Bloomberg reports that Kroger and Albertsons, two of the biggest grocery chains in the US, have started merger talks. This would create an enormous entity about the size of Wal-Mart. In Chicago, it would result in the merger of Jewel (Albertsons) and Mariano's (Kroger), just a few years after the dissolution of Dominick's, leaving us with just three major chains including Trader Joe's and Whole Foods Market.
Crain's elaborates:
An agreement could be reached as soon as this week, [unnamed sources] said, asking not to be identified discussing confidential information. No final decisions have been made and talks could still be delayed or falter, according to the people.
A potential tie-up would give the combined entity increased purchasing power, a sprawling shopper-loyalty program and greater heft in technology investments as online grocery sales increase. The resulting giant would be of comparable size in groceries to Walmart Inc., the US market leader.
But any deal would face tough scrutiny from US antitrust authorities, said Jennifer Bartashus, an analyst at Bloomberg Intelligence. The US Federal Trade Commission is already subjecting mergers to close examination, and a Kroger-Albertsons deal would join two large players that directly compete in much of the country.
“This is the type of transaction that really looks good on paper, but the actual practicality of achieving regulatory approval by the FTC could be difficult,” Bartashus said. “If you think about the store bases of the two respective entities, there is a lot of overlap in very competitive markets.”
I really hope the FTC shuts this thing down. While bigger and fewer grocery stores might make some business sense in less-dense areas, here in Chicago we like having more, smaller stores—and more choice.