Purged by the Merge: An in-depth look at a potential grocery store mega-merger
A multi-billion dollar mega-merger in the grocery business may have some big impacts on the Coachella Valley.
"It's a hot mess, John," said Jo Ann Sherley, who has been in the grocery game for 38 years.
Sherley has been through this before with other mergers but now with billions at stake on Wall Street, she's hoping workers will be protected.
"We are the little people, but we're the little people that makes these companies who they are. We built these companies," Sherley said.
The deal would combine Kroger, the parent company of Ralph's and Food 4 less with Albertsons, which is also the parent company of Vons. Kroger, in a release, said it's worth $24.6 billion.
Albertson's shareholders get a special dividend of nearly $7 a share which amounts to $4 billion.
It involves nearly 5,000 stores, nearly 4,000 pharmacies, and over 2,000 fuel centers. A complicated deal the union worries will result in a major shake-up and potential store closures.
(UPDTE 2/1/2: New Statement from Kroeger)
"Our merger with Albertsons provides meaningful, measurable benefits to America’s consumers, associates of both companies, and the communities we serve. As we have in past mergers, we will hold ourselves accountable to our associate and customer commitments, including lowering prices starting on day one post-close. We will also continue to invest in our associates by investing an additional $1 billion to raise wages and our comprehensive, industry-leading benefits.
Kroger will not close any stores, distribution centers or manufacturing facilities as a result of this merger, including stores that may need to be divested to obtain regulatory approval. Kroger intends to position any store that is not part of the combined company for success going forward."
"We're talking roughly just here in the Coachella Valley, roughly 2,000 of our union members who could be impacted by this merger," said Joe Duffle, president of the local union.
There are 15 stores valley-wide. Duffle said the big concern is areas like south Palm Springs, where there are two Ralph's and a Vons in close proximity.
Or in Palm Desert, where an Albertson's is just across the street from a Ralph's in Bermuda Dunes.
"And certainly a decision is going to have to be made. and generally, when that decision is made, the employees in the store are the ones that are impacted first and foremost," Duffle said.
The decision may not be "close a store or keep it open." The deal calls for some to be spun-off to a company that would be called "Spin-co."
Kristy Jeffrey was involved in the Albertson's-Vons merger back in 2014 when many of the stores were sold-off.
"They came in with Haagan and they brought them in to take over 140 or 42 stores they needed and as soon as they did it, they just strategically bankrupt them or shut them down," Jeffrey said.
One example is a location in Rancho Mirage. It went from a Vons-Pavillions to Haggan. Gelsons then brought it back to life which is where Jeffrey now works.
When stores do close that can have big impacts.
"This has been difficult for the city to have a big box like this vacant?" John asked.
"It certainly has been, So the Ralph's left in 2016 and for the last several years the city's been working with the property owners to bring in a new tenant," said Chris Freeland, city manager of Indian Wells.
The vacant store in Indian Wells is about to be brought back to life as a Sprouts in the coming months.
"For this center, it's gonna be a huge boost not just for them, our residents and all the other businesses here in the center, who are looking forward to extra traffic and customers coming into the community," Freeland said.
7 years without an anchor is a long time. There are empty store-fronts and signs of neglect that will soon be addressed with Sprouts on the way.
One business owner in the center, Jan Boydstun of Kitchen, Kitchen has found a way to thrive despite not having that anchor store.
"We've been in the center 33 years, so we had an anchor all but 7 and we're very fortunate that we not only survived, we sort of flourished, and we are excited for the new store for sure," Boydstun said.
Shop owners, workers, communities, and consumers will all be impacted in some way.
"This decision is going to have far-reaching impacts, not just short term, but long term, not just regionally, but nationally," Duffle said.
The regulatory process will play out over this year. If it's approved -- at that point -- it'll become clearer how many stores may be impacted.
National Grocers Association Statement:
"Years of grocery consolidation enabled dominant grocers to use their economic power to disadvantage smaller competitors and shut out rivals. The announced merger between Kroger and Albertsons will only increase the influence that a handful of grocery players wield over food suppliers and harm the ability of smaller players to compete in the market. Kroger and Albertsons currently hold a large share of the grocery market in Southern California. Should the merger be approved, the combined firm should be required to divest a robust number of stores to avoid higher grocery prices and creation of food deserts. Independent grocers should get a chance to buy divested stores to avoid the prospect of store closures as we’ve seen with previous mergers."
Statement from Rep. Raul Ruiz, M.D./(D) 25th District:
“I am continuing to monitor the pending merger between Kroger and Albertsons to ensure that this does not create a monopoly. The companies must be transparent with United Food & Commercial Workers and the affected communities about which stores will be impacted by this potential merger. The FTC must ensure any merger protects our local essential workers and their jobs and protects consumers from higher costs."
