California has seen the loss of their neighborhood supermarkets as global retailers have come to dominate the grocery industry. And with that change comes loss of access to retail markets for small businesses and higher food prices for consumers. As president of the California Hispanic Chambers of Commerce representing the interests of more 850,000 Hispanic-owned businesses in California, I have serious concerns if this trend continues unabated. That is why I support the Kroger-Albertsons merger. The deal promises to lower prices for consumers and increase support for diverse small businesses.
The grocery industry landscape has transformed in the past ten years. Neighborhood supermarkets have closed while supercenters and discount grocers captured markets. Take southern California, where supermarket grocers have lost 50 stores in the past 10 years, while supercenters and discount grocers added more than 750 stores. The supercenter and discount grocers’ growth has come largely at the expense of supermarket grocers. In 2012, Albertsons and Kroger had the largest share of the grocery market in Southern California. But in 2022, the leading grocery sellers are Walmart and Costco, with Walmart more than tripling its market share in a decade.
And the same is true nationwide. Large global retailers like Walmart, Target, Costco, and Amazon sell more than 60% of all groceries in the U.S. And Walmart, far and away the nation’s largest grocer, has sales as large as the next four grocers combined. On the other side, supermarket grocers are now the primary shop for only 39% of American shoppers, when 20 years ago, it was 79%.
This rising dominance of supercenters and discount grocers has proven costly to small businesses and consumers. Local producers lose access to local retail food markets when large, dominant players with a global footprint leverage their size and scale. And consumers face higher grocery prices as these global retailers grow their profit margins as they grow store footprint.
California’s small businesses and consumers need a combined Kroger-Albertsons company to compete against this trend. Local farmers, producers and small businesses stand to benefit from the merger through increased access to retail markets to sell their goods. Local producers already get better access to retail consumers through supermarkets than through discount grocers. And with this merger, Kroger will increase its local food sourcing. Kroger has committed that the combined company will increase the number of local products in its stores by 10%, which equates to at least 30 new local products in each store. A combined Kroger-Albertsons will offer local producers more access to retail while the discount grocers work to cut off access and dominate local suppliers.
This merger will increase supplier diversity along with increased local supply. Unlike many of their competitors, Kroger and Albertsons both have robust supplier diversity programs. Each company is also committed to expanding those programs. A combined Kroger-Albertsons will offer diverse small businesses like CHCC’s members the ability to expand their reach and increase their sales.
And consumers will benefit not only from more local produce from diverse small businesses, but the merger will result in lower food prices. Kroger has a history of investing in price reductions after a merger. Building on a similar track record in prior transactions, Kroger has committed to investing $500 million in price reductions for customers following the Albertsons merger. And unlike Amazon and Walmart who have increased their profit margins, Kroger has reduced its profit margins by 5% in the last 20 years, saving its customers billions.
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Pricing is particularly important to the Hispanic community, which food inflation has hit hard. According to an Urban Institute study, nearly a third of Hispanic Americans reported experiencing food insecurity in 2022, about 50% higher than the share of white adults who reported food insecurity. Hispanic adults were also more likely than white adults to report reducing the amount of food they bought suggesting their family budgets were less able to absorb grocery price increases.
Small businesses and consumers need a combined Kroger and Albertsons to compete against the growing supercenters and discount grocers. And a combined Kroger Albertsons means more opportunities for small businesses to grow and, in turn, lower grocery bills for consumers. This merger is good for small business and good for consumers’ wallets. The California Hispanic Chambers of Commerce calls on the FTC and the California Attorney General to approve the Kroger Albertsons merger.
Julian Cañete is the President and CEO of the California Hispanic Chambers of Commerce.