The Kroger Co. and Albertsons Companies Inc. have responded to federal and state antitrust regulators’ concerns about their potential merger by amending their plan to sell grocery stores to C&S Wholesale Grocers, LLC. The updated plan would see the grocery retailers offload additional stores in the wake of regulatory concerns expressed earlier this year.

The Federal Trade Commission (FTC) released a statement in late February calling the proposed Kroger-Albertsons merger “anticompetitive” and suing to block the $24.6 billion acquisition.

The revised divestiture package Kroger and Albertsons put together expands both the number of stores the companies plan to sell and non-store assets. This will better “enable C&S to operate competitively following the completion of the proposed merger,” the companies said in an April 22 statement.

“We have reached an agreement with C&S for an updated divestiture package that maintains Kroger’s commitments to customers, associates and communities, addresses concerns raised by regulators, and will further ensure that C&S can successfully operate the divested stores as they are operated today,” said Rodney McMullen, Kroger’s chairman and CEO, in the statement. “Importantly, the updated divestiture plan continues to ensure no stores will close as a result of the merger and that all frontline associates will remain employed, all existing collective bargaining agreements will continue, and associates will continue to receive industry-leading health care and pension benefits alongside bargained-for wages. Our proposed merger with Albertsons will bring lower prices and more choices to more customers and secure the long-term future of unionized grocery jobs.”

And if the Kroger-Albertsons merger closes, C&S will pay Kroger an all-cash consideration of approximately $2.9 billion.

Kroger ranks No. 6 in the Top 1000, Digital Commerce 360’s database of North America’s leading retailers by online sales. Furthermore, Kroger is first in the Top 1000’s Food/Beverage category. Albertsons ranks No. 24. C&S currently does not rank in the Top 1000.

Why did the FTC sue to block the Kroger-Albertsons merger?

The two grocery retailers first proposed the deal in 2022. Kroger was slated to buy Albertsons at the time, pending regulatory approval. The merger would allow the chains to create a “premier omnichannel food retailer,” Kroger said in a statement at the time. Together, the retailers would operate more than 5,000 stores across 48 states, with nearly 700,000 employees.

The suit came two days before the FTC’s Feb. 28 deadline. That’s when an agreement between the grocery retailers and the FTC not to close the deal would have expired.

The FTC’s argument is that the merger would harm consumers, as the retailers directly compete in pricing, hours, product offerings and other factors.

“If the merger takes place, grocery prices will increase, and Kroger and Albertsons’ incentive to improve product quality and customer service will decrease, further harming customers,” the FTC said in the same press release.

Kroger, Albertsons propose updated divestiture plan with C&S

The updated Kroger and Albertsons divestiture package increased the total store count to 579. That’s 144 more than the previous package’s proposed 413 stores.

The divestiture plan already included selling stores under the QFC, Mariano’s and Carrs brands to C&S. In the amended divestiture plan, Kroger and Albertsons would also sell some stores under the Haggen banner to C&S. The Haggen stores that remain under Kroger ownership “will be re-bannered into one of the retained Kroger or Albertsons Cos. banners following the close of the transaction with C&S.”

Additionally, under the amended agreement, C&S will license the Albertsons banner in California and Wyoming. It will also license the Safeway banner in Arizona and Colorado. In those four states, Kroger would re-banner the Albertsons and Safeway stores it retains after the merger closes. Kroger will also maintain the Albertsons and Safeway banners in the remaining states.

The number of stores contained in the divestiture plan by geography is as follows:

• Washington: 124 Albertsons Cos. and Kroger stores
• Arizona: 101 Albertsons Cos. stores
• Colorado: 91 Albertsons Cos. stores
• California: 63 Albertsons Cos. stores
• Oregon: 62 Albertsons Cos. and Kroger stores
• Illinois: 35 Albertsons Cos. and Kroger stores
• Texas/Louisiana: 30 Albertsons Cos. stores
• Arkansas: 18 Albertsons Cos. stores
• Nevada: 16 Albertsons Cos. stores
• Montana/Utah/Wyoming: 11 Albertsons Cos. stores
• Idaho: 10 Albertsons Cos. stores
• New Mexico: 9 Albertsons Cos. stores
• DC/Maryland/Virginia/Delaware: 9 Harris Teeter stores

Kroger will sell the above stores (regardless of banner) to C&S following the closing of the merger with Albertsons Cos.

“We are confident this expanded divestiture package will provide the stores, supporting assets and expert operators needed to ensure these stores continue to successfully serve their communities for many generations to come,” said Eric Winn, CEO of C&S, in the statement.

Non-store assets in the divestiture plan

The updated divestiture package includes increased distribution capacity, the statement said. It also includes one dairy facility. All fuel centers and pharmacies associated with the divested stores will remain with the stores and continue to operate, Kroger said.

The updated agreement maintains the sale of private-label brands:

• Debi Lilly Design
• Primo Taglio
• Open Nature
• ReadyMeals
• Waterfront Bistro

Kroger will sell all these brands to C&S, and it is adding “access to” the Signature and O Organics private-label brands.

Kroger to suspend delivery in parts of Texas, Florida

The grocery chain said it will stop offering grocery delivery in certain Texas and Florida locations beginning May 26.

Kroger announced that it opened a 60,000-square-foot automated fulfillment center in Opa-locka, Florida, in early 2023 to support ecommerce deliveries in South Florida. That followed investments from Kroger in other fulfillment centers in areas it didn’t have physical locations, including a 350,000-square-foot fulfillment center in Dallas — serving Austin, San Antonio and Oklahoma City  — which opened in 2023.

The three closures will not impact Kroger’s other automated fulfillment centers, a spokesperson previously told Digital Commerce 360.

“Kroger remains committed to growing its e-commerce offerings, delivering fresh food to more communities across the U.S.,” the statement continued.

Mary Meisenzahl contributed to this report.

Do you rank in our database?

Submit your data with this quick survey and we’ll see where you fit in our next ranking update.

Sign up

Stay on top of the latest developments in the ecommerce industry. Sign up for a complimentary subscription to Digital Commerce 360 Retail News. Follow us on LinkedIn, Twitter, Facebook and YouTube. Be the first to know when Digital Commerce 360 publishes news content.