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Kroger-Albertsons merger raises fears of store closures; this is where the chains clash in oregon

The 2002 closure of the Fred Meyer Grocery serving Rockwood was a blow to the Gresham neighborhood, leaving a hole in its center and one less option for groceries.

The next blow came in 2015, when a merger between the Albertsons and Safeway brands resulted in the closure of a nearby Safeway store. This left an Albertsons store as the last supermarket chain in the area.

Now, a proposal by Kroger Co. to buy Albertsons has residents wondering if that store might close as well. If Albertsons were to close in Rockwood as a result of the merger, it would “put a dent in the community,” said Catherine Nicewood, president of the neighborhood association, although it’s one of the costliest options left.

“Rockwood is considered a food desert, and we tried to bring places where people could easily access healthier food options at an affordable price,” Nicewood said. Losing the Albertsons would be another setback.

The $24.6 billion sale would put Albertsons, Safeway, Fred Meyer and QFC under one umbrella and leave the chains with dozens of Oregon stores that could now be considered redundant.

The Oregonian/OregonLive identified about 33 Kroger and Albertsons-owned stores across the state that are within a mile of each other, including 20 in the Portland metro area. Over 100 are less than two miles away.

Many are within sight of a nearby store. In Oregon City, for example, a Fred Meyer, Safeway, and Albertsons are within a few blocks of each other.

Albertsons and Kroger in Oregon

Dozens of Oregon grocery stores owned by Kroger Co. (Fred Meyer and QFC) and Albertsons Cos. (Albertsons and Safeway) are located close to other stores and could be considered redundant if the chains merge. Here, stores are displayed with a 1 mile stamp.

Kroger and Albertsons are two of the largest grocery chains in the state, with 171 stores in total.

Kroger and Albertsons would likely have to divest hundreds of stores nationwide to assuage anticompetitive concerns from regulators, including the Federal Trade Commission, retail analysts and consumer advocates say.

Anticipating that, Kroger and Albertsons said in an announcement last week that they were ready to divest between 100 and 375 sites by spun-off them into a separate company — called SpinCo in the filing — that would be controlled by Albertsons shareholders.

In Oregon, Kroger and Albertsons are two of the largest grocery chains, with an even larger combined market share than Walmart.

Kroger did not address potential store closings in its filing with the Securities Exchange Commission, but it is common to close stores during a major retail merger, retail analysts said. Splitting redundant stores isn’t a foolproof solution either.

Following the merger of Albertsons and Safeway in 2015, regulators required the chains to find a buyer for about 20 stores in Oregon to maintain market competitiveness.

Haggen, a small grocery chain in Washington state, agreed to buy and rebrand 146 West Coast Safeway and Albertsons locations following the merger with Safeway. But within months, the overwhelmed Haggen filed for bankruptcy and sold several of those stores back to Albertsons for a much cheaper price. Others have closed permanently.

Kroger and Albertsons executives expect the deal to close in early 2024, at which point the two companies will begin making choices about which stores will stay or go and under which banner they will operate. .

Kevin Coupe, a retail analyst and author of grocery blog Morning News Beat, thinks the companies’ proposal to divest up to 375 stores may not satisfy regulators.

“I think they’re going to have to divest over a thousand stores,” Coupe said. “This is a much tougher FTC that maybe they’re used to, and we’re in an era of rising consumer prices.”

The proposed combined company would have annual revenue of $209 billion and operate 4,996 stores nationwide, according to Kroger. It would come close to rivaling Walmart, losing just $10 billion in annual revenue to the retail giant.

Safeway Albertsons

A Safeway-Albertsons delivery center near the Beaverton Hillsdale Freeway in southwest Portland.

Meanwhile, the deal faces pushback from consumer advocates, unions and politicians as companies seek to shore up stores amid soaring food prices.

Jagjit Nagra, executive director of the nonprofit Oregon Consumer Justice, said the proposed deal would be bad for consumers because less competition could mean grocery store prices go unchecked. He said the potential merger could also lead to more food deserts, likely in low-income areas.

“They’re not going to close their biggest, brightest stars in their quiver,” he said. “They’re probably going to go to lower performers, show stores, maybe stores adjacent to, for example, tougher neighborhoods, or areas that have more crime, or maybe areas just more rural.”

Kelley Fuller, a resident of Depoe Bay on Oregon’s central coast, said the closest Fred Meyer and Safeway to Newport were across from each other.

“If Kroger and Albertson are allowed to merge, we will almost certainly lose this Safeway,” Fuller said, “which would mean not only losing a grocery store, but also the pharmacy inside.”

She said Lincoln City had already lost a pharmacy when Bi-Mart exited the pharmaceutical business, and competing pharmacies became noticeably more “crowded and chaotic” afterward.

And she said it was important to have two supermarkets because the pandemic has taken a toll on the supply chain.

“When Fred Meyer lacked basics, Safeway sometimes still had some,” she said. “It would have been worse for the local communities if we hadn’t also had Safeway to shop for.”

Nagra, along with a state consumer advocacy group, said the Kroger-Albertsons merger leaves areas that are already food deserts with even fewer choices.

“Not only would they take away people’s ability to choose, they would actually have a direct impact on people’s health,” he said. “Because if you don’t have access to good quality foods, I think it’s fair to assume that your health outcomes may not be as good.”

He said the deal could “cause more harm and kind of squeeze consumers who are already struggling to afford food.”

But Kroger executives said in a statement it would reinvest $500 million to “reduce prices for customers” and $1 billion to increase salaries and employee benefits.

Earlier this week, U.S. Senators Amy Klobuchar of Minnesota and Mike Lee of Utah said in a statement that the Senate Judiciary Subcommittee on Competition Policy, Antitrust and Consumer Rights “would hold a hearing focused on this merger proposal and the consequences consumers may face if this deal goes ahead.

The committee has “serious concerns” about the merger and wants a grocery market that “remains competitive so that American families can afford to put food on the table,” Klobuchar and Lee said.

–Kristine de Leon, kdeleon@oregonian.com, 503-221-8506

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