Pressure around The Kroger Co.’s proposed acquisition of Albertsons Companies Inc. continues to build.
The presidents of three major produce groups, Western Growers, the California Fresh Fruit Association, and the Colorado Fruit & Vegetable Growers Association, have all sent a joint letter to the Federal Trade Commission opposing the deal.
The parties warn that the acquisition will shrink competition among retail buyers and give the newly combined entity significantly more leverage over the growers and shippers.
Because of an expected reduction in farmers’ margins and pressure to cut back on acreage, consumers will experience rising retail produce prices, the letter also stated.
“The buying power of the newly combined Kroger entity cannot be understated,” the associations said. “Growers and shippers are ultimately price takers and are constantly struggling to achieve better than break-even pricing from retailers. An entity as large as Kroger-Albertsons combined will allow it to dictate pricing and leverage its buying power with even more aggressive contract pricing than is currently seen. This exorbitant buying power will allow Kroger to play suppliers against one another to compete for the business.”
The associations also pointed to past supermarket consolidation — arguing that those deals increased sourcing by retailers from foreign suppliers, “who are ready, willing and able to undercut American producers on operating costs and price they will accept from the retailer.”
“With the volume of product Kroger will be able to move post-merger, contract prices offered to suppliers will fall fast, while the cost burden to our industry for labor, water, fertilizer, transportation, and other expenses goes up year after year,” the letter said. “Meanwhile, foreign suppliers will reap the rewards of expanded shelf space.”
The associations said a deal will result in “undesirable, yet entirely foreseeable, consequences,” which could include consolidation among produce shippers so that the suppliers can remain competitive for the remaining major retail grocery outlets.
“Eliminating major competitors from the marketplace never leads to reduced prices for the consumer,” the letter said. “Rather, food costs, already under pressure by high inflation, will only go up if this mega-merger is permitted to proceed. That is harmful for consumers.”
With growers being paid less for their crops while operating costs continue to rise, “something must give,” the letter said. “This dual pressure has forced many of our members to farm less acreage, move production to other countries when feasible, or leave farming altogether. That is harmful for farmers, farmworkers and rural communities that depend on a robust agriculture industry.”
The produce associations are joining the growing list of entities that are opposing the proposed acquisition. They range from unionized grocery workers who have expressed concerns about the negative impact the deal would have on competition, retail pricing and job cuts, to Sen. Elizabeth Warren (D-Mass.), Sen. Bernie Sanders (I-N.H.), and Rep. Jan Schakowsky (D-Ill.), who urged the FTC to oppose the deal in their own letter to the agency.
The lawmakers claim that a merger could increase monopoly power, buyer power, and hurt both companies’ workers and consumers.
Marilyn Bay Drake, a spokeswoman for the Eaton-based Colorado Fruit and Vegetable Growers Association, which has more than 260 members, said ramifications from Kroger’s purchase of Albertsons would add to the burdens already impacting Colorado growers.
“Produce growers are facing a variety of additional restrictions recently passed by the Colorado General Assembly, including moving into paying overtime during their very compressed harvest seasons,” she said. “They are feeling squeezed between the input cost increases and the income options side, with the proposed merger exacerbating these pressures.”
A spokeswoman for the Irvine, Calif.-based Western Growers, which represents local and regional family farmers growing fresh produce in Arizona, California, Colorado, and New Mexico, declined further comment.
The Fresno-based California Fresh Fruit Association, which is comprised of more than 300 members, also did not respond to request for comment.