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Kroger-Albertsons merger raises fears of store closures; This is where the chains compete in Oregon

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The 2002 closure of the Fred Meyer grocery store serving Rockwood was a blow to the Gresham neighborhood, leaving it with a hole in its center and less of an option for groceries.

The next success 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 chain supermarket in the area.

Now, with Kroger Co.’s bid to buy Albertsons, residents are wondering if that store will close as well. If Albertsons were to close in Rockwood as a result of the merger, it would “make a dent in the community,” said Catherine Nicewood, president of the neighborhood association, despite being one of the most expensive options remaining.

“Rockwood is considered a food desert, and we’re trying to bring it to places where people have easy access to healthier food options at an affordable price,” Nicewood said. Losing the Albertsons would be another setback.

The $24.6 billion sale would bring Albertsons, Safeway, Fred Meyer and QFC under one corporate roof, leaving the chains with dozens of Oregon stores that would now be deemed redundant.

Oregonian/OregonLive has identified approximately 33 Kroger and Albertsons-owned stores across the state, including 20 in the Portland metro area within a mile of each other. More than 100 less than two miles.

Many are within sight of a neighboring store. For example, in Oregon City, a Fred Meyer, Safeway, and Albertsons are within blocks of each other.

Albertsons and Kroger in Oregon

Kroger Co. (Fred Meyer and QFC) and Dozens of Oregon convenience stores owned by Albertsons Cos. (Albertsons and Safeway) are located near other stores and would be redundant if the chains merged. Here stores are shown with 1 mile buffer.

Kroger and Albertsons are two of the province’s largest grocery chains, with a total of 171 stores.

According to retail analysts and consumer advocates, Kroger and Albertsons will have to divest hundreds of stores nationwide to alleviate anti-competitive concerns from regulators, including the Federal Trade Commission.

Anticipating this, Kroger and Albertsons said in an announcement last week that they are willing to divest by converting the 100 to 375 locations into a separate company that will be controlled by Albertsons shareholders – named SpinCo in the filing.

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

Kroger didn’t address potential store closures in its filing with the Securities Exchange Commission, but according to retail analysts, it’s a common occurrence for shutter stores during a major retail merger. Closing unnecessary stores is also not a sure solution.

After Albertsons and Safeway merged in 2015, regulators required the chains to find a buyer for about 20 stores in Oregon to keep the market competitive.

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

Executives at Kroger and Albertsons expect the deal to be done in early 2024, at which point the two companies will begin making choices about which stores will remain or under which title they will operate.

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

“I think they’re going to have to dispose of it closer to a thousand stores,” the coupe said. “This is a much harder FTC than they’re used to, and we’re in a time of rising consumer prices.”

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

A Safeway-Albertsons distribution center off the Beaverton Hillsdale Highway in Southwest Portland.

Meanwhile, the deal is facing backlash from consumer advocates, labor unions and politicians as companies try to consolidate their stores amid skyrocketing food prices.

Jagjit Nagra, executive director of the nonprofit Oregon Consumer Justice, said the proposed deal would be bad for consumers, as less competition could cause grocery prices to go unchecked. He said the potential merger could potentially lead to more food deserts in lower-income areas.

“They won’t be closing their biggest bright stars in their quivers,” he said. “They’ll probably go to lower performing stores, maybe stores adjacent to tougher neighborhoods, or areas with more crime, or maybe more rural areas.”

Kelley Fuller, a resident of Depoe Bay on the central Oregon coast, said the closest Fred Meyer and Safeway in Newport is across the street.

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

He said that when Bi-Mart pulled out of the pharmacy business, Lincoln City had already lost one pharmacy, and then rival pharmacies had become visibly more “crowded and chaotic.”

He said it’s important to have two supermarkets as the pandemic wreaks havoc on the supply chain.

“When Fred Meyer got over the basics, Safeway still had them sometimes,” he said. “It would be worse for local communities if we didn’t have Safeway to shop.”

Nagra, which has a state consumer advocacy group, said the Kroger-Albertsons merger is leaving areas that are already food deserts with fewer options.

“Not only will they take away people’s ability to choose, they will now directly affect people’s health,” he said. “Because if you don’t have access to quality food, it’s fair to assume that your health outcomes might not be as strong.”

He said the deal “could cause more harm and pinch consumers who are already struggling to buy food.”

But Kroger leaders said in a statement that it would reinvest $500 million to “lower prices for customers” and $1 billion to increase employee wages and benefits.

Earlier this week, Sens from Minnesota, USA. Amy Klobuchar and Mike Lee of Utah said in a statement that the Senate’s Competition Policy, Antitrust and Consumer Rights Judiciary Subcommittee will hold a hearing that “focuses on this proposed merger and the consequences consumers may face. This deal goes forward.”

Klobuchar and Lee said the committee had “serious concerns” about unification and wanted a grocery market that “remains competitive so that American families can afford to put food on the table.”

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

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