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Kroger-Albertsons merger needed to close pricing gap with Walmart, executives testify

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Two Kroger executives took the stand Monday in Denver District Court saying a merger with Albertsons is the key to competing with Walmart.

FILE – Kroger CEO Rodney McMullen leaves federal court after testifying during a federal court hearing on Sept. 4, 2024, in Portland, Ore. seeking to block the grocer’s $24.6 billion merger with Albertsons Cos., arguing the combination is key to competing with Walmart and will not harm Colorado consumers.

Consumer advocates and worker unions have criticized the proposed sale, viewing C&S as a weak buyer that won’t survive long. State attorneys pursued that line of questioning on Monday, pushing Kroger CEO Rodney McMullen on whether the company chose what would be a weaker competitor without adequate management talent.

Another $1.3 billion will go into store upgrades and $1 billion to employees, who are called associates. McMullen and Aitken emphasized that Walmart, with 3.5 times the grocery sales of Kroger, is the key competitor not Albertsons. Kroger has built its business strategy entirely around matching Walmart’s prices and staying ahead of a host of other rivals like Costco, Whole Foods, Trader Joe’s, etc.

While acknowledging that gross margins did double, Aitken said the added revenues didn’t drop to the bottom line because higher transportation and labor costs ate up much of the gains. McMullen also noted the difficulty the retailer has had in finding workers. For example, if Coca-Cola rolls out a new product, Kroger can offer a coupon or free sample to the consumers in its database most likely to try it out, avoiding Pepsi loyalists. That understanding of consumers’ preferences and patterns offers a growing revenue source.

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