Ep. 1372 A Big Food Merger of Convenience

The Food Chain

Michael Olson hosts Scott Moses, Partner, Solomon Partners Head of Grocery, Pharmacy and Restaurnts, for a conversation about the consolidation of the nation’s grocery stores.

Should Kroger and Albertsons be allowed to merge?

For the moment, you and I live in the small town of Anywhere, USA. There are two grocers in town, Deluxe Food on North Main and Star Market on South Main. Deluxe and Star have been competing for our grocery dollars by offering their best prices on food. Sometimes Deluxe has the best prices and wins our dollars, other times Star wins.

All goes well, in our small town world, until one day a big box store pops up in the neighboring small town of Somewhere with really cheap prices! Deluxe and Star are now unable to compete for our grocery dollars with their prices. To survive, Deluxe and Star must do something. But what can they do?

We see this small town dilemma being played out on a national scale with the proposed $20 billion merger of two of the nation’s largest supermarket chains, Kroger and Albertsons.

With about 5,000 stores between them, Kroger and Albertsons would seem to be big enough to compete for the nation’s grocery dollars. And they were big enough, until others with different business models appeared on the scene and grew to be much larger. You know the names: Walmart, Costco, Amazon.

Kroger and Albertsons, though with many stores between them, now find themselves becoming the little fish in the sea, and their business is gradually being eaten up by bigger fish.

What can Kroger and Albertsons do to survive?

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