Grocery giants Kroger and Albertsons are said to be in talks to merge

“These two companies can combine their skills, expand their reach and improve their buying or purchasing power relative to Amazon, Costco or Walmart,” said Mr. Flickinger. “You really need the group to lower operating costs, and at the same time, give them more leverage to decisively lower prices for shoppers.”

While grocery stores have seen a surge during the pandemic as home-grown consumers stockpiled food, they have recently faced stress amid supply chain challenges and rapidly increasing costs for food. Grocery chains must balance their relationships with consumer brands that sell products through their stores and inflation-affected shoppers looking to save money, a formula for very slim profit margins.

The latest consumer price index, released on Thursday, showed that Inflation remained stubbornly high All year round until September, with food prices continues to rise.

However, industry mergers have a proven track record. The two largest food distribution companies, Sysco and US Food, They canceled their $3.5 billion deal In 2015 after the Federal Trade Commission sued to block the deal. That same year, the Federal Trade Commission required Albertsons and Safeway to sell more than 100 stores before obtaining a license. The grocer who bought those stores, Hagen, later filed for bankruptcy.

An investment banker who was not involved in the deal and asked not to be named said regulators would likely scrutinize and order divestments from stores in cities and other regions where there is significant overlap between Kroger and Albertsons. He said the major cities the FTC is likely to consider include Chicago, Denver and Seattle.

The potential deal has already raised the flags of consumer protection groups on Thursday afternoon. The American Economic Freedoms Project, a nonprofit organization that promotes antitrust legislation, criticized the potential merger as a “bad deal for consumers, workers, and communities.”

“The Kroger-Albertson deal will put pressure on consumers already struggling to buy food, crush workers fighting for fair wages, and destroy independent community stores,” Sarah Miller, the group’s executive director, said in a statement. “This merger is a final case of a monopoly, and implementers must prevent it.”