Cincinnati, Ohio – Kroger, the nation’s largest supermarket chain, announced today a definitive agreement to acquire Albertsons Companies, including Safeway, for approximately $1.7 billion. The deal, expected to close in early 2024, pending regulatory approval, will combine two of the biggest players in the U.S. grocery market, creating a retail behemoth with over 5,000 stores and annual sales exceeding $200 billion.

The acquisition will bring together Kroger’s extensive presence in the Midwest and South with Albertsons’ strong foothold on the West Coast. The combined company will operate under the Kroger banner, though some Albertsons stores will continue to operate under their existing names, such as safeway and vons, at least initially. The merger aims to enhance Kroger’s ability to compete with Walmart and Amazon in the increasingly competitive grocery landscape.

According to a joint press release, the merger is projected to generate $1 billion in cost synergies within three years of completion. These savings are expected to be achieved through streamlining operations, optimizing supply chains, and leveraging the combined purchasing power of the two companies. Kroger has committed to reinvesting these savings into lowering prices for customers and improving employee wages and benefits.

The Federal Trade Commission (FTC) is expected to scrutinize the deal closely, given concerns about potential antitrust implications. Analysts predict the FTC will focus on potential market concentration in several metropolitan areas, especially in California, Oregon, and Washington, were both Kroger and Albertsons have meaningful market share. The United Food and Commercial Workers International Union (UFCW),representing over 1.3 million grocery workers,has also voiced concerns about the impact of the merger on jobs and wages.

Kroger’s CEO, Rodney McMullen, stated that the merger will “accelerate our path to deliver fresh and affordable food to families across the contry.” Albertsons CEO, Vivek Sankaran, added that the combination will “create a stronger, more competitive company that is better positioned to serve customers and communities.”

The American grocery industry has undergone a dramatic change over the past century. Initially dominated by small, independent grocers, the industry began to consolidate in the early 20th century with the emergence of supermarket chains like Kroger (founded in 1883) and Safeway (founded in 1918). These chains leveraged economies of scale and efficient distribution networks to offer lower prices and a wider selection of goods.

The post-World War II era saw the rise of self-service supermarkets and the proliferation of private-label brands. In the late 20th and early 21st centuries, the industry faced new challenges from big-box retailers like Walmart and Target, which expanded into the grocery business. More recently, Amazon’s acquisition of Whole Foods Market in 2017 and the growth of online grocery delivery services have further disrupted the market.

Today, the grocery industry is characterized by intense competition, razor-thin margins, and rapidly changing consumer preferences. Consumers are increasingly demanding convenience, affordability, and healthy food options. Grocery retailers are responding by investing in technology, expanding their online presence, and offering a wider range of services, such as meal kits and prepared foods.