Much like it’s been from the beginning nearly two years ago, the federal government (FTC) and Kroger and Albertsons remain polarized as the two sides clash over whether the chains should be allowed to merge.
However, this time the venue is in courtroom 14A in the U.S. District Courthouse in Portland, OR where the resolution to this question should finally be answered. Or will it?
District Court Judge Adrienne Nelson is presiding over the trial which is expected to end on September 13 with more than 60 witnesses scheduled to be called.
Based on numerous reports, the FTC has been the aggressor from the outset, trying to connect an admission from Kroger’s senior director of pricing Andy Groff that it raised prices on milk and eggs beyond inflationary levels to what consumers can expect to see if the merger is approved. Contrarily, Kroger said it intends to lower prices at Albertsons stores if the deal is sanctioned.
Also questioned by the FTC was the ability of C&S Wholesalers to successfully operate the 579 divested stores (mostly Albertsons units) it would acquire in the prospective agreement. Not only did the FTC question the quality of the stores to be sold to C&S (the 413 stores that were on the original divesture list were upgraded, with 166 supermarkets added), the large federal agency argued that C&S does not have the required retail store experience to operate that many stores in an area that would cover 17 states. In direct court testimony, C&S’ president of retail operations Mark McGowan said that its 12 Grand Union and Piggly Wiggly stores in New York and Vermont, acquired after the Tops/Price Chopper merger, are operating at a loss.
The FTC has also accused four senior Albertsons executives, including CEO Vivek Sankaran, of destroying text messages about the proposed merger. The FTC added that another Albertsons executive, Todd Broderick, president of the chain’s Colorado division, sent several texts to Scott Shores, Albertsons’ senior director of HR, discussing pricing in which Shores stated that “we all know that prices will not go down.” Broderick acknowledged he might have deleted the texts, but did not remove them intentionally.
On September 4, both Sankaran and Kroger CEO Rodney McMullen testified and both defended the deal, stating will help the combined entity better compete against its major competitors – Walmart, Amazon and Costco. McMullen again stated the benefits of the merger will be seen in lower prices and upgraded stores.
Sankaran, who was named Albertsons CEO in 2019, noted on the stand: “Grocery is a zero-sum game in America,” alluding to the reality that competitors, particularly alternate channel retailers, are taking share of market away from his company.
The former PepsiCo executive also testified that his company is financially sound, but faces difficult years ahead if the merger isn’t completed, adding that if the deal falls apart Albertsons might consider layoffs, store closures or leaving some markets where it currently operates.
There are still plenty of fireworks left in the proceedings with both chains expected to focus further on the FTC’s refusal to acknowledge non-supermarket retailers as competitors. We can also expect to hear more direct testimony from union representatives and consumer advocacy groups who have almost universally panned the deal as being anticompetitive, despite Kroger’s promise to maintain all store-level union jobs. You’ll likely hear testimony about the job losses from the Albertsons/Safeway/Haggen deal in 2015 and how that bitter memory still lingers.
It seems likely that once the hearing ends, Judge Nelson will issue her ruling before the end of this month.
It’s also likely that the victor won’t be able to enjoy any spoils because an appeal by the loser is almost certain.
By then, Albertsons’ and Kroger’s legal fees will have topped $1 billion – hardly a victory for the shareholders.
‘Round The Trade
Rite Aid has officially re-entered the world as a privately held company, after exiting bankruptcy earlier this month. The Philadelphia-based drug chain is now controlled by its largest creditors who appointed CFO Matt Schroeder as its new CEO, replacing the greedy Jeffrey Stein. Schroeder now arguably has the food and drug industry’s most difficult job.
Could there a more horrific scenario than the one that deli processor Boar’s Head now finds itself in? At presstime, nine people have died and another 57 have been hospitalized from listeria, the bacteria found at the Boar’s Head plant in Jarratt, VA, which was closed indefinitely on September 13. It seems like a bad case of “too little, too late.” According to The New York Times, food safety experts who reviewed the inspection reports said that they were troubling, noting the repeated nature of problems, including an October 2023 report where an inspector noted plastic wrapped around an overhead pipe outside a cooler with orange/brown water pooled in the lowest hanging point. Six months later another report noted “ample amounts of blood in puddles on the floor” and “a rancid smell in the cooler.” Another inspection in June revealed that 15 to 20 flies were seen going in and out of vats of pickles. This is a catastrophe, not unlike the Blue Bell ice cream listeria contamination in 2015 (which killed three people) and the Peanut Corporation of America’s salmonella outbreak which killed nine people. What’s worse for Boar’s Head, a privately-owned company based in Sarasota, FL, is that they have marketed their products as being of the highest quality, sometimes demanding from retailers a level of exclusivity rarely seen anymore. In light of the inspection reports from the Jarratt plant, the company’s hypocrisy is obvious and the repercussions of its disingenuousness will be felt for years to come. As Benjamin Franklin once said, “It takes many good deeds to build a good reputation, and only one bad one to lose it.”
Local Notes
Sprouts had a huge opening at its newest store in Westminster, MD which debuted on August 30. The 23,000 square foot perishables-oriented store is the seventh in the state for the Phoenix-based retailer. It was nice to see former A&P and Acme executive Dan Croce (my pick as “frequent flier man of the year”), who now oversees all real estate duties for Sprouts, at the opening. Dan will be a busy man for the next four months, as Sprouts is scheduled to open 22 new units including stores in York, PA (October 13); Leesburg, VA (October 25); and Middletown, DE (December 6).
Aldi, the king of the small-box format, opened two new Pennsylvania stores last month – one in Waynesboro (Franklin County) and the other in Harmony (Butler County).
At Ahold Delhaize USA, the big merchant has promoted Moira O’Toole to VP-pharmacy services where she will oversee prescription drug procurement, managed care reimbursement and network contracting, drug pricing, clinical program development, regulatory compliance, pharmacy systems administration and customer-facing service development. O’Toole has worked in the ADUSA system for 24 years and was most recently director of patient services. She’s based in Scarborough, ME, headquarters for ADUSA’s Hannaford banner.
We have a few obits to report this month including Wally “Famous” Amos, who parlayed a $25,000 loan in 1975 from a few friends (including Marvin Gaye) into a cookie empire. For about 15 years, Amos’ cookies and his charismatic persona made him a national figure. The company operated dozens of its own stores and also sold its cookies to other high-end merchants such as Bloomingdale’s. However, he had difficulty expanding the company even further and in 1988 sold the corporation’s remaining equity to the Shansby Group, a PE firm, for $3 million. Over the years, I met Wally Amos several times and I can vouch for his enthusiasm and sales ability. He was 88 when he passed.
Host to guest: “True or false. Some airlines now give you a thorough frisking before permitting you to board the plane.” Guest to host: “That’s the only reason I fly.” You might have guessed that the “guest” was Paul Lynde and the “host” was Peter Marshall, who as “Master of the Hollywood Squares” would feed a panel of celebrities questions that usually elicited a funny response. Lynde passed away in 1982 and other frequent comedic “squares” such as George Gobel, Jonathan Winters, Charley Weaver (Cliff Arquette), Wally Cox and Joan Rivers have also departed, but until last month Marshall had outlived almost all of them. Marshall died in August at the age of 98 and will long be remembered by aging boomers as the ringmaster for one of the funniest game shows of the ‘70s. Born Ralph Pierre LaCock in Clarksburg, WV (one of his sons, Pete LaCock enjoyed an eight-year career as a Major League ballplayer), Marshall began his show business career as an actor and comedian (his older sister, Joanne Dru, had more success as an actress). With his show business career floundering, Marshall auditioned for an opportunity to become host of a new game show, whose rules resembled tic-tac-toe. When producers Bob Quigley and Merrill Heatter told Marshall they were looking for a “complete non-entity,” Marshall said “Well, look no further.” When Marshall left “The Hollywood Squares” in 1980, he resumed his career as an actor, mostly appearing in touring companies of once famous Broadway shows. And here’s a little known fact about how the daily daytime show was recorded: all five shows were taped in one night each week. In between tapings, the guest cast was offered food and drink with one regular cast member noting that shows taped for Thursday or Friday were much raunchier than the ones taped earlier that evening.
Finally, I’m sad to announce the passing of Phil Donahue, 88, the great (mostly) daytime host of “The Phil Donahue Show” which was groundbreaking for its time as it explored such once-taboo topics human sexuality, prison reform, feminism and religion. His syndicated show ran for 29 years (1967-1996) and won 20 Daytime Emmy awards. He hosted more than 6,000 one-hour episodes, including one in 1977 that featured actress Marlo Thomas, who he met for the first time that day. The two were married three years later. While he was often rebuked for bringing on controversial guests who talked about sensitive topics, Donahue was unmoved by the criticism, noting, “Television’s problem is not controversy – it is blandness,” adding that his epitaph should read: “Here lies Phil. Occasionally he went too far.
