The finish line is still likely a year away, but it seems every day that the Kroger-Albertsons prospective merger lingers on the vine, the more the “piling on” increases.
Already facing an uphill battle in the court of public opinion (which includes no members of either company’s executive team or the investment community), a new force emerged this month with the singular intent to “Stop the Merger.”
The coalition includes more than 100 labor-related organizations, elected officials and consumer advocacy groups, who through their website – stopthemerger.com – offer details of what they believe are the negative ramifications of the deal between the two largest pure-play supermarket chains in the country. Those “details” include narratives from community members, commentary from union members and politicians, and guidelines for how to express opposition to the $24.6 billion merger.
A recent letter from the group to the Federal Trade Commission (FTC) notes that if the deal is approved, the merger would “likely lead to store closures, worsen food deserts, increase prices for consumers and destroy thousands of unionized jobs.” The letter also states that “this deal is an antitrust travesty and it must be stopped.”
In the real world, however, these efforts will likely have little impact on whether the deal ultimately is approved. That decision will be made by the FTC, led by its left-leaning chairwoman, 33-year old Lina “Wrath Of” Khan, who’s shown a proclivity for litigating deals that she considers would change the balance of power in a given industry. Before her appointment as FTC chair in June 2021, Khan was critical of the 2015 deal between Albertsons and Safeway.
However, there may be a glimmer of optimism for both retailers as it concerns the large federal agency. According to The Wall Street Journal, while the FTC is examining if the deal would adversely impact consumers, it is also scrutinizing the potential omnichannel benefits that such a deal could bring. Both Kroger and Albertsons have invested heavily in the past four years into expanding their traditional brick and mortar operating platforms and vow to continue to offer their customers a broader and more creative shopping experience.
If the FTC really does look objectively at the potential unique opportunities that such a union could bring, then I believe the odds of approval improve substantially. And by taking a deeper dive into what a new omnichannel presence would look like, the agency seems to be tacitly acknowledging that some of Kroger’s and Albertsons’ non-supermarket rivals – Walmart, Target, Amazon, Costco, BJ’s, etc. – are real time competitors who are also feverishly attempting to grow their omnichannel presence and all practice their crafts on the same playing field. As logical as that sounds, this will likely be the first time the FTC has ever considered those alternate channel merchants as true competitors to all supermarket retailers.
There are still miles to go before anyone sleeps peacefully. Personally, I remain pessimistic about the odds of approval, primarily because of the large role that the “Wrath Of” Khan will play.
And if you believe the WSJ story about the FTC’s objective interest in learning more about the “shapeshifting” of the industry, remember Khan and her team earlier this month sued to block a potential $11.7 billion acquisition of mortgage software provider Black Knight by Intercontinental Exchange, her eighth attempt to block an acquisition or merger in the past 21 months.
‘Round The Trade
As has been the case for three consecutive months, overall inflation is mitigating, but food prices remain high. In its latest report, which was released in mid-March, the Bureau of Labor Statistics’ Consumer Price Index (CPI) reported that total year-over-year (YOY) national inflation for February was 6 percent, down from 6.4 percent compared to last month. Food price increases followed that declining trend but remained at 9.5 percent YOY. As retailers can attest, that’s not enough of a dip to allay concerns about more difficult economic challenges ahead. And in somewhat of an alarming reversal, five of the six largest food measuring groups showed slight price increases over the past month. Those include: cereal/bakery products (+15.9 percent YOY, a 0.3 percent increase over last month); fruits and vegetables (+7.4 percent YOY, a 0.2 percent increase over last month); dairy (+14.1 percent YOY, a 0.1 percent increase over last month); non-alcoholic beverages (+14.1 percent YOY, a 1 percent over last month); and other food at home (+13.6 percent YOY, an increase of 0.3 percent over last month). Only one large category declined – meat/poultry/seafood/eggs (+8.0 percent YOY, a decrease of 0.1 percent over last month) – primarily because of a 6.7 percent decrease in egg prices last month. As far as monthly online grocery revenue goes, according to research firm Brick Meets Click/Mercatus, total U.S. online grocery sales increased 1.5 percent in February 2023 to $8.8 billion from a year ago. Another research group, Incisiv, said that digital sales now account for $128 billion (14.4 percent) of the annual retail food pie. The New Jersey-based analytics firm also predicted that digital sales by the end of this year will reach $146 billion, and by 2026, 20 percent of all grocery revenue will be online driven…in Walmart news, the planet’s largest merchant said that it will maintain 2022 pricing for Easter meal ingredients and Easter basket offerings. Walmart will also add 28 healthcare centers to existing Supercenters, primarily in the Dallas and Houston markets, next year. That’s in addition to the 17 new facilities it is opening in Florida in 2023. Included in the new offering will be primary care, dental services, behavioral health and audiology. The “Behemoth” currently operates 32 healthcare facilities within its stores nationally…yes, we do have Amazon news to report. Earlier this month, the company announced the closing of eight Amazon Go c-stores in New York City, San Francisco and Seattle by April 1. A spokesman for “Godzilla” also confirmed that it is pausing construction of its second headquarters (HQ2). Much like its sputtering Amazon Fresh and Amazon Go stores, this humongous project is also on “pause.” According to a spokesman from “Godzilla,” the HQ2 project, which was first announced in 2020, will still be completed by 2030. Phase 1 of the plan is almost finished and Amazon said that the roughly 8,000 employees who work in the DC area will be relocating to two new office towers in a 2.1 million square foot development in June. On hold for now is a larger part of the project which will feature three 22-story office towers, a 350-foot tall helix, and a corporate conference center…Howard (“Humble Howie”) Schultz was back in the news recently. Not surprisingly, Schultz had initially declined an invitation to testify before the U.S. Senate’s Health, Education, Labor and Pension Committee to discuss Starbucks’ view on unionization and overall labor relations. Just before presstime, however, after the threat of a subpoena from committee chairman Bernie Sanders for “his humbleness” to change his mind, Schultz will now appear at the March 29 hearing. When Schultz threw his hat in the ring in 2019 to become the Democratic Presidential nominee in 2020, weren’t he and Comrade Sanders supposed to be politically aligned? I guess that ain’t the case no more….I guess there’s a reformulation coming for “Bunnies and Chicks,” the Easter candy offered by Aldi in the UK. The marshmallow confection looked neither like a bunny nor a chick, but rather resembled something from a men’s genitalia catalogue. Not surprisingly, the social media reaction was quick and plentiful including the classic, “did they misspell chicks?” Even Aldi couldn’t find an adequate response for its product design problem. “We can’t even defend this one,” the German-owned discounter tweeted.
Local Notes
A tip of the hat to Jake Tavello, who earlier this month was named COO of Stew Leonard’s, the seven-store juggernaut that was founded by Jake’s grandfather, Stew Leonard Sr., in 1969. Tavello, who began working at the third-generation independent retailer in 2003 while still in high school, was most recently VP-stores. In his new role, the 37-year old Tavello, who did a three-year learning tour at soon-to-be competitor Wegmans, will oversee product quality and freshness, customer service excellence, and growing team members. He’ll report to his uncle, Stew Leonard Jr., the company’s president and CEO. Stew Jr.’s sister, Jill Tavello, is Jake’s mom. As for Stew Sr., we’re told that at age 92 he’s in remarkable health and spends much of his time at his home on the Caribbean island of St. Martin’s…new store openings this month are again dominated by smaller-box discount grocers including two Aldi debuts in Woodlyn, PA (Delaware County) on March 2 and on S. 20th Street in South Philadelphia one week later. Grocery Outlet, which has opened more stores in the Mid-Atlantic area in the past 18 months than it did in the previous 10 years (when it acquired Amelia’s) will cut the ribbon on its fifth Philly unit on March 23 on North American Street in the Fishtown area of the city. One exception to that small-store opening trend: BJ’s said it will open a new club store (likely next year) in Johnson City, NY (Broome County near Elmira). It is one of five new units the Marlborough, MA-based merchant recently announced would be added to its growing roster of stores. BJ’s also posted Q4 and full 2022 results. Highlights include a very impressive 9.8 percent sales increase in its most recent 13-week period and the surpassing of the $1 billion (adjusted) EBITA mark for its full 52-week fiscal year ended January 28…in our lead story about job layoffs at Ahold Delhaize USA, we noted other major corporate enterprises have also announced significant layoffs over the past six weeks, fearing that a significant economic turndown is ahead in the next 9-12 months. We mentioned that German grocer Lidl was one of those companies. The discount merchant confirmed that about 200 associates will be laid off at its U.S. corporate headquarters in Arlington, VA…a tip of the hat to Cyndi Ireland, who has been named sales director – head of sales, conventional and mass channels, for Eat the Change, the start-up firm founded by entrepreneur and philanthropist Seth Goldman (Honest Tea, Beyond Meat) and renowned chef Spike Mendelsohn. Cyndi, a veteran of Coca-Cola and most recently Monster Beverage, will focus on expanding distribution and awareness of the company’s Just Ice Tea brand. This is a great opportunity for Cyndi to run a national sales team and knowing her work ethic, intelligence and pedigree, I’m certain she’ll do a great job. And why am I so sure? Well, I’ve known Cyndi since she’s been a little girl and have watched her blossom. She’s also the daughter of my retired partner Dick Bestany – and you can’t do much better than that!…from the Taking Stock obituary desk: passing on was David Lindley, one of rock and roll’s finest string instrumentalists of the past 50 years. Lindley, 78, a hidden genius since the mid-1960s, is best known for his creative collaborations with such industry greats as Linda Ronstadt, Bonnie Raitt, Ry Cooder and most notably Jackson Browne. He could play virtually any stringed-instrument that best suited an artist’s song – electric and acoustic guitar, Hawaiian laptop guitar, dulcimer, mandolin, fiddle and also such exotic instruments as the bouzouki, oud and saz. Upon his passing, Graham Nash, who worked with Lindley many times since the early 1970s, said: “He was far more than a supporting player – he was one of the most talented musicians there has ever been. He truly was a musician’s musician.” If you’ve never heard of Lindley or are interested in hearing one example of his genius as a player, listen to his slide guitar lead on Jackson Browne’s “Running On Empty.” Jaw dropping!…during the past month we also lost two baseball players – one known for his longevity, the other for his zany off-the-field-behavior. That would be Tim McCarver and Joe Pepitone, respectively. McCarver, 81, one of only a handful of major leaguers who played in four decades (1959-1980), was best known as a solid left-handed hitting catcher (he came in second in the MVP voting in 1967) and was the primary receiver for two of the greatest pitchers in major league history – Bob Gibson (in St. Louis) and Steve Carlton (in Philadelphia). McCarver recalled that he rarely paid a visit to the pitcher’s mound when “Gibby” was on the hill, noting that the fireballing, tempestuous right-hander would turn his back on McCarver and then exhort him to go back to his position. As for the more enigmatic Carlton, who also began his career with the Cardinals, McCarver became his personal catcher when both were traded to the Phillies in separate deals in 1972 (the underrated Bob Boone, Aaron’s father, was the regular catcher for the Phils). Their first year together, Carlton had one of the greatest seasons in MLB history with a 27-10 record and an ERA of 1.97 with 30 complete games, eight shutouts and 310 strikeouts – an amazing year in itself but when put in perspective of a Phillies team that only won 59 games all season, Carlton’s stats are even more remarkable. After his retirement, McCarver jumped into broadcasting with great success. He called 24 World Series for ABC, CBS and Fox – a record for an analyst. In 2012, Tim McCarver was inducted into the broadcasters’ wing of baseball’s Hall of Fame. And then there’s Pepitone, 82, who had a more than respectable 13-year career with the Yankees, Astros, Braves and Cubs in which he batted .258 with 229 homers and earned three Gold Gloves as a slick-fielding first baseman. His glory days came with the Yankees where he spent eight seasons. And many of his most glorious days came off the field. I’ll let the obituaries that ran in the New York Times and from the Associated Press describe some of his antics. From the Times: For most of his career, Pepitone undermined his own gifts with his rambunctious and self-destructive behavior. He had money problems and marital problems. His night life began after night games; he drank with and without his teammates and was no stranger to drugs. He claimed at one point to have turned (Mickey)) Mantle and Whitey Ford on to marijuana, and in an interview in Rolling Stone magazine in 2015, he recalled that when he was with the Cubs, fans in the bleachers would throw packets of joints and cocaine at him in the outfield, and he would hide them in the ivy that covered the stadium wall. “Used to be I was always the first person at the ballpark and the first one to leave; next thing you know, people are wondering why I’m hanging out at the ballpark so long.” When the manager, Leo Durocher, asked him what he was doing hanging around, he would say he was going to get a rubdown from the trainer. “Then I’d be out in center field with my shorts on, looking through the ivy to find my dope,” he noted. “I loved Chicago!” From the AP: Pepitone drew attention for his off-the-field conduct. In a time when most players were staid and conformist, Pepitone was thought to be the first to bring a hair dryer into the clubhouse, an artifact later given to the Baseball Reliquary and displayed at the Burbank Central Library in California during a 2004 exhibition: The Times They Were A-Changin’: Baseball in the Age of Aquarius. Pepitone also posed nude for the January 1975 edition of Foxylady magazine. “Things were a little different back then, sure. When I brought the hair dryer into the clubhouse, they thought I was a hairdresser or something; they didn’t know what the hell was going on, you know? I’d walk in with a black Nehru jacket on, beads, my hair slicked back; it was ridiculous. I think about it now, and I laugh.” Jim Bouton, in his groundbreaking 1970 book “Ball Four” (still a hilarious read) that revealed the inner working of baseball teams, recounted how “Pepitone took to wearing the hairpieces when his hair started to get thin on top…He carries around all kinds of equipment in a little Blue Pan Am bag.” Pepitone’s 1975 autobiography, “Joe, You Coulda Made Us Proud,” detailed nightlife with Frank Sinatra, smoking marijuana with Mantle and Whitey Ford and Pepitone’s jailing at Rikers Island. Yankees owner George Steinbrenner brought Pepitone back as a minor league hitting instructor in 1980 and promoted him to the big league team two years later. Pepitone said he would even trim his wigs to comply with the Yankees’ grooming policy.“This one,” he said holding one wig, “is my gamer. It’s got gray in it. The longer one is my going-outer.” They just don’t make ‘em like that anymore…
