Western Growers opposes merger between Kroger and Albertsons

In a fiercely worded letter, Western Growers joined the California Fresh Fruit Association and Colorado Fruit & Vegetable Growers Association in opposing the merger between Kroger and Albertsons.

Dave Puglia, president and CEO of Western Growers; Ian LeMay, president of the California Fresh Fruit Association; and Bruce Talbott, president of the Colorado Fruit & Vegetable Growers Association, sent a letter to Lina Khan, chair of the Federal Trade Commission, outlining their reasons for opposing the merger.

In the letter, the groups said the merger is likely to be detrimental to suppliers of fresh produce.

“The two retail giants combined would account for 15.6% of the U.S. grocery market share, second only to Walmart at 21%,” the groups said in the letter. “But if this deal is granted approval by the FTC, suppliers of fresh produce will be harmed by shrinking competition among retailer buyers since the newly combined entity would have significantly more leverage over the growers and shippers that feed the nation. This will not only reduce farmers’ margins and pressure them to cut back on acreage, but also have negative impact on farmworker jobs and income. Consumers who purchase our members’ products will see prices in the produce aisles of grocery stores rise, making it more difficult for Americans to eat healthy fruits, vegetables, and tree nuts.”

The groups said Kroger and Albertsons, currently the largest and second-largest supermarket chains in the U.S., already have considerable influence over produce suppliers as stand-alone entities.

“Their merger would exacerbate the cycle of supermarket consolidation we have seen in recent years,” the letter said.

“For example, when Albertsons acquired Safeway in 2015, Albertsons consolidated its buying program by rewarding contracts only to its largest produce suppliers," the letter continued. "Those who shipped fewer packages to Albertsons and had low to no exposure to Safeway pre-merger were supplanted in favor of Albertsons’ largest shippers."

The buying power of the newly combined Kroger entity “cannot be underestimated,” the letter said.

“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 groups also said one consequence of consolidation at retail has been increased sourcing by retailers from foreign suppliers who are “ready, willing and able to undercut American producers.”

“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 letter also referenced what it called Kroger’s “undue influence” over produce sellers, noting that in 2018, Kroger sent a letter to shippers announcing new standardized payment terms of “Net 90 days,” terms that would have forced shippers to waive the Perishable Agricultural Commodities Act (PACA) Trust protections. Kroger rescinded its payment policy less than a month later under pressure from the industry and the USDA, the letter said.

“While Kroger withdrew its attempt to unilaterally impose PACA waiver payment terms on shippers, Kroger continues to exert outsized influence over its produce suppliers,” the letter said. “For example, Kroger offers shippers an egregious take-it-or-leave-it contract pricing structure. Few shippers have the leverage to negotiate more balanced terms. And shippers, including those with long term relationships with Kroger, find that it is very difficult to regain the business with Kroger should they ever deign to decline Kroger’s intolerable terms.”

In addition, the letter said Kroger bills shippers for the design of Kroger's private label packaging.

“The massive retailer also does not permit suppliers to dispute quality rejections or quantity discrepancies — practices that fall well outside of industry norms,” the letter said. “As a result of these heavy-handed practices, many of our members opt to sell their produce to Albertsons or other retailers, rather than Kroger, if they can. If Kroger is permitted to acquire Albertsons, that will eliminate yet another major produce buyer and competitor to Kroger, allowing Kroger to push prices down even further on its suppliers.”

The groups also said that Kroger’s divestiture plan will not lessen the anti-competitive impact of the merger, noting that Kroger could later buy back some of the stores that it sells. In the letter’s conclusion, the groups said Kroger’s acquisition of Albertsons will result in “undesirable, yet entirely foreseeable, consequences.”

“In response to consolidation of the retail grocery segment, produce shippers have been pressured to consolidate themselves to remain competitive as suppliers for the few remaining major retail grocery outlets,” the letter said. “Particularly in the leafy green vegetable sector, many growers are left with one or two shippers they can grow for. Middlemen-processors and shippers are similarly squeezed on price by giant retailers like Kroger, so they in turn are forced to push down the price they will pay to the growers for the product that they process and ship to stores.”

The letter said consumers will not benefit from reduced prices because of the merger.

“Growers are being paid less for the crops they grow, while the cost of labor, water, fertilizer and crop protection tools, transportation costs, and regulatory compliance continue to rise — something must give. 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.”

Fewer farmers will lead to less domestic production of fresh produce and tree nuts, increasing the trend of rising imports and reduced food security in the U.S.

“In sum, the Kroger-Albertsons merger is anticompetitive and will harm the fresh produce industry, farmworkers and farm communities, consumers, and threaten national security. We urge FTC to oppose this merger.”

Western Growers opposes merger between Kroger and Albertsons

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