Two major U.S. supermarkets, Kroger and Albertsons, have been seeking to combine forces after their boards reached a unanimous all-cash merger agreement, first announced in October 2022.
However, the potential $24.6 billion deal has encountered another roadblock, as the U.S. government requested a preliminary injunction to block the merger. In response, Kroger CEO Rodney McMullen pledged to cut prices by $1 billion if the merger goes through.
“The day that we merge is the day that we will begin lowering prices,” McMullen said on Wednesday while testifying during a federal court hearing in Portland, Oregon.
McMullen also noted that the merger would allow the company to lower prices and better compete with larger retailers like Walmart, Amazon, and Costco. If combined, Albertsons and Kroger would control around 13% of U.S. grocery sales, still less than Walmart’s nearly 22% market share.
When asked if Kroger would raise prices after the merger, he replied, “Absolutely not. We believe over time, value will be increasingly important, and you can’t price your items above the market.”
Kroger and Albertsons first proposed the merger in October 2022, after Kroger agreed to purchase Albertsons. The Federal Trade Commission sued earlier this year to block the deal, alleging that the merger would eliminate competition and raise grocery prices amid already high food price inflation.
In his recent testimony, McMullen cited rising supplier costs, fuel prices, and credit card swipe fees when asked by the company’s lawyer why prices have increased.
In a statement at the time of the initial proposal, McMullen said, “Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. This merger advances our commitment to building a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors.”
Kroger also stated in its news release, “At a time when people are increasingly shopping for groceries and eating at home, Kroger and Albertsons Cos. will be better positioned to relieve the inflationary pressures facing shoppers with a combined portfolio of approximately 34,000 total private label products across premium, natural and organic, and opening price point brands.”
