Source: kroger.com
Is the Kroger-Albertsons merger really a retail media deal?
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
Discussion Questions
DISCUSSION QUESTIONS: What would the proposed merger of Kroger and Albertsons mean for the retail media space? How confident are you that in-store represents retail media’s next big growth opportunity?
Poll
Loading …BrainTrust
David Weinand
Chief Customer Officer, Incisiv
Liza Amlani
Principal and Founder, Retail Strategy Group
The media opportunity is a very attractive part of any deal. Advertising margins are great and Kroger can bring extensive expertise to Albertsons whose media efforts are more embryonic. However advertising is only one side of this deal. Much is also related to synergistic cost savings, better economies of scale in buying, expanding geographical reach, and consolidating digital strategies. Of course, all of this looks good on paper but it can be much more difficult to attain the benefits – as we have seen with numerous past mergers which have not lived up to expectations.
So true. Mergers and acquisitions built on synergies fail 80 percent of the time.
The case for in-store media is very compelling. For brands, having the ability to present promotional messages/offers at the point of decision in-store is an attribute that no other media can deliver. This is going to be very big.
Retail media is definitely part of the appeal for this merger — and for the immense opportunity it affords retailers like Kroger/Albertsons!
I can imagine it. Mr. Vendor is looking for big promotional support or introducing a new item. Mr. Vendor makes the presentation to the buyer. The buyer hands Mr. Vendor a sheet outlining media packages the vendor’s company can buy.
Beyond the apparent synergies, potential cost savings, and the increased grocery market domination that will come with Kroger and Albertsons’ proposed merger, with the emergence of retail media as a significant revenue channel, their stores are the next retail media growth opportunity. Kroger has already made significant strides with its Precision Marketing (KPM) capabilities, making advertising more transparent by closing the loop between media exposure and store sales.
Retail media networks represent the next frontier for grocers, retailers, and brands. The deal has created an opportunity for the industry to rally behind a centralized retail media network, leading to standardized measurement abilities that help deliver high-quality digital campaigns. The Kroger and Albertsons merger will further consolidate the industry and push better products to the forefront, minimizing the number of retail media networks within the space to help brands deliver more effective and personalized advertising to customers.
Kroger + Albertsons would make a powerful retail media player, armed with omnichannel data and national reach.
Despite e-grocery gains, we still love supermarkets. Grocery stores are ideal retail media channels that attract the masses and earn frequent visits. Now more brands seek an in-store media presence to drive product discovery where shoppers already spend time and money.
Yes – it’s pretty clear that most grocery chains see media as their #1 growth opportunity. We released a study in September on this and 78 percent of respondents said media monetization was important vs. #2 at 61 percent for prepared foods/delivery. Other than Walmart, this merger will provide the greatest reach of consumers from an in-store perspective. The Kroger team are smart people and I’m sure this is an opportunity they won’t miss.
Retail media is changing the balance of power (again) between retailers and CPG companies, and the Kroger-Albertsons merger will provide scale and negotiating leverage.
Absolutely not. This merger is not just a media deal.
This deal is about buying power and scaling merchandising strategies. Highly successful Kroger and Albertsons private label brands is where the opportunities are and the cost benefits will directly translate to customer benefits. The Kroger-Albertsons merger is about joining forces to give the customers what they want. Savings on everyday grocery and merchandise, data driven customer-centric assortments and brand loyalty.
Media is an important component of the deal, but at its core it’s a location-based deal, with the overlaps being cast off to appease the regulatory bodies. As grocers find ways to replicate Walmart’s wall of TVs and electronic signage in the store, they will continue to look at the online experience as the initial growth channel for retail media. My several IDC articles on retail media networks as well as the Kroger-Albertsons deal covers the issue in more depth. (Behind a paywall, but reach out if you’d like to discuss).
For RW readers, the RMN for Kroger Precision Marketing and Albertsons Media Collective will be brought under one roof, but the main advantage will be extending online ad inventory availability-a headwind for most RMNs requiring them to go offsite. The in-store component, will be valuable, but presently represents a tiny ad inventory opportunity for the merged entity.
A very strong media opportunity by merging these two. After overlapping stores are shed, duplicative corporate labor and operational expenses are reduced, the media will show a boost in profitability, representing a larger share of income. Since in-store shopping isn’t going away anytime soon, the opportunity to personalize media offerings for the customer base has solid growth upside.
General Electric launched a finance division to help families afford fridges and sell more fridges — eventually GE Capital became much larger than the appliance business. Similar things happened in the automotive industry. Consequently there is some logic about similar things happening in retail.
Data has hailed as a highly valuable tool and advertising is clearly the way in which it can be utilised — for me this is the way forward for retailers.