The key events surrounding the failed $25-billion Kroger/Albertsons merger are common knowledge by now.
Judge Adrienne Nelson of the U.S. District Court for the District of Oregon temporarily halted the proposed merger on Tuesday, siding with federal regulators who have argued that the merger would lessen competition at the expense of consumers and workers.
Just one hour later, Judge Marshall Ferguson in Washington State Court issued another decision blocking the merger.
Then Albertsons on Wednesday said it was backing out of the merger and suing Kroger because it didn’t “exercise its best efforts” to secure regulatory approval, a development that some are likening to a messy divorce.
As someone who resides in Spokane, Washington, it’s interesting to see all of these events transpiring in my neck of the woods – the Pacific Northwest. In addition to the court decisions coming out of Oregon and Washington state, Albertsons Companies is based in Boise, Idaho.
Two big (and closely related) questions are: 1) What would a successful merger have meant for CPG companies? and 2) What does the failed merger mean for CPG companies?
In my opinion, some of the most thoughtful reflections on the ramifications for CPG come from Victor Martino, a columnist for Just Food.
“It might make for more dramatic literary effect if I were to come down on the side that a combined Kroger-Albertsons will have a significant effect on how CPG companies and brands do business with the new retailer – but I can’t,” Martino wrote in late October. “The deal to combine Kroger and Albertsons into a single mega-retailer will have little effect on CPG brands. The changes will be around the edges rather than substantial.”
Some of Martino’s key points regarding a Kroger-Albertsons merger (or lack thereof):
- For big brands, there might be some benefits and efficiencies with a merger, such as labor savings from a sales and logistics standpoint, because some consolidation between the two retailers would occur.
- There also might be some time and cost savings when it comes to promotional planning and implementation. Big CPG brands, for example, can use the same sales model they use with Walmart, which most often takes the form of either a Walmart-dedicated sales team or Walmart-dedicated broker team. This approach can provide real efficiencies from both expense and organizational perspectives.
- On the other hand – for brands large and small – there’s a benefit to being able to do business with a separate Kroger and a separate Albertsons for reasons involving distribution, sales promotion and marketing. Consolidation for CPG brands often means fewer options when it comes to item distribution, promotion and strategy.
- Martino also expressed concern that a combined Kroger and Albertsons might result in higher slotting fees for early-stage and emerging brands, which are the innovation engines in the CPG industry. “Many of these brands are already struggling when it comes to coming up with funds to get on the shelf, although both Kroger and Albertsons are very flexible in this regard,” Martino noted.
Meanwhile, Packaging Strategies reports on both Kroger and Albertsons on a regular basis. However, those stories usually entail less drama than the events that have unfolded over the past few days.
Most recently, Albertsons introduced flat bottle packaging for Bee Lightly, the newest addition to the company’s Own Brands wine portfolio. That story can be found here.
In a similar development, Kroger expanded its Our Brands portfolio with the addition of Field & Vine™, a fresh produce line grown by U.S. farmers in California, Florida, Georgia, Michigan, New Jersey, North Carolina, Oregon and Washington. That story can be found here.
Merger or no merger, Packaging Strategies will continue to report on brand packaging and the issues that CPG firms face when it comes to getting their brands noticed in retail settings.
