Kroger-Albertsons Inch Closer to Joining Forces: What it Means for Chicagoans (Part 2)
This is the second part of a two-part blog series covering the Kroger-Albertsons merger and associated sale to C&S Wholesale Grocers. Check out part one here, which covers what the acquisitions would mean for the companies involved and how it would impact the broader grocery industry.
Picking up where we left off in the first half of this series, which covered the retailer perspective of the Kroger-Albertsons merger and sale to C&S Wholesale, next we explore how these deals could impact U.S. grocery shoppers. As retail experts with roots in Chicago, we specifically explore how the C&S announcement could impact Chicagoans who shop at the local banners, Mariano’s (Kroger) and Jewel-Osco (Albertsons), as 14 yet-to-be-disclosed, Kroger-owned locations are earmarked to be included in the sale to C&S.
What does this mean for consumers?
Kroger and Albertsons leadership argue that the deal will streamline the two companies’ operations, allowing them to pass along savings to customers through lower prices. However, pushback from unions, industry trade groups, and elected officials call into question whether diminished competition will do the opposite and actually increase grocery prices for Americans. While the impact on grocery prices is still up for debate and likely to be fought out with the Federal Trade Commission (FTC), Americans in affected markets can expect changes in their local Kroger and Albertsons stores if the deal does go through.
A map of Kroger and Albertsons store locations demonstrates regions where the two brands have clear market overlap, including in Seattle, Portland, Los Angeles, San Diego, Denver, Houston, Dallas, and Chicago. With divestitures ranging from only 10 stores in the DMV area upward to 104 stores in Washington state, the impact would vary widely by market. We can look to the Chicago market, where 14 not-yet-disclosed locations would be divested, for an illustrative example of how this could affect Chicagoans who shop at local banners Mariano’s (Kroger) and Jewel-Osco (Albertsons).
For stores divested to C&S Wholesale in Chicago:
- Brand: C&S will have the rights to the use of the Mariano’s name. Any Mariano’s locations acquired by C&S could be re-bannered to their existing Piggly Wiggly or Grand Union brands, converted into an entirely new banner, or retain the Mariano’s name. The latter is the most likely choice and the most strategic option of the three. The Mariano’s brand is a household name with strong local ties and a storied heritage beloved by Chicagoans. C&S would benefit from leveraging the strong brand recognition and customer affinity for the Mariano’s name.
- Product: Acquired stores would stock their products from C&S Wholesale. We would anticipate some changes in the assortment, most notably the absence of Kroger private label brands like Simple Truth and Private Selection.
- Experience: How the shopping experience would change remains a question mark. Quite possibly, the stores might have “Mariano’s” on the storefront but look and operate like a Piggly Wiggly on the inside.
For Kroger-retained stores in Chicago:
- Brand: Mariano’s stores retained by Kroger will be re-bannered, since the Mariano’s name will be sold to C&S. Stores will mostly likely convert to Jewel-Osco, or perhaps, an alternative “Jewel-Osco Plus”-type name that distinguishes it from conventional Jewel stores and recognizes the more food service-heavy design of Mariano’s locations (that is, if Kroger does not remodel this part of the store). In Los Angeles, Kroger-owned Ralphs stores distinguish their traditional stores from Ralphs Fresh Fare stores, whose store designs place more emphasis on the fresh departments. We could potentially see the emergence of Jewel-Osco variation similar to this.
- Product: In the short run, it is unclear whether the Mariano’s-turned-Jewel stores would continue to offer a Kroger product assortment or convert to an Albertsons assortment. In the long run, if the merger is approved, it will take years for Kroger to reconcile product assortments and private label brands. For example, it would be redundant to retain both Kroger’s Simple Truth and Albertsons’ O Organic private label brands.
- Experience: It is also unclear how much of the Mariano’s shopping experience would be preserved in these converted stores. Will there still be a wine bar? Will there be as many foodservice options? Or will these re-bannered stores be converted into uniform Jewel-Osco stores? Regardless, it is not the first time Chicagoans have seen Mariano’s stores transform before their eyes. After Kroger acquired Mariano’s parent company Roundy’s in 2015, Mariano’s stores become “Kroger-ized”, with some of the high-end flourishes unique to the chain substituted out for operational efficiencies and product assortments that are typical of a Kroger banner, much to locals’ dismay.
Lastly, one buried but potentially significant detail to point out in Kroger’s divestiture plan press release is that an additional 237 stores may need to be divested to obtain governmental clearance, for a total of 650 offloaded stores. In Chicago, a market with clear competitive overlap between the two banners, that could mean additional stores would be sold to C&S on top of the original 14 announced in September.
Kroger and Albertsons expect the deal to close in early 2024, but the FTC appears ready to challenge the merger and bring the companies to court if needed. Whether the merger and sale to C&S will take off remains uncertain, but the U.S. grocery industry already appears to be bracing for impact.