Colorado growers voice opposition to Kroger merger
The Colorado Fruit and Vegetable Growers and the collective members of Western Growers and the California Fresh Fruit Association sent a letter in opposition to Kroger’s proposed $24.6 billion acquisition of Albertson’s. This prefaced a call the trade groups had with the Federal Trade Commission and the Colorado Attorney General last week during which growers reportedly corroborated much of the concerns communicated by the groups.
According to the letter to Lina Khan, chair of the Federal Trade Commission, the two retail giants combined would account for 15.6% of the U.S. grocery market share, second only to Walmart at 21%. If approved by the FTC, the merger would harm suppliers of fresh produce by shrinking competition among retailer buyers since the newly combined entity would have significantly more leverage over the growers and shippers.
The trade groups anticipate the deal will not only reduce farmers’ margins and pressure them to reduce acreage, but also have negative impact on farmworker jobs and income. They also predict increased prices for consumers.
“Their merger would exacerbate the cycle of supermarket consolidation we have seen in recent years. For example, when Albertsons acquired Safeway in 2015, Albertsons consolidated its buying program by rewarding contracts only to its largest produce suppliers. Those who shipped fewer packages to Albertsons and had low to no exposure to Safeway pre-merger were supplanted in favor of Albertsons’ largest shippers. The buying power of the newly combined Kroger entity cannot be understated. Growers and shippers are ultimately price takers and are constantly struggling to achieve better than breakeven pricing from retailers. An entity as large as Kroger-Albertsons combined will allow it to dictate pricing and leverage its buying power with even more aggressive contract pricing than is currently seen. This exorbitant buying power will allow Kroger to play suppliers against one another to compete for the business.”
Additional consolidation, according to the trade organizations, would be increased sourcing by retailers from “foreign suppliers who are ready, willing and able to undercut American producers on operating costs and price they will accept from the retailer.”
“If Kroger is permitted to acquire Albertsons, that will eliminate yet another major produce buyer and competitor to Kroger, allowing Kroger to push prices down even further on its suppliers. Kroger’s divestiture plan will not lessen these impacts. As you know, the FTC required Albertsons and Safeway Inc. to divest 168 stores as part of a settlement allowing those companies to merge. Albertsons bought 33 stores back less than a year after the deal closed when Haggen Holdings LLC — which had bought most of the available Albertson’s stores — filed for bankruptcy. You criticized that outcome in 2017, calling it a “spectacular” failure that a casual observer could have anticipated. If the Kroger divestiture plan is permitted to proceed, past will be prologue.”
Bruce Talbott, the president of CFVGA, said Colorado growers have seen the consequences of grocery consolidation as it relates to apple production. He said chains that purchase for thousands of stores must purchase from incredibly large growers and those growers, in order to supply produce year-round, are often forced to grow in multiple states and even multiple countries. Talbott grew 8,000 acres of apples in 1992. They downsized their acres in 1999 before exiting apple production entirely in 2006.
“What killed us was consolidation,” he said. “When there were small grocery chains around, they matched small growers, although small is a relative term, of course. But when you consolidate into thousands of stores per entity, it’s only the Sunkists and the guys who represent millions of bushels of product and ship year-round.”
He said much of the produce to meet the demands of the large chains is custom grown by multinational growers, which is difficult for Colorado growers who, with a few exceptions, grow only in the state.