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US grocer Kroger is in talks to merge with rival Albertsons, sources say

US grocer Kroger is in talks to merge with rival Albertsons, sources say
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October 13 (Reuters) – US food company Kroger Co (KR.N) is in talks to merge with smaller rival Albertsons Companies Inc (ACI.N) It will form a supermarket titan, people familiar with the matter said.

A combination of the nation’s no. 1 and 2 Independent grocers, if available, can help retailers negotiate with consumer product manufacturers such as Procter & Gamble. (PG.N) and Unilever (ULVR.L) during sharp price increases.

The sources, who spoke on the condition of anonymity because the discussions are confidential, said that if talks do not break down, an agreement could be announced as soon as this week.

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Major consumer goods companies around the world have announced plans to raise prices at a faster pace as they try to curb the impact of rising raw material costs on their margins.

Some critics of the chain have pointed out that the merger would reduce competition among United States grocers and potentially lead to higher prices for American shoppers. The deal would create a combined company with a market value of about $47 billion, representing one of the largest retail mergers in recent years.

Neither Kroger nor Albertsons immediately responded to requests for comment. The news was first reported by Bloomberg.

Merger talks between the two largest US supermarket chains, Walmart Inc (WMT.N) focused on expanding its food business. Grocery now accounts for about 55% of Walmart’s annual sales. Walmart has traditionally used its influence to demand the lowest possible prices from food and beverage suppliers, putting rival supermarkets at a disadvantage in its negotiations with suppliers.

But consultant Burt Flickinger, who owns shares in both Kroger and Albertsons, said a merger would give the two supermarket operators more buying power and make it easier for them to compete with Walmart.

COMPETITIVE POWER

According to data from Euromonitor, nearly 25% of all US grocery dollars are spent at Walmart. According to Euromonitor, Kroger and Albertsons have about 8% and 5% of the US grocery market.

The razor-thin margins of independent US supermarket chains have been squeezed by rising costs and supply chain disruptions after a boom at the height of the pandemic. Grocers told Reuters that large packaged food and consumer goods manufacturers are still not supplying many grocers with products to fill their shelves.

Shares of Albertsons were down 11% Thursday afternoon, while shares of Kroger were down 1.4%. Shares of British online supermarket and technology group Ocado Group Plc (OCDO.L) It was up more than 10% in late London trading. Kroger is Ocado’s biggest customer.

Kroger, which also houses supermarket chains such as Fred Meyer, Ralphs and King Soopers, has overtaken Walmart as the top grocer in the United States. Contains the Boise, Idaho-based Albertsons Safeway banner.

Sarah Miller, executive director of the American Economic Freedom Project, an antitrust nonprofit, said the deal “will squeeze consumers who are already struggling to afford groceries.”

“This merger is a cut-and-dried case of monopoly power, and regulators must prevent it,” Miller said.

Bloomberg reported that a deal could be reached this week, adding that a final decision had been made and talks could still be delayed or stalled.

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Reporting by Anirban Sen and Abigail Summerville in New York Additional reporting by Siddarth Cavale, Jessica DiNapoli and Arriana McLymore in New York and Aishwarya Venugopal in Bengaluru Editing by Sriraj Kalluvila and Matthew Lewis

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