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Would an Albertsons-Kroger merger be bad for Durango?

Economist says labor and grocery store prices would likely be impacted
On Feb. 15, Colorado Attorney General Phil Weiser sued to stop Kroger’s $25 billion takeover of Albertsons. (Jerry McBride/Durango Herald file)

A Durango economist says the Kroger-Albertsons merger could mean a loss of jobs for local workers.

If the deal is allowed to proceed, Fort Lewis College Associate Economics professor Nate Peach suspects one of three stores in Durango – Albertsons or one of the two City Markets – might close.

“For one company to have that many (stores) in a market (would seem) a bit redundant,” he said.

Earlier this week, the U.S. Federal Trade Commission blocked a proposed merger of Albertsons Inc. and The Kroger Co., which owns City Market.

The merger would take the two prominent grocery corporations and combine them into one, creating less competition in market areas like Durango.

“The FTC’s action is a huge win for Colorado workers, their families and our communities,” State Treasurer Dave Young said in a statement Monday. “The risks posed by this merger far outweighed the benefit to the shareholders of Kroger and Albertsons. When consolidation harms workers, lowers accessibility of food and medicine, and results in detrimental impacts to local and state economies, it’s clear the deal is good for c-suite executives and bad for everyone else.”

Last May, Colorado Attorney General Phil Weiser spoke in Durango, voicing concerns about a possible merger.

He said during the forum that a merger would drastically impact prices in smaller markets like Durango, which has an Albertsons and two City Market stores, making up three of the nine grocery retailers in the greater Durango area.

A merger could have a severe impact on employment with jobs being lost, Peach said, depending on how the newly merged company restructures its management system. He said he could foresee Kroger cutting managers and finding overlap between stores as a way to save money.

In regard to grocery store prices, Peach said Durango would likely see an increase, but he can’t imagine a scenario in which prices would skyrocket simply as a result of the merger.

Grocery store prices have already been escalating since 2020.

According to the Bureau of Labor Statistics, the cost of store-bought food increased 23.5% from February 2020 to May 2023.

Peach said production input costs are among the reasons the cost of grocery goods are going up.

“If you think about groceries, you have things like an apple that falls off the tree or is picked that needs to be cleaned and transported,” he said. “But then you have something like chips where the company is adding value to potatoes to cook them in this way and add spices, etc. Their input costs are going up.”

But labor is also a factor in rising grocery store costs. As wages increase, some if not all, of that extra cost is passed on to customers.

Peach said competition is a good thing for the Durango market.

“You tell me that there’s these grocery stores in town, and (hypothetically) most of them are going to be owned by one entity: As an economist, that makes me cringe,” he said.

The only viable competition would be Walmart, he said, but even that would depend on consumer preferences.

Walmart has heralded itself as a cheaper grocery store option. Yet, many shoppers prefer a higher-quality product than what Walmart offers, Peach said.

Stores like Albertsons and City Market that focus exclusively on groceries tend to have more selection. Walmart is often able to offset its lower costs with other items sold throughout the store such as electronics and sporting goods.

“There are some ways in which they compete directly,” Peach said. “But for a lot of people, the quality of some of the things that Walmart offers is inferior.”

Durango has several locally owned grocers that specialize in organic foods that cost more than nonorganic produce sold in bulk. It is hard for them to compete with a Kroger-Albertsons merger in the current market.

Durango farmer Linley Dixon said a merger between Kroger and Albertsons could drive up prices and make it more difficult for small producers to break into the market.

Most big-name grocery corporations do not purchase from local farmers, preferring instead to do business with larger producers that can deliver in bulk, she said.

It creates a domino effect, in which smaller stores must compete on price with the corporate stores.

“The Natural Grocers of the world have to then compete with (Albertsons and Kroger) which means that they stop working with local producers, because they’re so competitive on pricing,” Dixon said.

Durango Chamber of Commerce CEO Jack Llewellyn said the lack of competition is concerning.

A lack of local competition could encourage some Durango consumers to drive to Farmington to shop at places like Sam’s Club where they can buy products in bulk.

“Consumers are very savvy nowadays. And, we’ve already seen large increases with inflation, and I think we’re going to see prices go up much more,” Llewellyn said. “You’re going to see consumers look for other places to shop.”

Yet, a potential merger may have its benefits, he said.

“There’s always a concern when you have a monopoly in our community for prices to go up,” Llewellyn said. “But on the other side, that gives them more buying power.”

Greater buying power could allow the company to expand its footprint in certain market areas. For Durango, that could mean a new grocery store in the Three Springs area, he said. While that is purely speculation, Llewellyn noted residents have been advocating for another grocery store in the area.


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