Some market watchers see the biggest benefit from the proposed merger of Kroger and Albertsons being the extended geographic reach and consumer data access that could help Kroger capitalize on the burgeoning retail media opportunity.
“The strongest rationale is that it’s about building a retail media juggernaut,” Andrew Lipsman, principal analyst for retail and e-commerce at Insider Intelligence, told The Wall Street Journal. “These digital ad businesses are completely transforming economics, and you get disproportionate gains from scale. It’s a case where 1+1 is going to equal 3, or maybe 4.”
Kroger and Albertsons entered the retail advertising space in 2015 and 2021, respectively.
Retail media is growing faster than grocery sales as first-party data has become more appealing, given the privacy issues associated with third-party cookies. It also packs a higher margin. Doug McMillon, Walmart’s CEO, said on Walmart’s second-quarter call, “I can’t remember a business with the margin structure of the advertising business here at Walmart.”
In announcing the merger, Kroger said the combined companies would reach approximately 85 million households nationwide. The statement read, “With an expanded footprint and the addition of the recently launched Albertsons Cos. Media Collective, Kroger will enhance its services to media clients and provide more targeted, sophisticated solutions.”
With scores of retail media networks arriving in recent years, the merger could simplify advertisers’ choices of where to place ads. Amazon.com is the dominant player, with $31 billion in advertising revenue last year, followed by Walmart, which reported $2.1 billion in ad revenue last year. Instacart, Kroger and Target are also often cited with larger networks.
With Albertsons, Kroger could compete as the largest in-store media channel in the U.S. with a grocery store base slightly higher than Walmart. About 97 percent of Kroger’s transactions go through its loyalty card membership program, giving Kroger an advantage in linking store purchases to customers, as well.
It is believed that retail media’s next big push will be driving offline sales, given that some 90 percent of grocery sales still happen in stores. Advertisers, however, are looking for better insights into how online and mobile behavior drives in-store sales.
- Kroger and Albertsons Companies to Combine Establishing National Footprint to Serve America with Fresh, Affordable Food – Kroger/Albertsons
- Is retail media the big beneficiary from Kroger-Albertsons Merger Would Create a Big Player in Retail Advertising – The Wall Street Journal
- Walmart, Inc. (WMT) Q2 2023 Earnings Call – Walmart
- What the Kroger-Albertsons merger means for the retail media landscape – ModernRetail
- Retail Media Effect of Kroger-Albertsons Merger – Street Fight
- What the Kroger-Albertsons merger tells us about the future of retail media networks – Insider Intelligence
- How retailers are reshaping the advertising industry – Financial Times
- Kroger and Albertsons are merging – RetailWire