Kroger Dropping Prices by $1 Billion Once Albertsons Merger Completes

Grocery prices could be dropping at supermarket chain Kroger. As soon as Kroger’s acquisition of rival Albertsons is complete, the company plans to reduce prices by $1 billion. Previously, Kroger announced a $500 million reduction of prices at Albertsons’ stores. The deal also includes provisions to increase employee wages and $1.3 billion for store renovations.

In October 2022, Kroger revealed a deal to buy out Albertsons, which would expand the number of locations to over 4,000. To better compete with retail giants Amazon and Walmart, Kroger offered $25 billion to acquire the Idaho-based grocery chain. If the deal is finalized, not only Albertsons but also grocery stores Vons, Ralphs, Dillons, and Safeway will all be a part of the Kroger family.

However, the deal has been mired in antitrust lawsuits. Fearing the merger would increase prices and push wages down, governments and union groups have tried to stop it. Currently, Kroger is battling two state lawsuits, one in Colorado and one in Washington, a federal challenge in an Oregon court, and a trial brought by the Federal Trade Commission (FTC).

Fees related to the acquisition have cost both companies a total of $864 million so far, with Kroger spending about $535 million and Albertsons around $329 million. If the deal fails, the grocers will likely need to cough up hundreds of millions more in possible breakup fees to part ways.

Kroger already has a history of lowering prices after making similar deals. Since purchasing Roundy’s in 2015, Kroger cut prices on multiple produce and dairy items. Harris Teeter was acquired over a decade ago, and Kroger spent $125 million in its effort to reduce prices.

Five years ago, Kroger and drugstore Walgreens teamed up to form a group purchasing organization called the Retail Procurement Alliance. The group’s aim is to cut costs by combining purchasing power. The two companies are encouraging other retailers to join the organization.