US grocer Kroger in talks to merge with rival Albertsons – sources

Oct 13 (Reuters) – U.S. grocery company Kroger Co (KR.N) is in talks to merge with smaller rival Albertsons Companies Inc (ACI.N) in a merger that would create a supermarket titan , said sources familiar with the matter. .

The merger of the nation’s No. 1 and 2 stand-alone grocers, if achieved, could give retailers a head start in negotiations with consumer products manufacturers such as Procter & Gamble (PG.N) and Unilever ( ULVR.L) at a period of sharp price increases.

A deal could be announced as early as this week if the talks do not collapse, said the sources, who spoke on condition of anonymity because the talks are confidential.

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Major consumer products companies around the world have announced plans to raise prices at a faster rate as they too seek to limit the impact of soaring raw material costs on their margins.

Some critics noted that a merger would reduce competition among American grocery chains and potentially drive up prices for American shoppers. A deal would create a combined company with a market valuation of around $47 billion, which would represent one of the largest retail mergers in recent years.

Neither Kroger nor Albertsons immediately responded to requests for comment. The news was first reported by Bloomberg.

Merger talks between the two largest U.S. supermarket chains come at a time when Walmart Inc (WMT.N) has focused on expanding its own grocery business. Groceries now make up about 55% of Walmart’s annual sales. Walmart has traditionally used its influence to demand the lowest possible prices from food and drink suppliers, leaving rival supermarkets at a disadvantage in their own negotiations with suppliers.

But consultant Burt Flickinger, who owns shares in Kroger and Albertsons, said a merger would give the two supermarket operators more buying power, making it easier for them to compete with Walmart.

COMPETITIVE POWER

About 25% of all dollars spent on groceries in the United States are spent at Walmart, according to data provided by Euromonitor. Kroger and Albertsons hold about 8% and 5% of the U.S. grocery market, respectively, according to Euromonitor.

The razor-thin margins of stand-alone U.S. supermarket chains have been squeezed by soaring costs and supply chain disruptions after a boom at the height of the pandemic. Major packaged food and consumer goods makers are still not supplying many grocers with products to fill their shelves, grocers told Reuters.

Shares of Albertsons rose 11% on Thursday afternoon, while shares of Kroger slid 1.4%. Shares of British online supermarket and technology group Ocado Group Plc (OCDO.L) rose more than 10% at the end of trading in London. Kroger is Ocado’s biggest customer.

Kroger, which is also home to supermarket chains such as Fred Meyer, Ralphs and King Soopers, follows Walmart, the top grocer in the United States. Albertsons, based in Boise, Idaho, includes the Safeway banner.

Sarah Miller, executive director of the American Economic Liberties Project, an anti-monopoly nonprofit, said the deal would “squeeze consumers who are already struggling to afford food.”

“This merger is a pure and simple case of monopoly power, and enforcement officials should block it,” Miller said.

A deal could be reached as early as this week, Bloomberg reported, adding that no final decision has been made and talks could still be delayed or fail.

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Reporting by Anirban Sen and Abigail Summerville in New York Additional reporting by Siddarth Cavale, Jessica DiNapoli and Arriana McLymore in New York and Aishwarya Venugopal in Bengaluru Editing by Sriraj Kalluvila and Matthew Lewis

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