happens then? Two likely things. One, as we have seen before, those kinds of divestitures to some third party not accustomed to operating big supermarkets, not accustomed to operating that level, that number, that sheer quantity of stores, all of a sudden they can’t do the job. And then you end up with this kind of cascading catastrophe where you have stores that are unable to operate, and they simply close or they’re sold back to the original parent companies because these third parties just can’t do it. So you have this staggering failure, and it’s the exact kind of thing that happened when Albertsons bought Safeway. And it was this drama that resulted in lost jobs in food deserts and all these real problems in real places around the country.
The other thing if the deal goes through is that even when you sell off stores… Let’s say that that happens, and let’s say hypothetically that that selloff is successful, which is super unlikely, but let’s say that that is what happens… you still end up with this merged conglomerate company with even more power to dictate the prices for all of the different things that it buys, whether it’s the produce in the produce section, the dry goods on the shelves or workers who are actually stocking those shelves and checking out groceries and bagging goods. Even with the divestiture, even with this supposed fix, you don’t fix that problem, and you don’t end up with a company that is competitively sized when it comes to the things that it buys. So that is essentially unsolvable, and that’s what happens if that deal goes through.
Now, what happens if the deal is blocked? Well, I mean, a few things, right? First thing is this super important shift in the way that our regulatory agencies behave and the messages that they send to the corporate world. If the FTC blocks this deal, that’s the FTC saying, “Look, don’t bring this stuff to us. Don’t think about it.” All right? “Don’t let this stuff get out of the boardroom, because we are going to fight you tooth and nail, and you’re going to rack up hundreds of millions of dollars in legal fees. And we’re going to drag you through the mud, and the public’s going to hate you, and all this other stuff is going to happen. Your shareholders aren’t going to like it because they don’t want to have to go through this stuff,” right? “Don’t even bring this stuff to us.” That’s the first thing.
And the second thing is that, look, in any market… I don’t care whether it’s supermarkets or airlines or cell phones or whatever… when you say no to a merger, the thing you’re saying yes to is opportunity, opportunity for another company to come in and gain a foothold and compete in that market, lower prices, offer better benefits to workers, offer better prices and opportunities to suppliers, all those kinds of things. It’s this idea that when you say no to concentration, you say yes to deconcentration, you say yes to more opportunity, more things in more places, fewer food deserts, better opportunities for unions to come in and organize workers and give them better pay. All these kinds of things happen. So the benefits are multifold, as are the risks, if the FTC lets this one go through.
Reggie Rucker: Ron, always so great to have you. Thank you for your expertise and perspective on this. What I love most about what Ron just shared and why I want to quickly get you to the second half of this episode is the part about it’s not just being some sort of punishment for bigness because like boo, we hate bigness. It’s the bigness, the consolidation that blocks the beautiful, local, connected outcomes that we get when people in communities have the space and freedom to exist and create together with each other the solutions that will make their community stronger and healthier and more vibrant. This next half of the episode has some great stories of communities doing just this to make sure that their neighbors have access to quality, affordable food for their families. I’m going to toss it back to Luke to take us through these stories.
Luke Gannon: Up next, we’ll share stories from ILSR’s new Community Wins series, spotlighting how communities are combating corporate power in building local self-reliance. Kennedy Smith, a senior researcher at ILSR, an author of these articles, will guide us through some of these narratives. We’ll first take you to the tiny town in Cody, Nebraska. Here’s Kennedy.
Kennedy Smith: There was a high school class in Cody that jumpstarted a market there called Circle C in 2008. It’s a tiny town. It only has 167 people. And they’d lost a grocery store, and what were they going to do? That state senator for rural affairs helped the community plan the store and secure startup funding from the USDA and several foundations to get it going. It’s operated as a nonprofit organization with a board of directors. The town’s government owns the building, and there’s a full-time manager who oversees the day-to-day operations. The store is staffed mostly by high school students who are learning how to run a grocery store and how to run a business in general by the experience of it.
Luke Gannon: Cody is reaping the benefits of the school-run grocery store, eliminating the need for a one-hour journey to reach the next closest grocery store, which is a common challenge faced by many individuals in rural areas living in food deserts.
Kennedy Smith: I think that more and more local governments are realizing, especially in smaller communities and in urban neighborhoods, places that have really been starved of food options for a long time, local governments are realizing that access to healthy, affordable food is really a human right, and government has a role to play in helping make that happen. And so I’m seeing communities taking sort of little baby steps in that direction, like in this instance where the local government owned the building. There are actually a couple of bigger examples, like in Baldwin, Florida and a few communities in Kansas, where local government decided, look, we have no grocery store. We don’t see anybody coming knocking on the door wanting to open one, so we, the local government, are going to do it ourselves. And so those are completely municipally-owned grocery stores that operate.
Luke Gannon: There are various types of grocery stores and operation supported by diverse sources, including local governments providing funds from the federal government through the American Rescue Plan Act, contributions from community charities, for-profit institutions within the community and individual investments. A common theme in the stories Kennedy writes about is a profound commitment to addressing the specific needs of the community. Up north in Evansville, Minnesota, a small town has found a solution that works for them.
Kennedy Smith: Evansville had lost its only grocery store in the mid 2010s, and the closest full-service store was 20 miles away. So this local couple, with the help of some community residents who chipped in some money to help renovate this building, opened this store called Main Street Market, which is largely a self-service grocery store. It’s staffed three days a week, but on the days that it’s closed, people who are members, which is 75 bucks a year, use an app on their telephones to open the door, scan things they want to buy and pay for the order. So each customer has a unique code so the owners know who’s in the store all the time, but there hasn’t been any issue with shoplifting at all. It’s very much honor system.
Luke Gannon: One local resident in Evansville says that having this local grocery option in town is a game-changer.
Speaker 6: It’s just so handy for me. I mean, I don’t have to drive 20, 30, 40, 50 miles to buy a loaf of bread or a can of soup. I can just walk next door.
Kennedy Smith: Customers can even write suggestions on a chalkboard inside the store about things they’d like to see the store get in stock, and so they can then go and get those things for the store. And that idea, I mean, it sounds kind of unique, and Evansville is the first place that I know of that did it, but I’m also beginning to see that pop up in larger cities, like in Denver and San Diego, where you see some apartment buildings and condominium buildings that have self-service grocery stores popping up on their first floors. And it’s a fairly common thing also in parts of Europe and even in parts of Canada.
Luke Gannon: In the last 30 plus years, we’ve seen a mass exodus of locally-owned grocery stores. Black-owned grocery stores have been particularly hard hit.
Kennedy Smith: Now looking back 100 years or so, the historically black commercial districts were well-served by locally-owned grocery stores. And at some point along the way, that began dropping pretty dramatically. In 1969, according to the Census Bureau, there were more than 11,000 Black-owned food stores in the US, but a couple of decades later that had dropped by 28% to 8,000, and it’s continued to drop. And it obviously is part of a larger morass of factors that include the development of the interstate highway system and White flight and grocery industry consolidation.
Luke Gannon: In 2015, there was an article that said there were only two Black-owned grocery stores left in the US. In May of 2018, another article said that there were 10. But today there are beginning to bounce back. In 2020, an article stated that 60 Black-owned grocery stores opened. Communities are tired of not having good options, and they are taking matters into their own hands. One community is taking matters into their own hands in Chicago.
Kennedy Smith: There was this woman named Liz Abunaw, who actually was a relatively recent MBA grad from University of Chicago. And she was going to O’Hare Airport on a bus, and she stopped in this neighborhood on the way there, Austin, thinking that she could stop at an ATM and get some cash for her trip-
Luke Gannon: Here’s Liz.
Liz Abunaw: Immediately noticing a lack of resources. They didn’t have a grocery store. They didn’t have a bank.
Kennedy Smith: And was just blown away by the fact that there was nothing. And she was like how can this be that we have a city that has neighborhoods that are so thriving and then places like this that just have nothing? And so she decided to do something about it and got back from her trip and got busy putting together the financing for this store that she’s calling Forty Acres Fresh Market, obviously harking back to the unrealized reconstruction dream of giving formerly enslaved people 40 acres and a mule, which is where the name comes from. And she began on a small scale by doing pop-up markets and going to farmer’s markets and doing deliveries of food boxes that people could buy. She’d put together a box of fresh vegetables, box of fresh fruit and doing deliveries that way. So she basically operated for her first couple of years without a physical storefront, just having a warehouse to put things together in.
But she then began raising money, and she’s been very successful in raising money. She’s gotten $185,000 from USDA’s Healthy Food Financing Initiative, $150,000 from the American Heart Association, $2.5 million dollars from the city of Chicago’s Recovery Plan Community Development Grant, and even Famous Amos, the cookie manufacturer, has chipped in 50,000 bucks. And she was finally able to buy a building, a former Salvation Army building, and just broke ground this past month in November of 2023 on doing the renovations for that building to open a full-service grocery store there in this neighborhood that’s had nothing for years.
Luke Gannon: In all of these examples, communities are uniting to cultivate robust local economies, resisting the economic turbulence caused by chains and monopolistic corporations seeking to extract wealth and dictate their future. In the Community Wins series, Kennedy writes about these new grocery models popping up around the country, including mobile, self-service, community-assisted, cooperative and publicly-owned grocery stores. But why now?
Kennedy Smith: I think that there’s something about the pandemic and the fact that people just began thinking about how to do things differently that began to spur some of this thinking. I think that the availability of money through the CARES Act and the American Rescue Plan Act have made some things happen that might not have been possible a few years before. And I think that there’s just sort of a greater sense of needing to take care of each other now than there might’ve been five or 10 years ago. I think that people are just no longer hesitant to step into the arena and say I’m going to go to a city council meeting and talk about the need for this, or I’m going to get together with my neighbors or the school group, and we’re going to try to figure out some solutions. And I think the kids are doing that too. You look at the example of Cody, Nebraska and some of these other places where they really are the kids who’ve pulled this together.
One of the examples that is not making it into my new article, but I found very inspiring, was also in Detroit. And it was this group of a dozen or so high school students who wanted a food market of some kind in their community, in their neighborhood, and thought they could do it as a popup during the summer. And they ended up talking to a Chicago Bears player, who loved the idea so much that he kicked in a half a million dollars for them to do it. And so they took over a former liquor store and turned it into a 12-week market during the summer. And again, they all got firsthand experience in that. So I think there’s something about this younger generation really feeling empowered to think outside the box and do some different things. And then of course, there’s just all the, I think, the sense of people being fed up with so much wealth in the US and in the world gravitating into the pockets of just a few people and a few big companies. And people are recognizing that there’s something going on there that they’re not happy with and therefore looking for local solutions.
And what I think we’re seeing are solutions that, whether it’s in terms of the product mix that these stores offer or their organizational model that they’re using or how they’re funded, whatever it is, they’re finding solutions that work for that community. And it may work there and may not work anywhere else. It may in part work someplace else. But that’s great. People are experimenting not just with new models for grocery stores, but the same thought that goes into what organizational model, what funding solution, what product mix can help businesses across the horizon. And so I think that there are going to be lessons beyond those that the grocery industry can learn and those that people in communities looking for grocery stores can learn that they can apply to other business development activities in the future too. It’s moving so much now towards consolidation that these stories are really heartening because they’re so unique and they’re such a good fit for each place.
Luke Gannon: Kennedy showcases stories from individuals across the country who in the face of daunting challenges are wholeheartedly dedicating themselves to the cause of improving their communities. Thanks so much for joining us today, Kennedy, to highlight these.
Now I’m going to pass it over to my co-host, who just learned why the en and em dash have their names. Fortunately, Reggie is well-versed in matters far more significant than the en and em dash. Reggie, the floor is yours.
Reggie Rucker: Thanks, Luke. Great job as always. And thank you, Kennedy and Ron, for being on the show today. It’s such a joy, a pleasure, a privilege to be able to work with both of you. And to all of you at home or in your cars or wherever you’re listening, thank you. If you made it this far, I assume that means you enjoyed this episode. So it’s my sworn duty to ask you to share it with even just one person you think will enjoy it too. Let’s get to that 10,000 listens so we can bring more people into these conversations about the type of society we want to live in, where the interest of us citizens is put above the interest of giant corporations and their deep-pocketed investors. And if you’re not a subscriber to the podcast yet, make sure to hit that subscribe button so you know when every new episode drops. And of course, your donations are essential to help us keep this podcast going and support the research and resources that we make available on our website for free. We truly welcome and appreciate it all.
And last, if you just have some feedback for us, we want to share a story about how your community approaches this issue. Or if you just want to share about when you first learned why it’s called an em dash and an en dash, send us an email to buildinglocalpower@ilsr.org. We’d love to share these in a special mailbag episode one day. We’ll definitely keep an eye out. This show is produced by Luke Gannon and me, Reggie Rucker. This podcast is edited by Luke Gannon and Andrew Frank. The music for this season is also composed by Andrew Frank. Thank you so much for listening to Building Local Power.

Like this episode? Please help us reach a wider audience by sharing Building Local Power with your family and friends. We would love your feedback. Please email buildinglocalpower@ilsr.org. Subscribe on the podcast platform of your choice.

 

Subscribe: Apple Podcasts | Android | RSS

 

Music Credit: Andrew Frank

Photo Credit: Em McPhie, ILSR’s Digital Communications Manager

Podcast produced by Reggie Rucker and Luke Gannon

Podcast edited by Luke Gannon and Andrew Frank

Copyright 2016 Licensed under a Creative Commons Attribution Noncommercial (3.0) license.

Follow the Institute for Local Self-Reliance on Twitter and Facebook and, for monthly updates on our work, sign-up for our ILSR general newsletter.

Facebooktwitterredditmail
Avatar photo
Follow Luke Gannon:
Luke Gannon

Luke Gannon is the Research and Communications Associate for the Independent Business team.

Avatar photo
Latest posts from Luke
Avatar photo
Follow Reggie Rucker:
Reggie Rucker

As Communications Director at the Institute for Local Self-Reliance, Reggie develops communications strategies and leads campaigns to build public support for ILSR local power initiatives. Contact Reggie with media inquiries.

Avatar photo
Latest posts from Reggie