Kroger CEO promises $1 billion grocery price cut if Albertsons merger goes through

A potential $24.6 billion deal between supermarket rivals Kroger and Albertsons has hit another roadblock with the U.S. government, but the CEO has promised to cut prices by $1 billion on day one to save the proposed deal.

After the U.S. government filed for an injunction to block the deal, Rodney McMullen, chief executive of the nation’s third-largest retail giant, took the witness stand on Wednesday to defend the merger with Albertsons during a three-week hearing in federal court in Oregon.

McMullen argued that the move would allow the company to lower its prices and compete with larger retailers such as Walmart, Amazon and Costco.

The final merger agreement was first announced in October 2022, and last month the Federal Trade Commission and the states of Colorado and Washington filed suit to stop the merger, arguing that it would “eliminate competition” in the 22 states where the companies currently compete and drive up food prices for millions at a time when Americans are already paying more for groceries due to high inflation.

On Wednesday, McMullen said prices at Albertsons are 10 to 12 percent higher than Kroger’s and argued the merged company could aim to close that gap as part of its new customer loyalty strategy.

Together, Albertsons and Kroger would control about 13 percent of U.S. grocery sales, still less than Walmart, which currently controls nearly 22 percent.

Cincinnati-based Kroger operates 2,800 stores in 35 states, with brands such as Ralphs, Smith’s and Harris Teeter.

Albertsons, based in Boise, operates 2,273 stores in 34 states, including brands such as Safeway, Jewel Osco and Shaw’s.

If the deal goes through, it would be the largest merger of two supermarket chains in US history.

Food prices continue to be a recurring issue for politicians. Vice President Kamala Harris declared during the election campaign that she would take a hard line on prices if elected president.

Former President Donald Trump made inflation a topic during the election campaign and recently reminded the public that food prices have risen by more than 20% under President Joe Biden.

Further details will emerge from a multi-court hearing on the proposed merger of the grocery chains, during which Albertsons CEO Vivek Sankaran will also testify.