To date, only a handful of chains have reduced prices, including regional retailers such as HEB, Weis Markets and Market Basket and discounters such as Aldi, that each compete with Kroger and Albertson’s in many markets. The consolidation in the grocery sector also contributes to price inflation, as retailers have marked up prices above supplier costs increases without fear of being undersold. Independent grocers have already testified to Congress about the leverage that such “power buyers’ have in the supply chain, including priority access to inventory, as well as exclusive pack sizes and volume deals. This includes Seattle, Denver/Boulder, Cincinnati, Houston, Dallas/Fort Worth, Salt Lake City, Boston, Washington D.C., Los Angeles and San Francisco, which have heavy market shares in Kroger and/or Albertsons banners. There are already 30% fewer grocery stores than a few decades ago and most major metropolitan areas (with the exception of New York City) are heavily concentrated among just a handful of grocery chains. Market Basket, based in the Boston area, is a top inflation-era grocery chain, according to. The efforts to grow supplier diversity could also be impacted, as retailers have only just started to prioritized brands owned and founded by diverse entrepreneurs. A merger would not enable the supplier base to be more innovative or competitive when a merged company with a tightly managed buying office and a top-down mandate to grow quarterly net income could just focus their negotiations on a small subset of category monopolies to extract maximum revenue. Seasonal varieties, smaller and midsize growers and regional manufacturers would hardly benefit unless there was a strategic prerogative. It would further centralize industrial agriculture supply chains from GMO-fed, concentrated animal feedlot beef, pork, poultry and dairy, as well as chemical-intensive fruit and vegetable monocultures that ensure uniformity of supply and low shrink. The merger would make it unlikely that a 5,000 store chain would double down on localized assortments, seasonality and sustainability trends, such as regenerative organic agriculture and climate-friendly plant-based foods. Grocery shelves, while seemingly abundant with choices, are already heavily concentrated among just a handful of companies in many packaged foods categories, such as Pepsico, Kraft Heinz, Nestle and Kelloggs, as well as meat and poultry barons such as Tyson, JBS and Smithfield. Meanwhile, for suppliers, especially smaller and emerging brands, doing business with the combined chain would not get easier. Soda categories are typically Coke or Pepsi dominant, occasionally with store brands and some. And a merger will mean large scale layoffs in redundant white collar jobs, such as office-based marketing, procurement, analytics, digital sales and category management roles. Now the combine duo would become the latest private sector unionized employer. But a merger may make it tougher for unions a 2004 grocery strike for better wages in California was squashed once Kroger and Albertsons joined forces against their own employees. A host of unions have negotiated new contracts with the chains for higher wages and better benefits. A recent report revealed up to 75% of grocery employees had faced food insecurity as pay rates failed to keep up with housing, child care and transportation costs. A restless labor force that was traumatized by workplace illness and death from Covid-19 has been reevaluating low pay, erratic schedules and long hours, causing record levels of staff turnover and modest boosts in starting pay rates. Yet all grocery chains have had to navigate choppy supply chains since 2020, including inventory out of stocks, and higher logistics and shipping costs.
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