Could Kroger, Albertsons merger end up closing one of Steamboat’s grocery stores?
Colorado Attorney General says there is a strong reason for skepticism both stores would remain open as he considers challenging the merger in court.
Sometimes City Market in Steamboat Springs is out of eggs, but Safeway just down the road has some. Other times Safeway may be out of eggs, but City Market has its shelves stocked.
“It happens all the time,” said Kate Nowak, the executive director of the Routt County United Way.
This happens with a lot of products in Steamboat’s two grocery stores because there are differences in the supply chain for each store. While both generally get their food driven up from Denver, the trucks, schedules and even some routes are different.
This is the benefit of competition, said Colorado Attorney General Phil Weiser at a community meeting in Steamboat on Wednesday. But whether or not there are eggs at either store may also be enough of a reason for him to challenge a nearly $25 billion merger of the parent companies of Steamboat’s two grocery stores.
Weiser has been holding community meetings across the state to talk about the merger of Kroger and Albertsons, which has a particular impact in Colorado where each owns dominant chains — Albertsons owns Safeway; Kroger owns City Market and King Soopers.
Perhaps a bigger concern than the availability of products is what Weiser referred to as the elephant in the room on Wednesday.
“If they merge, will they keep both stores open?” Weiser asked. “We have strong reason for skepticism about this.”
Weiser said he has heard from a lot of concerned residents in the Yampa Valley, where it is next to impossible to do all your grocery shopping without a stop by Safeway or City Market.
In many markets, Walmart is a significant competitor of both chains, and Walmart’s dominance is one of the key reasons the companies give for why this merger is necessary. But Steamboat’s famously small Walmart store doesn’t have a robust grocery section. Natural Grocers is in Steamboat too, but Weiser said he’s heard that for most residents, a trip to Natural Grocers alone is not enough.
This sets up Steamboat to be a community that Weiser called a two-to-one merger, where if Kroger and Albertsons successfully merge, both stores would be centrally owned, or worse, one store would close.
“We’re trying to figure out all the facts about this merger and understand the consequences if it happens,” Weiser said. “If our conclusion is that the consequences of this merger are that it’s bad for competition and would harm consumers, workers and suppliers, that is enough for me, and Colorado in general, to go to court and stop the merger.”
John Bartlett, who is the meat manager as Safeway in Steamboat, said he was concerned that policies the companies have about how close stores can be to one another would eventually force one of Steamboat’s stores to close. He speculated it would be Safeway, as employees there are part of a union and employees at City Market are not.
“We’re a union store. It helps us a lot to protect our employees,” Bartlett said. “If that merges, that would be their chance to shut our store down, say okay, we’re going to build one on the other side of town. But how long is that going to take to get approved, and then they start up with no union, which they would rather go with where they can work their workers as long as they want.”
Bartlett said he and his wife, who also works at Safeway said they have been shown a corporate video that outlines things that won’t change in the merger, but he was skeptical.
“The phrase talk is cheap comes to mind,” Weiser said.
Catherine Carson, who sits on the Yampa Valley Housing Authority Board, recalled a study they did as part of their health equity work for Brown Ranch that showed food prices in Routt County are already some of the highest in the state. How would a lack of competition impact prices?
Tyler Garrett, director of Government Relations for the Rocky Mountains Farmers Union, said he was concerned that small local producers would be hit on both sides of this merger. First, the lack of competition means they get a worse price when selling their product. Second, they pay more to buy food when they go to the grocery store.
“In communities like this, one of the concerns is it will be a double hit to producers,” Garrett said. “Ranchers get 14.3 cents per dollar whenever we’re selling food, and so what we’re afraid of is that they are going to lower prices (producers) can sell for and increase the price at the grocery store.”
Steamboat Springs City Council member Joella West said one concern for the city — which derives the lions share of its revenues on sales taxes — is what happens if it is City Market that closes.
“That is the anchor tenant for a shopping center full of all kinds of businesses,” West said. “We can’t afford to have that center with a dead space that large.”
The Federal Trade Commission is the major national agency that could try to stop the merger, but if they decline to do so, state Attorneys General like Weiser could do it instead. (Weiser is actually leading a coalition of state AGs who are weighing their options about what they could do.) This may not stop the merger forever, but it could force the companies to make certain concessions to maintain competition.
Weiser said that can sometimes be a scary outcome as well and there are previous mergers to look at to hint at how things may play out, like the 2015 merger of Safeway and Albertsons. Worried about a lack of competition, government anti-trust officials forced Albertsons to sell off some of their Safeway stores to allow the deal to go through.
This led to the Safeway store in Glenwood Springs being sold off to a company that later went bankrupt. The effort to preserve the store failed, and the building still sits empty today, Weiser said. Weiser said if that type of situation arises this time, he would ensure that whatever company buys spun-off stores is able to operate them as well as Albertsons or Kroger operate them today.
Weiser said the parties had indicated a merger deal could be finalized by January, though more recent indications are it could be earlier. That is when the FTC will decide whether or not it will challenge the merger. If they don’t, Weiser said he is strongly considering doing it himself.
“If I conclude this merger harms rural Colorado communities, but it doesn’t necessarily harm people in Denver where there are more choices, that is a good enough reason, I would say a good enough obligation, that I should stop the merger,” Weiser said.
Top Photo Caption: City Market, owned by Kroger, is one of two large grocery stores in Steamboat Springs that are part of the $25 billion merger of Kroger and Albertsons. (Dylan Anderson/The Yampa Valley Bugle)